The Wrong Reasons To Pursue Venture Capital: Founder Salaries | Hacker News Reader

The Wrong Reasons To Pursue Venture Capital: Founder Salaries

markpeterdavis.com

I don't see why the reason for the money really matters. If you have founders that don't need salaries, but do need to buy $400k worth of equipment (or whatever) it's not much different than two guys who need $90k/year salaries for 2 years (because they're older and have mortgages/families/whatever).

If you can get enough money from angels you should probably always do that first. If you can only get a sufficient amount from VCs then you don't have a choice.

I think a very small % of founders raise money solely for their own salaries. However, given that human capital is often the majority of costs for early stage start-ups (especially consumer Internet) and that small teams can accomplish a lot it doesn't seem off-base for lean startups to extend their runway by raising venture capital to pay salaries for founders and early employees.

In unrelated news, an associate at a VC firm makes an average salary of $194K/year. :)

While I agree with the general idea, that a founder's salary is a means to and end (growing a company) and not an end in and of itself (hooray I have a paycheck!) I'm not sure it was well explained. He seems to be saying that VC funding should not be thought of as the road to fat paychecks but that there are other routes to go if thats your goal. There is a decent bone of an idea in this article - just not enough meat on it for my tastes.

"The lower the CEO salary, the more likely [a startup] is to succeed." - Peter Thiel

http://techcrunch.com/2008/09/08/peter-thiel-best-predictor-...

Low != non-existent. He certainly is not saying that money raised should not be for salaries.

'What’s the average salary for CEOs from funded startups? Thiel was hesitant to answer, but eventually said “$100-125k.”'

Probably because low salaries are a proxy for commitment, not because of direct cause-and-effect.

The investors I know want to match their risk profile with the risk profile of the founders.

That means that if they are risking 1% of their net wealth, they would like the founders to also risk ~1% of their net wealth - even if that means $4m or $40.

This is because they don't want founders to have incentives that don't align with theirs. You are right that no one wants a founder who is under-invested as they may end up not pushing hard enough.

But a founder who is over-invested might cause even more problems because if a 2x return means they get to keep their house they might not go all out for a 50x return if it puts that 2x return at risk.

I would enjoy the site more without ridiculous pictures.

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