Like all entrepreneurs I closely follow a host of first generation entrepreneurs on social media. Peter Thiel (co-founder – PayPayl) is one of them. In one of his interviews, he had mentioned that the CEO’s Salary was one of the critical things he considered before investing. In a startup environment, the salary of the CEO says a lot about the startup and its potential for success.

It took me down the memory lane, because that’s what my investors had said to me when I had approached them for funding.

So how much a startup founder or a CEO should pay himself?

• A lower salary equates to more cash for the company, especially at the seed stage. As many of you would know, how vital it is to be capital-conscious at this stage. Many startups owe their success to their CEOs, because they didn’t draw salaries (yes, they worked for free) and put in their share of the “sweat equity”.
• However, this austerity should be limited. How can a CEO make critical business decisions if he is always stressed about defaulting on the home loan? Salaries should match the needs of the CEO. A young and single CEO can afford to take home less than a married CEO with kids.
• The amount raised in the seed round affects the salaries. The bigger the amount raised in the seed round, the higher the salary of the founders.

There is no correct answer to the question. How much a CEO takes home has to be jointly decided by the CEO and the investor. However, it is advisable to use the investment wisely and keep track of the cash burn.

Eazyhire Team