Don’t Be a Greedy Founder!
October 3, 2008
Jay Parkhill who authors the Startup Toolbox has a great post about Why Deferred Salaries Don’t Work for Startup Founders, and his advice is pretty solid in my opinion. Jay talks about how many startup founders are worried about salaries, especially those who come from pretty comfy jobs.
So how do you NOT care about NOT getting paid?
Here’s the meat of Jay’s argument:
No Deferral, No Salary, Just Stock
The way out of the dilemma is to give up on the idea of taking much cash out of the business in the early going. Buy your founder stock (for cash!) at a very low price when you start the business. That is what you get instead of a salary, so be mindful of unnecessary dilution (no “advisory” options to friends and relatives) and work on making that stock as valuable as you possibly can. You may not see much cash for a couple of years or more, but if you are lucky the stock will more than compensate for the sacrifices made in the early days.
My own thought on that matter is that if you’re truly worried about your salary, then maybe the startup environment isn’t for you. After all, you could lose your job at any given moment!
For web startups, there seems to be a growing trend toward bootstrapping and building your business one customer/feature at a time. If you don’t need a bunch of money to get your idea off the ground, this is probably the best route to go if you’re worried about your personal cash flow.
