One Simple Rule On How Much To Pay Yourself Once You Raise Venture Capital

The Answer: 2 X The Average Employee Salary At Your Startup

Photo by Lala Azizli on Unsplash
  • How much money has been raised in total (the more money that has been raised, the less founder equity each founder owns, so they get paid less)
  • How long have you been working on this startup (founders who have worked on their startup for a long time should get paid more than founders who just started working on their startup)
  • Your personal circumstances (for example, whether or not you have kids or another source of income).

Here’s how to use the 2x rule to set your founder/CEO salary.

Step 1: Calculate the average employee salary at your startup.

At most startups, the founder/CEO is also the most senior employee. So you can just use your own salary as a proxy for the average employee salary.

Step 2: Set your founder/CEO salary to 2x that number.

So if your startup has 10 employees and their average salary is $120,000/year, then you should set your founder/CEO salary to 2x that number: $240,000/year.

There are two exceptions to this rule:

Founders who just raised venture capital who are also the most senior employees at their startup.

These founders might think that their company is different from the rest of the startups out there, and that they should set their founder/CEO salary to something other than 2x the average employee salary.

Now let’s talk about how to set your founder/CEO salary if you’re not the most senior employee at your startup.

If you’re not the most senior employee at your startup, then you can still use the 2x rule to set your founder/CEO salary.

Founder of Cudy Technologies (www.cudy.co), a full-stack EdTech startup helping teachers and students teach and learn better. I am also a mentor and investor.

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