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Fundraising
How to Discuss Founder Compensation With The Board
Research on founder salaries suggest there’s a better way to negotiate with your investors
If you’re motivated by a high salary, think twice before founding a startup. Even if you manage to raise money from angel or seed investors, you can expect to take home very little in cash.
The assumptions you make when agreeing on a salary at the start of your venture may turn out to be optimistic. Raising a Series A has never been harder and you may stay a seed-funded startup for longer than you expected.
And if you’re worried about your finances, it’s not uncommon to feel a growing sense of resentment.
‘I’m working my ass off at this company!’ you think to yourself. ‘I can’t afford to eat out, I have debts building up, and the board doesn’t seem to care.’
So when is the right time to negotiate your salary? How much should you ask for? And how should you do it?
An Analysis of CEO Salaries in London
A number of my coaching clients wanted salary guidelines for particular startup stages, so I created this confidential salary survey and shared it with my network of early-stage founders in London. Forty CEOs filled it in and I ran the numbers.
At first glance, the findings seem intuitive. The average salary is larger for Series A CEOs than for seed or late-seed CEOs. And there is a clear jump in salary from late-seed to Series A.
This is easily explained, since raising a Series A is the ideal time to ask for, and receive, a significant increase in salary. No surprises here.
However, what’s interesting is that the distribution within seed and late seed overlaps significantly. This means that a CEO who has raised less than £1M of capital may earn more than a CEO who’s raised £4.5M.
In search of a better explanation, I used AnswerMiner to calculate the correlations between salaries at seed and late-seed…
