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My co-founders asked for a €150k salary (Seed). What is your take on this?

6 points by nh2121 ↗ HN
My co-founders asked for an initial salary of €150k. To me that seems too high for an early stage (seed) startup. IMHO, the purpose of a founder's salary is to cover monthly expenses so we can focus on building the business.

Expenses are higher when there is a mortgage and kids involved. That's fine. But I think our focus should be more on how we invest financial resources in infrastructure, innovation and employees in the most value-creating way.

I wonder what motivated them to ask for €150k and whether they are co-founding for the right reasons.

What is your take on this?

16 comments

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wmf
In the US I would consider that reasonable (e.g. Oxide pays $160K) but cost of living is probably lower in Europe. As for what someone is thinking, ask them not us.
bcantrill
For whatever it's worth we paid $175,000 when we started the company, but we now pay (everyone) $185,657. Of the three founders, two had kids -- and many of our employees have young families or others that they provide for. In terms of the original question, I think it's (very) fair to ask your co-founders about the salary they deem appropriate for themselves. Some follow up questions might be around the salaries that you intend to pay employees; if it's any lower than old €150K (that is, if they want to pay themselves more than they pay your future employees), that is a huge, huge red flag. Another may be: do we (as a company) hold financial prudence as a value? If expenses are high (kids, mortgage, etc.), there may be some good reasons for this -- but based on the way you are phrasing your question, I suspect that there is a deeper fracture in underlying values that you want to understand before you make long-term commitments to one another. Finally, if I may offer one additional piece of advice: if you are going to take more salary, consider putting founders on a longer term vest (e.g., 6 or 8 years instead of 4). If your co-founders balk at this, there is again an indicator that something deeper is amiss...
relaunched
My take is stop listening to venture capitalists. There is no right or wrong salary level. However, there should be a common understanding that there will be some level of sacrifice in the short-term, for the long-term. However, if your co-founders have real expenses, 150k or more might reflect that. A family of four, with student loans, living in a high cost area, when the person was making 250k...that sounds like a sacrifice to me.

On the other hand, if they want the startup to match the market rate job they are turning down to join the startup...that's a problem.

Or, if you don't have the money to pay, reasonable or not, you can't pay what you don't have.

An even bigger problem is if you can't have a discussion and work this out amongst yourselves - you have an even bigger problem. This is probably the easiest co-founder conflict you'll run into and you're not even officially co-founders. It only gets harder from here.

rasz
>IMHO, the purpose of a founder's salary is to cover monthly expenses so we can focus on building the business

Pay yourself same €150k, problem solved.

solumunus
How does that solve the problem of needing to keep costs low? Silly.
rasz
If you are bootstrapping you dont need a $150K/year cofounder, you need one willing to put money into the business. If you are VC funded you need to pay yourself good salary, because chances of cashing out are very low and chances of burnout while doing 15h days on ramen are high.
nh2121
You just added a whole new perspective. Thanks for sharing!
paulcole
> I wonder what motivated them to ask for €150k

To cover their monthly expenses? Because they have other options well above €150k? Because they want €150k?

This is a you problem, not a them problem. Either get over it, get more money for yourself, or find a new job.

> whether they are co-founding for the right reasons.

What are the right reasons? Most people work for money.

t6jvcereio
> What are the right reasons? Most people work for money.

The right reasons for co-founding are to grow equity in the short to medium term. Obviously. To some degree you must be aware of this, and your confusion that there is such thing as "too much" for a co-founder comes across as disingenuous. These are the right reasons in the sense that align the co-founders interests with the investors. Contrast this with a co-founder who co-founds so he can draw as much investment money as possible for his salary.

nh2121
Thank you for sharing your perspective! The way I see it, every euro you don't spend on growing your business hurts the value of your equity. When we reach a certain level of product-market fit, it's a bad idea to pay yourself more than you really "need" because those dollars could be more valuable to the company. I'm all for paying people what they're worth and what they need, but if you're primarily motivated by a paycheck, you might be looking for a job, not a company.
jordancode
IMO it sounds high but not ridiculous for the Bay Area but I'm not familiar with market rates in Europe. A few thoughts generally:

1) Did you raise enough money to afford this? Does it meaningfully decrease burn? 2) If you think of this person as a key hire instead of a founder are they worth the high salary + high equity? 3) Are your VC's OK with it? 4) If you require much less salary you can may be able to use it as a negotiation point to change your equity split 5) One argument for paying comfortable salaries is it allows founders to be more long-term minded and to ignore early exists. There's a sense in which being broke makes you irrational so not having your exec team worry about personal finances could be a good thing for the business.

Good luck with this! negotiations between business partners are always tough.

faangiq
What is your cofounder’s market value?
nh2121
Don't know for sure, but market rates are somewhere around 100k to 120k
drx
Hard to answer without more info, so I’m going to make some assumptions, YMMV. Depending on the area and situation, $150k could be reasonable, or ludicrous.

If it’s significantly above their personal expenses and you are uncomfortable with it, I would ask myself if they are cofounders or employees.

You should have a candid conversation about what the seed money is for. It could be the case that they never considered your perspective, and this is a good opportunity to get aligned on the topic.

Side note, salary disparities between cofounders are a potential future source of resentment.

nh2121
Thank you for taking the time to share your perspective!

Are they co-founders or employees? That's the key question.

You are right though – perhaps they have not considered my perspective. And vice versa. I might be missing something as well.

I will take your advice into consideration when I talk to them about it.

bismarck611
Never realized founders got paid a salary. I thought by starting a business you're passing up on salary by taking equity. Defiantly more interested in starting a business if I can draw a salary and be the equity holder.