Ever wonder how much you should pay yourself or how much equity stake you deserve after getting that shiny new check from your favorite VC? Professor Noam Wasserman of HBS plus a host of consulting firms puts together an survey pretty much every year called Compensation and Entrepreneurship Report in Information Technology. You can find it at www.compstudy.com. Here are some of the interesting parts. . .
Most non-CEO founders end up in “Business Development” which quickly translate to “out of a job” within a year (j/k)
Blue is median, red is mean. Not sure if the number is total founder stake or for a single founder . . . but I’m guessing its a total number but the average # of founder is less than 2 . . .
Dark blue is non-founder, light blue is founder . . . founder equity share does vary with position . . .
The first graph is the average the second graph is founder who also holds the title. . . take away? Dont let VC’s convince you to take more than 15% less cash just because you have more equity . . . get what you deserve at market rate.
Actually, I think Wasserman makes some good rational arguments about why founders take less cash compensation, and the conclusion is not necessarily that founders should negotiate harder with VC’s. The gap between founder and non-founder cash comp broken down by stage of venture it narrows significantly.
I know a few founders who explicitly took lower comp so that they could use that as a negotiating lever for new hires (”that’s more than I make as the CEO!!”), for instance.
Comment by Jeremy — April 18, 2006 @ 10:07 pm
Hi Jeremy. . . I was being a little facetious
. . . I personally took a lot less as a founder than my non-founder peers (over 50% less) . . . as a way to set the tone for the company. . . but as the company grew the gap narrowed. . . if I was to do it again, I’ll do a 25% discount rather than 50% . . .
Comment by will — April 19, 2006 @ 10:05 am