Dropping your salary by over 75% to below poverty wages doesn't signal to me that you have "skin in the game", it signals to me that you're compensating for poor choices by making further poor choices and you likely do not think very far into the future.
It wasn't clear to me while reading this that the drop occurred while at the company, or was the drop from their prior gig. If they indeed lowered the salary their company paid them... yikes. Especially if a justification is "investor signalling". Sounds like kowtowing to unhappy investors.
Safety nets are for emergencies - by definition. If you are relying on them, you are having an emergency, by your own choice. Hard not to call that a poor one.
You're trying to run a company while making less than a single experienced engineer. If you even can't pay yourself that much, what exactly have you been doing with your investors' money?
Depends on your perspective I suppose. As I see it, starting over is a opportunity to try again, this time with all the knowledge you lacked the first time around. You may still encounter many of the pitfalls of the first iteration, but this time, you'll have the advantage of experience.
I reduced my salary to force myself to focus on what makes the most sense strategically for the product.
You know that sentence is completely incoherent, right? The man running the company suddenly having a bunch of personal financial distractions is bad. You thinking that having less money will make you more focused is a red flag big enough to go in a car dealership parking lot.
While I agree with your sentiment and am working through this issue myself... the appeal of the entrepreneurial grind goes hand in hand with a lot of religious suffering, or specifically a Christian martyrdom.
Only very recently had a heard a parable that began to challenge the idea that to do deep good, one must materially suffer...
However, I'm no where near cured, and hearing your take definitely helps.
Unless they have significant savings and/or some passive income, or they don't have family and can live with their parents or adopt a very frugal lifestyle, they will find their focus distracted by worries over everyday things like rent and bills. They are more likely to make poor short-term decisions, or have to supplement their income to do things like consulting or part-time work, to literally keep the lights on.
As an investor I'd be very concerned by this move.
I do think the idea of redemptive suffering unfortunately permeates (at least) American society too much. If someone else wants to suffer that's OK, but I feel like it's baked into every day life too much and suffering just for suffering's sake is confused with being moral or working hard. I guess that's expected from a country founded by puritans though!
Well, it's about a yearly developer salary where that founder lives - so not really "a lot of money" for them there, just the expected amount (and FAANGs do better, as do developers in New York working for finance).
Whereas his new salary is closer to a burger flipping salary, and actually less.
Are you a full time software engineer in the United States ?
A decent programer can make at least 100k almost anywhere in the US. I'd expect anyone running a tech company to make more than their own developers.
You don't even need to be a good developer, you can use an easier language like Python or JavaScript. Honestly 90% of success in this industry is not being a jerk and showing up on time. I've seen developers outright confront C level execs and predictably it doesn't work out so well.
The other 10% is luck. Occasionally you'll have a bad manager, or you'll join a company which doesn't manage their money well. And the only thing you can do in that case is leave.
We do actually make payroll and have a solid runway. What my salary cut does is: a) signal the investor and the team that I'm serious about this venture, b) increase my equity and c) increase our runway by a couple of months.
As I've noted in a top-level comment, my intended message about focus gets a bit muddled without me giving the proper context. I'll add an update to my post with some context.
It's a horizon several factors longer than they would be able to make course corrections.
If you planned what lunch you would eat on January 15th, 2022, I'd also say that you were planning far into the future, even though it's only a tiny fraction of the time between now and the sun swallowing the Earth.
"Dropping your salary by over 75% to below poverty wages doesn't signal to me that you have "skin in the game"
Why not? Author remains exposed to the upside through equity but their downside was always limited by their comfortable salary
You might think that's a poor choice, and you might be right, but it's the very definition of skin in the game that poorer choices on their part leaves them more exposed to a poorer outcome.
Or that you can afford to take big risks because you have parents who are willing and able to support you. The rich get richer...
