{"id":42593,"date":"2023-10-20T15:22:21","date_gmt":"2023-10-20T15:22:21","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/do-australian-startup-founders-pay-themselves-too-much-startupsmart\/"},"modified":"2023-10-20T15:22:21","modified_gmt":"2023-10-20T15:22:21","slug":"do-australian-startup-founders-pay-themselves-too-much-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/do-australian-startup-founders-pay-themselves-too-much-startupsmart\/","title":{"rendered":"Do Australian startup founders pay themselves too much? – StartupSmart"},"content":{"rendered":"
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When did salary expectations for some early stage startup founders in Australia reach $150,000? Optus-Innov8 lead principal Alfred Lo found himself asking that question after looking into possible investments late last year.<\/p>\n

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There\u2019s no hard and fast rule for figuring out founder salaries. Last year\u2019s Compass Report highlighted the salaries of Australian founders were relatively high when compared to startup markets like San Francisco, Los Angeles and New York. The recent fall in the Australian dollar has dropped that average to about the same level of the Los Angeles Market \u2013 between $US61,000 and $72,000.<\/p>\n

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\u201cThe interesting stat however isn\u2019t actually the salary,\u201d Lo says.<\/p>\n

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\u201cIt\u2019s the ratio of the salary to the amount of capital raised \u2013 rounds in the US and more developed ecosystems tend to be larger for the same life stage and as a result, Australian founder salaries tend to be a larger percentage of the funds raised.\u201d<\/p>\n

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As startups become more and more popular in Australia, Lo says he\u2019s noticing entrepreneurs entering the market that have previously held well-paying jobs and managing their salary expectations can be challenging for investors.<\/p>\n

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AirTree Ventures partner Craig Blair has been on both sides of the negotiating table. In 1999 he quit his strategic consultancy job, one that paid roughly \u00a3120,000 ($A220,000), to join a startup \u2013 TravelSelect.com, where his salary was roughly a third of that, even after a large Series A fundraising round.<\/p>\n

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\u201cIt\u2019s a very tricky conversation, that\u2019s more of an art form than a science,\u201d Blair says.<\/p>\n

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\u201cYou\u2019ve got to consider, from the investor\u2019s perspective, almost certainly when someone\u2019s writing a cheque, it\u2019s not worth that today. It could be in the future, but it\u2019s not worth that today. It\u2019s correct that founders have to realise equity is where the upside is coming from, not a big fat salary.<\/p>\n

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\u201cWhen you\u2019re trying to keep costs low, the founder really sets the benchmark for everybody for how to use capital sensibly. But you also want your founders happy. You want them to be able to live a reasonable life, to be able to take their partner out for a meal every now and then and not be worried about the bills.<\/p>\n

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\u201cIn terms of numbers, I would say it depends on the stage. Series B, C and D you\u2019re looking at anything from $200,000 to $500,000. If you\u2019re looking at very early stage then sub $100,000.\u201d<\/p>\n

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Blackbird Ventures managing director Rick Baker says Blackbird has a general rule that early stage founder salaries shouldn\u2019t go above $100,000. The firm expect founders to earn salaries between $60,000 and $80,000 for seed round and from $80,000 to $100,000 for Series A.<\/p>\n

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\u201cIn the very early stages of a business before an external funding round, say the first 6-12 months, we often advise founders take no salary, or just enough to scrape by,\u201d he says.<\/p>\n

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\u201cThe idea here is that they can take the business as far as possible before raising capital to minimise their equity dilution.<\/p>\n

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\u201cAll that aside, at Blackbird we\u2019re very focused on making sure the founder(s) are aligned with us as investors. This is almost always best done through equity. We\u2019ve said no to a few investments where we\u2019ve liked the business, but for some reason the active founders do not own enough equity. In other cases we\u2019ve worked with the founders and other shareholders to increase founder equity to a level we think is appropriate before investing.\u201d<\/p>\n

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Follow<\/i> StartupSmart on<\/i> Facebook<\/i>,<\/i> Twitter<\/i>, and<\/i> LinkedIn<\/i>.<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

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