Ask HN: do founders get a salary after raising angel round?

I worked 3 years at my last startup paying myself the absolute minimum possible. When the startup failed, this meant I didn't have any savings and immediately had to dive into consulting work. Part of the reason you take investors is to share the risk of the startup. In retrospect, I wish I'd paid myself more and hedged my bets a little better. Most startups fail leaving the founders burned out and broke. Now, I agree you shouldn't be making a fortune, but you don't want your personal finances to ever be a distraction from your business. You should be figuring out how to make your business successful, not worrying about finding money to eat or pay rent. You'll have plenty enough to stress over at work.

Norms are in a rapid state of flux on this. I was told by people I consider extraordinarily credible that in the last two years their best companies, whose angel rounds would have resembled Series A a few years back, offered founders salaries roughly approximating market value of eqivalently skilled engineers employed in the area. (i.e. $120k not $40k, in the Bay area.)

I will also report this observation: "You'll think this is crazy. I thought it was crazy. But the last REDACTED deals I did included a partial cash-out for the founders." (I.e. rather than selling 10% of the company for $800k deposited in the corporate account the deal was $600k for the Corp and a $100k check for each founder.)

Really depends on how big your angel round is. If you've raised 200k and you've got 3 founders who all require 60k salaries each you'll get a year of runway which isn't very long and that's not even taking into account the possibility or need for taking on more employees.

I recognised early on that 'end of runway' anxiety is very real for me, as it creeps up it really affects your decision making on product direction and how you spend your time.

I would prefer to work backwards and do whatever it takes to make the angel round cash last at least 24 months without sizeable revenue with the salary capped at somewhere between 60-70k if the angel round was big.

If that cuts your salary from 60k to 30k so be it, make the necessary adjustments, it might even include taking a part-time gig consulting/designing/selling or whatever it is your skillset allows you do. In the same vein that the cash you spend now is 'expensive', any cash you earn on the side is should be viewed as a necessary investment of time to help you reap the returns later if your startup salary can't stretch to cover all your costs.

I worked with a few venture firms last summer and got to meet a lot of the entrepreneurs they've funded. Most of them were working out of a angel or seed round and all were being paid.

The understanding is that you as the entrepreneur will put in 100% (more like 150%) of your effort & time into the company so, naturally, that eliminates other direct work for a source of income. The venture firm was providing them a salary but it was always explained as just enough to cover living expenses (rent, food, car, etc). In terms of numbers, this will obviously vary greatly depending on cost of living in your area but consider what would be just enough for a modest life.

Taking as little money as possible from the round for a salary is actually in the best interests of the entrepreneur as well. The money raised early on is very "expensive" in terms of equity given up for it. If you truly believe in your company and idea, you'll realize that the 40K or 60K salary you want now actually costs you $400K if/when you exit or IPO. Of course, this is just an sample, optimistic scenario but hopefully you see my point.

It's normal to take a livable salary. For the founders I've spoken to in the Bay Area the range is somewhere between 40-60k/year. The variance depends on your expense policy and how you've setup your work environment. For example if you expense all meals, coffee, and you live and work out of an apartment, it's easy to get by on less than 40k which can take care of things like car payments, student loans, etc.

Maybe this would be a good question for a poll. We pay ourselves each 40k/year.

You can't live without a salary, and you can't be productive unless you're alive. Putting money into a start up and expecting the founders to not take a salary would be like putting money into a bakery and expecting the owners not to buy flour.

As far as what is acceptable, it depends on your market, the idea, the investors, and the founders. I've seen as low as 40k (approx 50% market value for the founders if they were employees) and higher than 100k.

If you can swing it, don't take a salary at all. You'll thank yourself later.

Otherwise, anything between $50k-$90k (Bay Area) is reasonable depending on founders' personal situations. My current company has raised <$1m and there hasn't been any pushback from investors so far.

Obviously, unless you're rich. Go for USD 500 more per month than you need to live (food & rent).

If you live in a place like the SF Bay area (or anywhere with a state income tax), take as little as possible for your salary. 60k max, and if possible even less than that because whatever you take as salary you'll be losing 30%-40% of it immediately (which could better be used for your business).

You can expense your rent out of your company since you will likely work out of a home office. Car and (maybe) meals as well.

There are some really good reasons to at least pay minimum wage to founders, including that it's really hard to get them health insurance if you don't. And, it's typically better to get enrolled in a health insurance plan early (when there are only a couple of employees) than later.

And there are lots of reasons (already mentioned in other comments) to pay them better than minimum wage.

Yes. I think worrying about how to pay your rent takes away from the value you can be adding to the company. I also would add, that I have seen my friends startup in which 1 founder took nothing, cause he was covered, another took about 60k, and the third took abut more cause he had 2 kids.

They should, and if one chooses not to take a salary because he can afford it, he should be getting equivalent equity.

I don't know why this "garage myth" gets so much romance. It works for rich kids who can fall back on their parents, for students, extremely well-established people who have lots of savings and connections to fall back on, and for people who can time-travel back to the time when rents were reasonable in Silicon Valley, Boston and New York. In practice, you cannot have long-standing (over 6 months) financial pressure and keep up the level of job performance that a startup demands. It does not work that way.

It varies. Depending on the size of the round though, at least a living wage is acceptable, so this will differ by region.