I agree with you, having to take such drastic measures to prove (to investors or yourself) that you have "skin in the game" wouldn't look good to me. It's cute to romanticize this ala Rocky III, but coming up with creative ways to overcome a lack of intrinsic motivation to do your job well is drama best left for the big screen, IMO.
I get the inevitable criticism, he calls it out himself: he's dropping his salary but he can afford to since he has two years of savings to burn through.
The sentiment though rings true for me at least — as I have been fortunate to have a large salary, over the years I in fact do finding new-self losing touch with old-self.
And losing touch with my roots, my friends less-fortunate lives, etc.
This is a good chance to understand the difference between intrinsic and extrinsic motivation; The motivation that comes from within, and the one that is based on external factors.
Sending signals, writing about it, and making visible sacrifices will likely have short lived results. The extrinsic motivations run out pretty fast once you start feeling stressed, spread thin, etc.
If you can find some purpose or passion based reason to increase your “skin in the game” it’ll probably last way longer.
I thought this post originally was about trading wages for equity via “skin in the game”. It seems it’s not though and is about motivation.
Motivation for work when you already have money is definitely hard for some. Just go check out /r/FIRE.
Huh. Weird post. Depending on the situation, I would want the founder motivated by money (real money, equity money) or just blind passion. I guess stay crazy and try things. Good luck!
I think you're rationalising a bad decision, one that weakens your position, and sadly it might be difficult to undo now, so you're even more likely to rationalise this to yourself.
If the problem was motivation try and find out why you were lacking it, I suspect the answer was not "I'm too gosh darn rich"
He missed the part from the story about how much his stake worth in the company. This move also tells me he can let $86k go because he doesn't need it badly.
It seems that this pay-cut is for the benefit of the investors - who I doubt will appreciate it as much as he expects. He could take deferred payment, use it to negotiate a bigger stake.
Doesn't dropping your own salary make you look less respectable in the eyes of investors? It did in mine but I'm not the target audience for this publicity stunt.
I believe you’re correct, except for the ultra rich. Some of them pay themselves symbolically like a 1$ pr. year , e.g. https://thehustle.co/1-ceo-salary/ that seems to have a positive effect.
So, let’s be clear that to focus on how to get social media content for podcasters spreading more quickly, he made a move to grab interest of a population.
This is manipulative and, because of his savings, ultimately meaningless.
Worse than, by dropping his salary for multiple years, then (most likely) getting the difference in a bonus or equity, he is able to escape being taxed, leading to a net profit.
Hmm, over two years you're putting in an additional $172k plus all of the time and effort cofounding a startup entails, plus the opportunity cost of doing a startup vs collecting regular tech company wages working a 9-5. Is your investment properly acknowledged in terms of equity?
You're also sending a signal to your investors that your time is not worth much, and a signal to your employees that they can also expect scant wages and personal sacrifices.
It sounds like a bad deal, one I personally would not agree to, let alone writing about it publicly.
It is quite likely that after let's say 6 months of gruelling work you will start to burn out, start to feel undervalued, become difficult to work with and end up getting fired as a result. If things are this tight you should probably raise more money instead.
(a) I don't believe my company will afford to pay me $110k soon enough. Don't bother investing here.
(b) I don't value my time as a founder/CEO financially
(c) I'm thrifty where it doesn't matter
(d) I signal employees that this is not a place that pays well, thus getting only subpar employees
(e) I signal employees that I'm all for "sacrifice" and thus not professional, and not a good place to work (e.g. if I had any loose excuse to sacrifice them and their compensation, I'd do it in an instant).
(f) I'm not mature enough not to buy into all this "ramen founder" BS aspiration stories
> (f) I'm not mature enough not to buy into all this "ramen founder" BS aspiration stories
This is the biggest message I got from the article. Everything about it screams that the author is someone you shouldn't trust with your time and/or money.
Exactly, it absolutely does not matter as much as this person thinks. Investors don't value money the same way you do. This a nice gesture that will be quickly forgotten, an oddity.
