How Much Co-Founders Should Pay Themselves at a Startup During Growth

When it comes to determining pay for co-founders in a startup, the question is not just 'How much do they generally pay themselves?' but more importantly, 'How much should they pay themselves?'

Getting Started and Initial Costs

At the genesis of a startup, co-founders often must borrow money to pay their employees, as loans are a common form of early funding. If the startup is successful, co-founders may eventually demand less than their employees, but their compensation will grow if the venture is a success.

Early Compensation: A Strategic Investment

Co-founders should pay themselves as little as possible without placing themselves in extreme financial hardship. Early stage funding is critical to the company's success, and the founders should be willing to give up equity offers in lieu of cash, as early dollars are more expensive. A good example is Airbnb, where the founding team managed financial hardships effectively.

The key point is that every dollar taken out of the company in the early stage to pay yourself is like taking nutrients out of a baby's bottle because you're not able to plow those funds back into operations. Founders should have enough vested equity to incentivize themselves to work hard and build the company, combined with their passion for creating great products.

Adjusting Compensation as the Startup Grows

As the startup grows, the founders' remuneration should also increase. If too long passes without income, founders may start to feel the personal financial strain, which can become a distraction and negatively impact their ability to keep going.

Example: Equal Power and Incentives

In some cases, such as in my situation, co-founders may have additional remuneration and bonuses. However, the amount and form of this remuneration can vary widely among different teams.

Deciding on Compensation: A Personal Decision

Ultimately, the amount of remuneration a startup founder decides to give themselves is up to them. There are no set guidelines. Generally, founders invest the money they earn back into the growth of the company.

It is essential for co-founders to decide together how much remuneration they want and understand that each decision is a strategic move that affects the company's growth trajectory. Whether you take a high salary now or save and invest, it's crucial to align this decision with the long-term success of the venture.