What Is A Reasonable Salary For Early Founders When Raising Outside Capital?

Posted by Robert Norton on

What Is A Reasonable Salary For Early Founders When Raising Outside Capital

A reasonable salary for any CEO or founder is a $100K to $200K today. This depends on their experience and market value which could easily be $500K+. A CEO with ten years in that seat is worth $300K to $500K base salary, but investors want them to have skin in the game and urgency too.

Like a salesperson you never pay them enough in base salary to be totally happy, or financially comfortable. Stock value should be the main long-term motivation. At 20% capital gains tax, not 50%+.

What is more important is that the base salary is a small fraction of the upside of their equity. Investors want founders 100% focused, not worried about paying their personal bills, or moonlighting to do that.

Building a company is a marathon not a sprint. All the founders need to be committed for a 5 year period. And in any VC level opportunity ought to have at least $10M to $20M upside with reasonable success. With 3 to 5 key players that's a $100M stock option pool. Normally at least 10% of the company, and can be 50% with founder stock too before a Series B round.

I would never sell more than twenty percent to investors in a first round series A. So founders and team own 80% with $1M to $3M in seed funds to build the real product at scale and enter the market too, not just the MVP. Then the series B can raise 2 to 4 times the capital and still sell only 30% in Round #2. Leaving founders and employees with about 50%.

Smart investors grant more options if the management team is diluted below 20% with 10% to a CEO Founder maintained. More if they put up early cash, as I always do.

Every billionaire ever bootstrapped first to get proof of concept and revenue before raising any institutional capital. The lean startup method building an MVP with founders sweat equity and personal funds. This is practical for most companies.

You can see my free course on the process of designing, building and launching a startup here:

Entrepreneur's Journey

We also have a webinar on raising capital here: https://www.ceobootcamp.us/capital

Bob Norton is a long-time Serial Entrepreneur and CEO with four exits that returned over $1 billion to investors. He has trained, coached and advised over 1,000 CEOs since 2002. And is Founder of The CEO Boot Camp™ and Entrepreneurship University™. Mr. Norton works with companies to triple their chances of success in launching new companies and products. He helps established companies scale faster using the six AirTight Management™ systems. And helps companies raise capital.

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