> (e) I signal employees that I'm all for "sacrifice" and thus not professional, and not a good place to work (e.g. if I had any loose excuse to sacrifice them and their compensation, I'd do it in an instant).
That one rings truest to me and was part of one work experience I had in the past. The owners "buy" a lottery ticket using everyone else's wages and time, but it's "cool" because you're "living the dream."
Furthermore, living at poverty level for 1-2 years, especially in New York, eventually gets depressing because you'll have to deny yourself a lot of experiences.
Be like the Buddha in your pursuits. Reject asceticism and extreme indulgence and find the middle path. You and your possible future employees will thank you.
I hope you find extra motivation from the extreme contraints you forced on yourself in the longer term.
Making yourself live on 24k in NYC is not a good idea. Publicly sharing that is an even worse idea. I’d be surprised if this gave a positive signal to your investors, but it surely won’t to anyone you possibly employ/pay salary for.
I had no salaries for 5 years almost and just exited very nicely. This makes sense if you have limited capital and it makes a significant difference. This way you auto-invest your delayed salaries into the company.
I commend the author. It’s not easy to take risks like this, especially when we are paid so much. In a world where money is so cheap I’m surprised more people aren’t taking calculated risks like this.
The opportunity cost maybe high to begin with, but if this doesn’t work I’m sure the author could also get a decently paid job again. He’s well qualified and has lots of experience, so there’ll be another job if he really needs one. Also having a Swiss passport provides a pretty soft landing if things really go wrong.
I enjoy that the author(OP) posted an article about how excited they are to build a product that doesn't have a landing page, social media page, or reference to on their own website.
The consulting / building combo is a good way to keep earning moderately well while trying to build a new co.
Building revenue generation is not easy. If you're going all-in on the build, there may well come a point where if your revenues are not sufficient you will start to feel pain. If you can structure the development process to deliver revenue from as simple and maintainable a product as possible and quickly find a route to sales that would be ideal.
I would guess that in terms of surviving to long term viability there are far more not-so-great but quickly revenue-generating products than there are great products that were unfortunately slow to get recognised and generate revenue. With cash, further development is possible to clean a product up - without it, even great stuff will rot. There are tons of genius ideas that have been through successful (working) development but then just died because they never made money.
Access sales resource - effective sales resource (not easy to find) - as quickly as possible. If you're aiming for investment financing, remember that few things build investor confidence like existing sales and cash flow.
Not the same starting point but I was making decent wage here at my previous jobs. Some logistics management and startups. I don't started to feel dissonance heavily and after the last startup was running out of runway we agreed it was best for me to go. I wasn't a founder either.
But I spent awhile trying to figure out what I want to do and my wasn't able. I only managed to figure out what the hell I don't want to do.
I was also fortunate enough to be able to afford a year of this downtime. At some point I mentioned that I might actually start working again but have no idea where to go and my friend told, as a joke I o dead sure, that come work with us. We need good guys.
So by pure chance I ended up working with disabled kids at a school with a four month trial contract. And loved every bloody second of it.
During my downtime I had experienced with my routines and gotten rid of alcohol, meat and car. Also basically decided not to buy anything I don't need, the only luxurious stuff being something odd for my kid.
And I realized my life is so much better this way, with shitty salary and simplistic lifestyle. The dissonance about burning the planet down with my lifestyle was gone. I can handle the mortgage alright and can save some for bad days.
I don't miss a damn thing from the past that was supposedly way cooler than current life.
Life's much more than only money. At least when you get by alright. And "the things you own end up owning you".
If it is not obvious - this company was started in 2015, and is doing consulting while building a product.
This means that they have to balance spending time on a) paid consulting, on b) unpaid product development, or c) investor financed development, or some mix of these. Investors require equity, so if you believe in your product and you can afford it taking a pay-cut it can make perfect sense.
As an occasional investor it makes sense to me that you would want to invest in a company where the founders value their shares more than their wages - who would want to invest invest somewhere the founders want to cash out through wages instead of a future exit?
