I’m currently working on my MVP with my other co-founders and the assumption is that I would quite my job once we receive our seed round. I’m not sure what the salary amount would be in respective of our burn and even reaching a series A.
My current role is senior eng making low 6 figures given the state of the market.
Our assumption is our seed would be around 3~5 mill and I would be taking the CTO role.
I’m trying to figure out what would be the appropriate salary and the opportunity cost of quitting my full time job?
You must log in or register to comment.
I would suggest you adjust expected seed round to around 1M as a long shot assumption. Lots of 250-500k seed rounds out there right now because market is inexorably tight.
For salary, I would try not to take a penny or to take as little as humanly possible. You need marketing, sales and engineering. Your goal is to grow the business with that money, not necessarily reward yourself as if you’ve “made it”.
This isn’t to say you shouldn’t be paid, but you should use those funds as judiciously as possible, and reach profitability as soon as possible.
If in a major US market I’ve seen 100-130k range post seed with the average on the lower end of that unless the person has kids.
Depends on how much you raise and what your cost of living is. There is this myth (?) that as a founder you should be constantly starving and living in a 20 person apartment. In reality, you should pay yourself the minimum amount of money that allows you to not stress about personal finances so that you can allocate all that stress to your startup. As long as you’re frugal and genuinely care about your startup’s long-term success, you should be fine.
Our assumption is…
Don’t count your chickens before they hatch. Worry about raising first then worry about salary.
Can you please give an example with some numbers. E.g., for a 12 Million USD funding, what will be the annual and monthly compensation come down to!
I’d argue that you are not really ready to run a business if your focus is “opportunity cost”.
It is a long hellish road building a business - your salary is the first to go when it takes a turn. Especially when taking in venture capital.
Also a word of advice is that investors will be interested until money is on the table - did you get a term sheet for the pre seed?
Ideally you shouldn’t have a salary, if your goal is to make your company as profitable as possible.
Pay yourself of course through an LLC, I say keep it low enough that you can pay your bills and sink the rest of the capital into the business.
Otherwise you’re just using that seed money to employ yourself. Which can psychologically cause you to get lazy and not give as much effort
I could be wrong ofc but it’s good to at least consider.
Pay yourself of course through an LLC
Do not - repeat, do not - use an LLC if you intend to raise venture capital. I can’t understand why this myth is so persistent. If you don’t get it right from the beginning (Delaware C corp), you’re going to have to change it later, and that will be a lot more difficult than just doing it right in the first place.
You are wrong.
You can’t raise venture capital through an llc.
Llcs are great if you are bootstrapping, want to have pass through taxation, and have personal business expenses to deduct.
150k-250k depending on your location and seniority. 250k is for NYC/Bay area.
Not for a seed founder salary; $250k is too high.
If you’re a co-founder your salary should be as low as possible while not drastically changing your lifestyle. Enough to pay for all your expenses and not worry about making rent. The actual dollar amount will vary greatly.
Given your current compensation it will likely be a large pay cut.
Yeah I’m seeing people paying themselves 60-70K and I’m thinking that is a lot for a startup founder. Rule of thumb is if you’re saving money you’re paying yourself too much
This depends largely on where you live. In some places 60-70k is the minimum to survive comfortably.
Well, you will always have “enough” money if you are working on a problem, you really want to solve.
With your post, I gauge that you are more into being a “tech help” or the “CTO” for the startup.
My simple point here is that if you really want to work on what you are working on, wouldn’t you cut costs? Figure out the least money you should take to survive and solve the problem? And lastly, if you are up for all of this, doesn’t it answer your question?
I agree with you, but if u got your own kids, cutting costs become a really tough task.
You need to be in alignment with what is going on in the industry otherwise your investors may ask tough questions later.
Generally speaking $100-125k for CTO is around average right now. The bigger question is what is your stock compensation as that is how you make up for lower salary if your company is successful.
On the stock side you should try to have acceleration on change of control for some percentage of your unvested share and be careful to understand how you could be diluted in future funding rounds.
https://www.fastcompany.com/90958008/startup-founder-salary-ceo-report-2023
All C-levels take mainly profit in the form of shares, and salary should (in healthy structure) equal or less than the highest manager salary. Basically meaning, you don’t get paid (enough) if you can’t make it profitable.
Expecting to raise 3-5 million for a seed round feels awfully high. As do some of the salary figures offered here. 150k salary pre-revenue?? Maybe I’m just out of touch but that sounds crazy high.
I am CTO at a pre-revenue startup. Fintech SaaS. We bootstrapped with $100k so I haven’t taken a penny for 6+ months. We have MVP built. Now hoping to raise $1 million to scale. I expect I’ll draw something like $60-$75k per year until we’re profitable. And I have kids. Was making ~$200k as a salaried tech employee before this.
I don’t want to be discouraging, but as others have mentioned, your expectations are bit too high for the situation you guys are in. Also, you haven’t mentioned the equity split, which is a factor here.
As a founder, you should pay yourself just enough to not be worried about it. You don’t want to be distracted by not being to pay bills but you also don’t want to take money that could be spent hiring talent and growing the company. The idea is that you forego your salary market expectations in exchange for something that could be much bigger.
CTO is just a title,the salary should be fair with your responsa.
If you are a CTO but 90% of your time is coding,then your salary will be as other devs
I’ve had a similar experience. Currently, I believe as long as my salary can meet my existing living needs, it’s sufficient.
Your payoff is equity, not salary. Draw enough salary to meet your bills. Then in 5-7 years’ time you exit and get enough to never have to work again. Or you fail along the way and lose out. It’s risky, but that’s why the rewards are so big