reduce your company\u2019s risk in stages<\/a>. At the pre-seed stage, there\u2019s a lot of risk because a lot of things are unknown: Will the product work? Can you find customers? Will they pay for the product? And so on.<\/p>\nHowever, there\u2019s another risk to the company: At an early-stage startup, founders can\u2019t afford to lose focus. I should have a big red button on my desk that makes a Voice of God shout \u201cFOCUS!\u201d at the startup founders I advise. This is the No. 1 challenge for most startups.<\/p>\n
It makes sense: Opportunities are everywhere and entrepreneurial folks are, well, entrepreneurial. It makes sense that they\u2019d be tempted to keep their options as open as possible for as long as possible.<\/p>\n
But you know what is one of the biggest distractions? Not being able to afford your mortgage, rent, car payment or next shipment of Huel. As a founder, it is your duty to focus on building the startup so it is as successful as it can be as quickly as possible.<\/p>\n
As an investor in these startups, it\u2019s your<\/em> duty to help the startup get to that point in the shortest possible amount of time. Telling founders not to take a salary is wonderfully counterproductive on so many levels.<\/p>\nOne caveat: That doesn\u2019t mean founders should pay themselves way above market rates. That said, it also isn\u2019t helpful if you are an experienced developer and you\u2019re getting calls from Facebook recruiters offering you a $250,000 salary. On a good day, it\u2019s easy to say no, but guess what? The life of an entrepreneur is hard and there will be many not-good days. On some of those days, throwing in the towel and taking the paycheck can seem mighty tempting.<\/p>\n
Pay yourself what you need and make it enough so you find it easy to say, \u201cWell, I could be making more at Facebook, but I\u2019m working on something I believe in here.\u201d In other words: if your market rate is $250,000 per year and you can make your finances work by paying yourself $150,000, then pay yourself that much and set some milestones that will let you bump your salary closer to your market rate. If those milestones are tied to revenue or other financial goals, all the better.<\/p>\n
Try this on for size: \u201cI am raising $3 million right now, and once the financing closes, I will pay myself a salary of $130,000. Once we hit $300,000 ARR three months in a row, I will pay myself a $30,000 bonus and raise my salary to $150,000 per year. Once we hit $1 million ARR three months in a row, I will pay myself a $50,000 bonus and raise my salary to $250,000 per year.\u201d<\/p>\n\n
Here are four more reasons why you should tell that investor to roll up their term sheet as tight as it will go and archive it deeply into the filing cabinet that sees no sunlight.<\/p>\n
You\u2019re not working for equity \u2014 you are giving up equity<\/h2>\n
Investors who try to tell you that you are working for equity are being a little rude.<\/p>\n
Yes, as a founder, you do have the benefit of vesting equity in the company. But when you founded the company, you and your co-founders, per definition, owned 100%. That ownership percentage typically goes in only one direction as your company evolves. When you raise funding, you issue more shares and dilute yourself.<\/p>\n<\/p><\/div>\n
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Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Forgive me, but this post will likely be a bit of a rant. I had a call with a founder I\u2019m advising this morning. He is out there raising money, and he received a term sheet from an investor (yay!), but the investor suggested that the founder and his co-founder shouldn\u2019t be taking a salary. […]<\/p>\n","protected":false},"author":1,"featured_media":12698,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"class_list":{"0":"post-12697","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-tech"},"_links":{"self":[{"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts\/12697","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/comments?post=12697"}],"version-history":[{"count":0,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts\/12697\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/media\/12698"}],"wp:attachment":[{"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/media?parent=12697"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/categories?post=12697"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/tags?post=12697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}