Quora Answer: Do Startup Founders Earn Less Than Their Employees Trying to Get the Company Off the Ground?

The following is my answer to a Quora question: “Do startup founders usually earn less than their lowest paid employees during the first few years of trying to get the company off the ground?” 

That really depends how much your lowest paid employee gets, and it is depends on many factors, including your relationship with your investors.  I have run companies, and we raise funds for projects.  As directors, we pay ourselves first, because our time, our effort, our network, our expertise, is worth something, and it is a cost to the business.  If an investor cannot understand that, that is an investor we can do without. 

This comes down to how you negotiate the deal, shape the conversation, and structure the relationship.  The investor is not merely putting money into an idea, a product, or a service.  They are investing in the people who came up with it, and set up the company.  In our case, they are investing in us.  Money loses leverage as the company grows and the business gains traction.  It is only logical that an investor would seek to extract as good a deal as they can when the power dynamic of the relationship is mostly in their favour. 

On the other hand, the investor understands that we have options in financing, and we can walk away if we do not like the deal, because we have the idea; all they have is money.  Without people with our ideas, they do not have the opportunity to make money from investing in this end of the spectrum.  It would be illogical for us to work for free, in the hopes that the business might make money some day.  That is playing the lottery with your personal finances.