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[ 0.17 ms ] story [ 162 ms ] thread> you likely do not think very far into the future
This is 1-2 year bet for me.
You're trying to run a company while making less than a single experienced engineer. If you even can't pay yourself that much, what exactly have you been doing with your investors' money?
You know that sentence is completely incoherent, right? The man running the company suddenly having a bunch of personal financial distractions is bad. You thinking that having less money will make you more focused is a red flag big enough to go in a car dealership parking lot.
Only very recently had a heard a parable that began to challenge the idea that to do deep good, one must materially suffer...
However, I'm no where near cured, and hearing your take definitely helps.
As an investor I'd be very concerned by this move.
He's admitting he can't make payroll. 110k isn't a ton of money.
Whereas his new salary is closer to a burger flipping salary, and actually less.
A decent programer can make at least 100k almost anywhere in the US. I'd expect anyone running a tech company to make more than their own developers.
You don't even need to be a good developer, you can use an easier language like Python or JavaScript. Honestly 90% of success in this industry is not being a jerk and showing up on time. I've seen developers outright confront C level execs and predictably it doesn't work out so well.
The other 10% is luck. Occasionally you'll have a bad manager, or you'll join a company which doesn't manage their money well. And the only thing you can do in that case is leave.
Yes. Almost 10 years experience and an MSIS. Making under $100k.
"Honestly 90% of success in this industry is not being a jerk and showing up on time."
I must be missing that other 10%. I've had multiple bad managers, switched stacks multiple times, and other bad luck.
As I've noted in a top-level comment, my intended message about focus gets a bit muddled without me giving the proper context. I'll add an update to my post with some context.
That to me is the opposite of "[does] not think very far into the future."
If you planned what lunch you would eat on January 15th, 2022, I'd also say that you were planning far into the future, even though it's only a tiny fraction of the time between now and the sun swallowing the Earth.
Why not? Author remains exposed to the upside through equity but their downside was always limited by their comfortable salary
You might think that's a poor choice, and you might be right, but it's the very definition of skin in the game that poorer choices on their part leaves them more exposed to a poorer outcome.
I agree with you, having to take such drastic measures to prove (to investors or yourself) that you have "skin in the game" wouldn't look good to me. It's cute to romanticize this ala Rocky III, but coming up with creative ways to overcome a lack of intrinsic motivation to do your job well is drama best left for the big screen, IMO.
The sentiment though rings true for me at least — as I have been fortunate to have a large salary, over the years I in fact do finding new-self losing touch with old-self.
And losing touch with my roots, my friends less-fortunate lives, etc.
Sending signals, writing about it, and making visible sacrifices will likely have short lived results. The extrinsic motivations run out pretty fast once you start feeling stressed, spread thin, etc.
If you can find some purpose or passion based reason to increase your “skin in the game” it’ll probably last way longer.
Motivation for work when you already have money is definitely hard for some. Just go check out /r/FIRE.
Huh. Weird post. Depending on the situation, I would want the founder motivated by money (real money, equity money) or just blind passion. I guess stay crazy and try things. Good luck!
If the problem was motivation try and find out why you were lacking it, I suspect the answer was not "I'm too gosh darn rich"
He has the funds for 2 years and isn’t breaking his own legs.
A better analogy would be like Bruce Wayne giving up everything for 2 years to focus in the mountains his ninja skills.
OP, do your thing!
This is manipulative and, because of his savings, ultimately meaningless.
Worse than, by dropping his salary for multiple years, then (most likely) getting the difference in a bonus or equity, he is able to escape being taxed, leading to a net profit.
You're also sending a signal to your investors that your time is not worth much, and a signal to your employees that they can also expect scant wages and personal sacrifices.
It sounds like a bad deal, one I personally would not agree to, let alone writing about it publicly.
It is quite likely that after let's say 6 months of gruelling work you will start to burn out, start to feel undervalued, become difficult to work with and end up getting fired as a result. If things are this tight you should probably raise more money instead.
