How much should my startup pay its executives?
Takeaway: Early-stage founder salaries are not about maximizing cash, but about covering living expenses; the real compensation is the equity, and the board must use market data to set a reasonable, defensible cash salary that preserves the company's precious capital.
Setting the initial cash salary for a founder is one of the first and most sensitive decisions a new board will make. It is a delicate balance. The salary must be enough for the founder to live on, but modest enough to signal to investors that they are frugal, capital-efficient, and primarily motivated by the long-term value of their equity, not by short-term cash compensation.
While the process becomes more data-driven in later stages, in the pre-seed and seed stage, the conversation is less about "what is the market rate for a CEO?" and more about "what is the minimum viable salary we need to pay to keep our founders 100% focused on the business?"
The "Founder Salary" Philosophy
In the earliest days, before you have significant venture funding, founder salaries are often very low or even non-existent. Founders are expected to have enough personal savings to support themselves for a period while they are working to get the company off the ground.
Once the company raises its first round of seed funding (e.g., from SAFEs or a small priced round), the board will formally set a cash salary for the founders. The philosophy here is not to match what a founder could earn at a large tech company. The philosophy is to pay them enough to take the personal financial stress off the table, allowing them to focus entirely on building the business. This means a salary that can cover rent, a mortgage, and basic living expenses.
Using Market Data to Set a Defensible Salary
Even at this early stage, the board has a fiduciary duty to the stockholders to ensure the compensation is reasonable. The best way to do this is to rely on independent, third-party compensation data.
A number of firms and cap table platforms conduct detailed surveys of the startup ecosystem, providing benchmark salary data for founders and executives broken down by key factors:
Funding Stage: This is the most important variable. The appropriate salary for a founder of a seed-stage company is dramatically different from that of a Series C company.
Geographic Location: Salaries are adjusted for the cost of living in high-cost areas like Silicon Valley or New York versus lower-cost regions.
Industry: A capital-intensive deep-tech or life sciences CEO may have a different compensation profile than a SaaS CEO.
The board will use this data to set a salary that is in line with the market for a company of your specific stage and size. This data-driven process is critical because it creates a defensible record that the board made an informed and reasonable decision, protecting them from any future claims that they were misusing investor capital.
It's All About the Equity
Ultimately, for any founder, the cash salary is not the real prize. Your primary financial motivation and reward is your founder's stock. The modest cash salary is simply the enabler that allows you to survive the long journey toward building a valuable company where your equity will be worth a life-changing amount. By keeping founder salaries reasonable and market-based, you demonstrate to your investors and your team that you are all in this for the long-term, aligned on the shared goal of creating immense value.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.