When asking for funds from an investor, how do I decide my own salary?
I will be speaking with a potential investor soon. And I will be quitting my job to run this startup. I will also be the only one running the startup for at least the first 6 months. How do I decide how much I should get paid? Is it right to ask for a salary even when we project no revenue the first 3 months?
3 Answers
If you can live without a salary, you can defer your salary for a few months. That way you won't lose it, and you won't adversely affect cash flow until you get some revenue.
It would be reasonable to ask for something on the low end of the average range for a similar position at an established company, with consideration for your experience, education, etc. If you can take a lower salary for the first year or so with a significant increase later, it might be more palatable to the investor.
Your investors should not want you to starve, or spend time worrying about finances when you could/should be worrying about the company. At the same time, they will likely expect you to be efficient with the investment.
A common approach can be to set a fair salary for yourself, we'll use $100K/yr. as a round number. Your agreement would be to take a fair "draw" on this to cover living expenses for the first x months (6-12, or when a particular milestone is hit), with the balance being accrued for a deferred payment. So, you might collect $2500/mo. as your direct salary, and $5800/mo would be accruing on your behalf for future payout, subject to milestones being met.
This way you can pay your bills without stress and maintain motivation to hit the milestone on time since it represents a bonus of sorts to you personally.
Also, the answer will vary somewhat based on your track record and available options. If have proven ability to deliver and other lucrative offers, then a more traditional base salary might be appropriate. If you represent a large gamble to them, the numbers might be lower.
