Startup Founders Need To Advocate For Their Own Compensation — Here's How To Do It Right

Then there's nan old-school mentality among immoderate investors that founders should "stay hungry," implying humble compensation is basal to enactment driven. Let's beryllium real. Running a startup is simply a grueling job, and founders merit to beryllium compensated justly for their efforts.

Compensation tin beryllium a tricky subject, peculiarly for investor-backed founders. Yet, it's a taxable that excessively often gets pushed aside. Studies personification indicated that startup founders, connected average, return location up to 20% small successful complaint compensation than non-founders successful comparable patient roles.

Startup founders earned an mean of $150,000 successful 2022, importantly small than backstage institution CEOs, who averaged $377,850. This stark dispersed highlights conscionable really undervalued founders tin be, moreover while shouldering nan immense activity of building and scaling their companies. Interestingly, method and merchandise founders bladed to summation overmuch (around $155,000) versus their CEO counterparts (approx. $142,000). However, immoderate founders forego net altogether, a inclination that accrued from 7% successful 2023 to 9% successful 2024, according to nan Pilot Founder Salary Report.

This is peculiarly existent for early-stage startups, which often deficiency building specified arsenic compensation committees. In specified cases, laminitis net tin easy get neglected, peculiarly arsenic lead investors get stretched bladed serving connected aggregate boards and making caller investments. So if you don't advocator for yourself, who different will?

As a erstwhile laminitis and investor who now sits connected respective institution boards, I've made it a privilege to reside laminitis compensation early on. I've seen really neglecting this rumor tin lead to burnout and resentment, yet affecting immoderate nan laminitis and nan company. Here's really you tin champion nan taxable of your compensation and yet do it successful a negotiated way.

Related: Founders' Salaries Are Shockingly Humble, New Report Finds

Approach nan reside strategically

When it comes to discussing your compensation, tread cautiously — you don't want to consequence being seen arsenic greedy and self-serving. Many founders look portion from antiquated manufacture norms that glorify under-compensation. Some investors judge that CEO net correlates pinch greater startup success, perpetuating nan conception that "the small nan CEO salary, nan overmuch apt it is to succeed." While this thought of "staying hungry" mightiness resonate pinch some, for galore founders, balancing individual and maestro obligations makes adjacent compensation a captious facet successful maintaining accusation and preventing burnout.

One measurement to onslaught this is to commencement by addressing nan broader executive compensation package for your team. Solicit nan board's input for existent and early cardinal hires. Once that's connected nan table, you tin modulation into asking nan committee really they position your executive compensation successful nan sermon of nan wide team.

Framing your compensation arsenic information of a larger committee process alternatively than a individual inquire makes it small self-serving and overmuch astir nan institution arsenic a whole. If location are too individual circumstances that are distracting you from your role, specified arsenic rising surviving costs aliases wellness issues, beryllium judge to mention them truthful your committee tin understand your afloat picture.

Be prepared and methodical

Once you're caller to onslaught your board, beryllium organized. When coaching founders connected boards I work on, I ever show them to spread accusation that will thief maine advocator connected their behalf. For example, you tin show your committee surveys aliases marketplace information that point what others successful akin roles are earning. If your net is beneath market, it's an easy suit to warrant a raise.

If you're unsure wherever to start, devices for illustration Christoph Janz's nett calculator tin help. For example, a San Francisco-based laminitis pinch 2 kids who has raised a $5 cardinal Series A mightiness beryllium suited for astir $150,000 successful yearly compensation; meanwhile, for a Berlin-based laminitis pinch nary kids and a $2 cardinal seed round, $50,000 mightiness beryllium a overmuch realistic average. By demonstrating really your projected nett aligns pinch factors specified arsenic institution stage, location and family obligations, you tin make a stronger suit for adjacent compensation.

Giving them elaborate headdress tables pinch pro forma calculations tin too thief them understand really expanding your equity impacts different stakeholders including themselves.

Related: 4 Expert-Backed Tips to Negotiate a Raise aliases Promotion

Don't spot equity

Equity is different often understated facet of compensation. Many founders personification afloat vested their banal aft 4 years and find themselves pinch point adjacent to earn. If location are nary further equity aliases top-up grants, your accusation could drop, peculiarly arsenic your ownership dilutes complete clip done caller backing rounds and issuing options to caller employees.

At Vungle, I received respective equity grants that helped support maine motivated. Some of these grants were designed to protect my stake, peculiarly arsenic we raised $25 cardinal crossed aggregate backing rounds. Without these grants, my equity would personification been diluted significantly.

If you're nearing nan extremity of your vesting schedule and haven't secured immoderate caller grants, it's clip to fto nan committee cognize truthful they tin talk giving you overmuch equity. It's too an opportune infinitesimal to inquire nan committee for "single-trigger acceleration," which allows you to afloat vest caller equity if nan institution is sold. This tin springiness you greater negotiating powerfulness successful nan arena of an acquisition by a larger company. Some boards whitethorn beryllium averse to this but nan economical effect connected your nett worthy tin beryllium important if it's granted truthful it's worthy asking.

Related: The Ultimate Guide to Equity Compensation

Time nan taxable correctly and bring successful advocates

The champion opportunity to bring up compensation is during year-end readying cycles. The committee is already focused connected budgets, capacity targets and strategy for nan upcoming year, making it a earthy infinitesimal to reside pay. I for illustration to activity pinch founders connected creating a board-approved yearly strategy and past relating nan laminitis prize to nan accomplishment of this plan. For instance, if you deed guidelines goals, you mightiness unafraid a 20% bonus, while exceeding targets could unlock a 40% bonus. Just retrieve to headdress those bonuses. Founders should beryllium incentivized, not compensated for illustration a income team.

Finally, it's important to beryllium humble and negotiated erstwhile discussing compensation. Always definitive gratitude for what you're given, and debar immoderate consciousness of entitlement. But overmuch importantly, don't spell it alone. My champion advice? Bring an advocator onto your board, whether that's an independent committee unit aliases a VC who is sympathetic to your individual goals, truthful you don't personification to beryllium nan 1 perpetually pushing for your ain compensation.

If you personification a smaller board, you'll apt petition to support your ain case. But if location are aggregate VCs, find 1 who tin champion your cause. Ideally, inquire nan committee to create a compensation committee. That way, there's a wide process successful spot to guarantee you are compensated appropriately.

Related: How to Build an Advisory Board That Drives Startup Success

At nan extremity of nan day, advocating for your compensation is astir ensuring fairness — for you and for nan early of your company. And while humility is crucial, it's too important not to downplay nan worth of adjacent compensation. A motivated laminitis is basal to a startup's success, truthful advocating for your net is astir alignment, not indulgence.