Here's How Much Startup Founders Are Allowed To Pay Themselves

first paycheck, check, woman, girl

Photo: Flickr / the Italian voice

If you’re running a venture-backed startup, don’t expect to be able to set a high salary for yourself. One founder who’s getting ready to quit his job and raise a $500,000 seed round asked on Quora: “Is a $100K salary too much for an angel/VC-backed startup co-founder?”

He says his co-founder, who’s a software engineer with a great resume, “won’t accept less than a $100K salary.”

Most responders including Foundry Group’s Brad Feld thought that salary was too high, especially when it’s one-fifth of the total amount raised. Others wondered if the founder was cut out to be an entrepreneur with such a high salary request.

“$100K is below market for a good engineer, but is certainly above market for a seed-funded startup,” one person responded. “Salary should be sufficient to not create hardship — no sense in losing productivity because you can barely eat.”

So what should the founders pay themselves and when is it ok to go for six-figures?

A $50-75,000 salary seems to be acceptable when an entrepreneur is first starting out. “$50K/year is plenty. Some families live on that,” says VC Sean Owen.

David Rose agrees. “On my experience, that fact pattern (a pair of founders, $500K seed round) would typically see them each taking $50-$75K, at least until they either start generating revenue, or raise a larger round.”

When you’re profitable, you can start paying yourself a more impressive salary.

“An adviser once told me to keep the total annual figure (including taxes and bene’s) under $100k per year until you’re profitable, and VCs have seemed to accept this,” another says.

Here’s the most voted up response by Michael Wolfe, a four-time entrepreneur:

Read Quote of Michael Wolfe’s answer to Is a $100k salary too much for an angel/VC-backed startup co-founder? on Quora

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