Why Deferred Salaries Don’t Work for Startup Founders

(1) Plenty of founders do get deferred comp. Like all other compensation issues, it's all about sales ability. You either sell your investors on getting money, or they sell you on keeping it.<p>(2) "There's never spare money" is a great argument for paying the CEO a sustenance wage. That never happens; the CEO walks in the door at 175-225k with a severance package and a founder's share of equity.<p>(3) "There's never enough revenue" is a great argument for running your business to break even or profit. If you can do that, you don't need VC. The question isn't <i>whether</i> to lose money, it's <i>where</i> to lose it.<p>(4) Get your accounting advice from an accountant, not a blog post.<p>I'm not advocating in favor of deferred comp, I'm just saying, anecdotally, I know the story not to be as simple as this post represents it. I don't think you should take VC at all.

This raises another question - how do you ensure fairness between co-founders. Particularly if one comes into the game later, or takes an extended break, or simply can't contribute as much as the others (e.g. has family commitments).<p>Is this usually settled in the division of equity? If so, how hard is this to change over time? I'm sure once you're rolling this wouldn't be overly simple.

I've always thought that deferred comp was a long shot at amounting to anything. It rarely pans out.<p>I've gone for the "founders never earn more than anyone else" approach through several startups and I've found that it works well. Sometimes, at the start, it means the founders earn $0 or need to infuse cash to pay others. But the benefits for the team are great. Of course, this assumes the founders can afford to do it.

How about raising some seed funding and paying yourself a modest salary out of that, rather than seeing no cash for years? Seems to work well enough for many.

Do founders actually do this? I'd never even heard of such a thing.<p>I imagine the investor is getting extra equity to make up for this (since the investment is less desirable due to it) so the deferred salary probably be less than the founder would get in a liquidity event if he had just hung on to the extra equity. And it there's no liquidity event, he's not getting it anyway.

why would you defer compensation? getting vc funding is the time to pay yourself your fantasy salary. most very-early people i know at startups now are paying themselves minimum $150k AND UP. you can get the funding to do that if you have a non-bullshit idea. if your funders put you on poverty wages, its time to read the tea-leaves...they are assuming you will fail