Founder Salary Confessions: How Much Should You Pay Yourself? AMA with 3x Founder Waseem Daher

@chrismessina My own experience is: being direct and transparent is critical. This is a business decision, and approaching the topic calmly and rationally is the only way to have a reasonable conversation about it.

If it starts to feel like a personal critique, an assessment of your value, or a tense negotiation, something has gone wrong. (Literally one VC thanked me at one point for handling this conversation rationally/not making this conversation be unnecessarily painful or personal.)

Re: how we approached it, we came armed with two things: (1) our own internal sense of what each of us actually needed in cash to let us focus on the company without distraction, and (2) benchmarking data like the data in this report, to demonstrate that our request was reasonable for this size and stage of company.

I don’t think folks should be greedy—I wouldn’t ask for more than average cash compensation—but I also don’t think founders should shortchange themselves either.

Everyone wins when the founders are focused, clear-thinking, able to take the long view, and aren’t constantly stressed about their personal finances.

@siddharthpereiras Hot Take!

@siddharthpereiras Not sure if you're serious or not, but I do think there's an important question here: should you be the lowest-paid employee at the company? Should you be the highest-paid employee at the company?

It's going to depend a lot on the company, but the answer to both questions probably is "no".

@prsarahevans Definitely the dramatic drop in the average founder salary (where this year's average was 43% lower than last year's average). I knew there was belt-tightening in the ecosystem, but I was surprised to see it... so tight.

@steveb What we found was that AI founders were paying themselves (on average) 20% more than non-AI founders. Probably because it feels like a good time to be an AI founder, and the fundraising landscape is better for AI founders at the moment.

@jessica_osorio1 Great question. My approach has definitely evolved:

In my first company, I paid myself minimum wage, and then just enough to cover rent and ramen—classic first-time founder mistake. I don’t recommend it. If you’re constantly sweating over whether you should walk, take the bus, or splurge for that Uber, that’s angst that distracts you from thinking about making the business successful, and is actually really harmful to your ability to build something successful.

For my second company, I took a more balanced approach—enough to let me not stress about that occasional Uber, but nothing too lavish. Probably about 50% of what I could have made elsewhere at the time, which seemed like the right compromise. Cover your costs, give yourself the ability to focus on the business, but also put the cash to work making your equity as valuable as possible.

In the early days of Pilot, we started off the same way, with my compensation ultimately trending closer to market as the company progressed. Ultimately, you want the founders to be able to make decisions that maximize long-term value in the company—and if you’re super-concerned about making rent next month, you’re going to optimize for short-term outcomes.

I definitely think that founders shouldn’t pay themselves lavish salaries—the equity is what’s going to make you rich, not the cash—but it should also be a sober business decision, not some kind of moral purity test about your commitment to being a founder.

@gadiel_morantes1 Here's how I would approach the question: is this going to improve team morale or hurt team morale? And if it hurts team morale, you probably shouldn't do it. In general, compensation transparency (for any role, not just for founders) mostly just leads to bad feelings, so I would probably try to avoid, if you can.

Because no one ever looks at their own compensation and thinks "Wow, I'm being paid too much". They either think "Sure, I deserve $x" or "I should be paid more than $x".

My guess is—if your salary is not $0—some % of folks will say "yes, that's a reasonable founder salary" and some % of folks will feel that you're overpaying yourself.

@jenn_g Honestly, probably both. It's a boom time for funding for AI companies, but not really much of a fruitful funding environment for non-AI companies, so I think that causes some belt-tigthening.

But even among AI companies, founder compensation fell significantly across the board.

So I think the ecosystem has really shifted to a "growth plus profitability" mindset (rather than a "growth at all costs"/"money is free" mindset), where founders are sacrificing their own compensation to extend runway and reinvest in their businesses.

@steveb I think you are correct that there are lots of early-stage founder-CEOs that are paying themselves far below market

@steveb I think that even Meta employees are paid more than CEOs. But when you try to scale up the business and survive, you need to sacrifice something.

@justinwiguna I think founder comp should scale up as the business raises more money—the company can afford it, and you actually do want the founders to be taking the long view on the trajectory of the company (otherwise they will exit too early.)

I think the same rules apply if the business is super-profitable.

The rule of thumb here is: if the business can afford to pay a salary that approaches the market rate for the person, without compromising the business's trajectory, they probably should.