Most people associated startups with rapid growth and big fat salaries for founders. The reality couldn’t be further from the truth and sometimes comes as a shock when I describe it to clients. I’ve outlined the key points that people miss below.
Let’s talk about your salary – it doesn’t matter if you were on 150K at Google or Facebook, your new startup is a clean slate. If your startup is profit positive, you can choose your salary. If you’re bootstrapped and are not yet profitable, you’ll probably take a small wage. And most importantly if you’re venture capital funded you’ll have an existence wage. This term describes a wage which will allow you live very modestly in your city (more in SF and less in Melbourne). I’ve heard averages like 40 to 50K from clients who have raised funds.
This is appraised when you’ve proven to the investors that the business has the potential to scale.
The business comes first – this is the usual justification as to why investors pay you an existence wage. In essence, they are investing in the business and not you per say. They want their funds to directly go towards scaling up the startup – not financing your new sports car. It’s harsh, but It makes sense, you can get all the perks once your company is working.
You’ll have to sacrifice – and this happens regardless of your funding method. Selling assets and putting everything into this new venture is a must. You have to be 100% all in to make it work! For instance, Mark and Josiah co-founders of Appster paid themselves a very small for a long time.
But at the end of the day the sacrifice and general “broke’ness” it’s all worth it – I hear this from every successful founder!