(a) I don't believe my company will afford to pay me $110k soon enough. Don't bother investing here.
(b) I don't value my time as a founder/CEO financially
(c) I'm thrifty where it doesn't matter
(d) I signal employees that this is not a place that pays well, thus getting only subpar employees
(e) I signal employees that I'm all for "sacrifice" and thus not professional, and not a good place to work (e.g. if I had any loose excuse to sacrifice them and their compensation, I'd do it in an instant).
(f) I'm not mature enough not to buy into all this "ramen founder" BS aspiration stories
This is the biggest message I got from the article. Everything about it screams that the author is someone you shouldn't trust with your time and/or money.
Exactly, it absolutely does not matter as much as this person thinks. Investors don't value money the same way you do. This a nice gesture that will be quickly forgotten, an oddity.
That one rings truest to me and was part of one work experience I had in the past. The owners "buy" a lottery ticket using everyone else's wages and time, but it's "cool" because you're "living the dream."
Furthermore, living at poverty level for 1-2 years, especially in New York, eventually gets depressing because you'll have to deny yourself a lot of experiences.
Be like the Buddha in your pursuits. Reject asceticism and extreme indulgence and find the middle path. You and your possible future employees will thank you.
> Sing along and it might just get you through
> Laugh along with the common people
> Laugh along, even though they're, they're laughing at you
> And the stupid things that you do
> Because you think that poor is cool
https://www.youtube.com/watch?v=yuTMWgOduFM
Frankly I find this type of exercise a bit obscene myself.
The opportunity cost maybe high to begin with, but if this doesn’t work I’m sure the author could also get a decently paid job again. He’s well qualified and has lots of experience, so there’ll be another job if he really needs one. Also having a Swiss passport provides a pretty soft landing if things really go wrong.
Building revenue generation is not easy. If you're going all-in on the build, there may well come a point where if your revenues are not sufficient you will start to feel pain. If you can structure the development process to deliver revenue from as simple and maintainable a product as possible and quickly find a route to sales that would be ideal.
I would guess that in terms of surviving to long term viability there are far more not-so-great but quickly revenue-generating products than there are great products that were unfortunately slow to get recognised and generate revenue. With cash, further development is possible to clean a product up - without it, even great stuff will rot. There are tons of genius ideas that have been through successful (working) development but then just died because they never made money.
Access sales resource - effective sales resource (not easy to find) - as quickly as possible. If you're aiming for investment financing, remember that few things build investor confidence like existing sales and cash flow.
Probably don't want to post to social or mention it increasing your skin in the game until the light is visible though.
But I spent awhile trying to figure out what I want to do and my wasn't able. I only managed to figure out what the hell I don't want to do.
I was also fortunate enough to be able to afford a year of this downtime. At some point I mentioned that I might actually start working again but have no idea where to go and my friend told, as a joke I o dead sure, that come work with us. We need good guys.
So by pure chance I ended up working with disabled kids at a school with a four month trial contract. And loved every bloody second of it.
During my downtime I had experienced with my routines and gotten rid of alcohol, meat and car. Also basically decided not to buy anything I don't need, the only luxurious stuff being something odd for my kid.
And I realized my life is so much better this way, with shitty salary and simplistic lifestyle. The dissonance about burning the planet down with my lifestyle was gone. I can handle the mortgage alright and can save some for bad days.
I don't miss a damn thing from the past that was supposedly way cooler than current life.
Life's much more than only money. At least when you get by alright. And "the things you own end up owning you".
This means that they have to balance spending time on a) paid consulting, on b) unpaid product development, or c) investor financed development, or some mix of these. Investors require equity, so if you believe in your product and you can afford it taking a pay-cut it can make perfect sense.
As an occasional investor it makes sense to me that you would want to invest in a company where the founders value their shares more than their wages - who would want to invest invest somewhere the founders want to cash out through wages instead of a future exit?