I don’t think many founders will enjoy reading this. It will sound too much like a VC lecturing, but I think it’s a topic that needs to be covered. At Boost VC, we run into this too much.

At Boost VC we invest in a lot of startups and with that we get a range of personalities, and with that comes a wide range of salary management philosophies. I’m not going to say that any specific one is right, other than the one that builds a successful company.

The two major mistakes that people make sound silly, but are detrimental long term:

I made $ X at Google/ or big corporation Y, and so I’ll make 20% less here.
It’s unsustainable to live on the salary I am paying myself, I should increase it.

First, this paradox determines what mindset you have in building your startup — The most ambitious founders, I find have the mindset of “THE WORST THING THAT COULD HAPPEN IS THE END OF THE COMPANY.” It sounds extreme, but in the history of startups that mentality will give you the best cushion to allow the success of the startup.

With the first example — This is the type of founder who believes that they can take all the risk of starting a business and none of the “Lifestyle” risk. It just doesn’t work. This means that you are putting your lifestyle and comfort above the success of the company, and the universe eventually death by 1,000 cuts you.

I’m not sure if I’m allowed to say this, but one of my good friends who had founded a space startup invested everything in the startup. He had a successful exit previously, has a wife and three kids, and when my partner asked him “what happens if this fundraise doesn’t work” answered: “Well, I’d have to sell my car, and my kids would go to public school, and I’ll have to move in with my in-laws.”

This is a founder who sold a company previously for $150m, who believes in himself and what he is doing so much that he took the ultimate risk. (In case you are worried, he landed the plane)

2. It’s unsustainable to live on the salary I am paying myself, I should increase it.

Look, I’m all for people to pay themselves more as a company grows, but if you are arbitrarily thinking “I need more money, so I’m going to pay myself more money,” You lost because the compounding impact of that decision making will kill your business. You need a process for rewarding good work and rejecting bad work.

The best example I have of this is the founders of Robin Hood who decided not to pay themselves until they got their broker dealer license. They knew that the most important thing for their business was to be able to transact stock trades… so they made their achievement unlock their salaries.

Reward achievements, not arbitrary moments.

*Originally published on Adam’s Substack - https://www.adamdraper.vc/

Founder Salaries.