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How much money should founder take from startup?

I'll be building a startup in near future. Don't question my passion because of such question, I'm highly passionate about startups and making a difference. I just want to get knowledge of every aspect of it before going into it.

Here, there are great entrepreneurs that have experience in startups. I want to get advices from you, that whether the founder should take money from startups revenue(not investment)? (Also, if I prefer going for bootstrapping then how this change)
If yes then,
->How much money he should take(in terms of %)?
If no then,
->When he should take?


Consider, there are 2 co founders that have a startup idea, had researched about the market, people are willing to pay. We go for crowdfunding. We build mvp. And if we get good revenue, then when is the time we should take money and above questions.

For summarizing,
There are three cases of this question.
1. Whether or not to take money, when, how much we should take it?
2. How will taking crowdfunding alter the answer?
3. How will bootstrapping alter the answer?

Answers will be greatly appreciated for all the cases. I'm entering the startup world. And all of you have gone through it and have been successful. So you can guide me through whole process. Any other startup related idea would be a great bonus for new comer.

Thanks,
Akshay N. D.

EDIT :
I'm a 4th year CSE guy, I personally not in a need of money, but if I'll go for the startup instead of normal job, my parents will be expecting me to take minimum salary that I would have got if I'd take job. Also if founders don't take money unto certain period, then what should I tell to my parents.

24 Replies

Ken Hollowell
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Ken Hollowell Advisor
Ken Hollowell President/CEO at Profran
Ashay No one with any credibility can answer your question without knowledge of the actually business and your experience in the business you are entering into. For 45 years I've consulted with thousands of entrepreneurs in business startups including franchising. I've developed several thousand companies with my clients too. Some of the areas for consideration are: Funding your business Business formation (the entity) i.e. Corporation, LLC or sole proprietor Board of Directors Officers of the Company Advisory Committee Trade Marking Registration (TM or SM in the meantime) Logo Design Domain Registration & Web Site Design Printing Requirements Development of at least an Executive Summary Projected Budget for the first 5 years of Operation Location of the Business (Lease or Purchase) Build Out of the Business Structure Employees and qualifications and where to find them Banking Relationships Line of Credit Equipment, Fixtures & Displays Vendors Inventory Etc... As a consultant I am available for hire - Ken Hollowell
AKSHAY DUDANI
0
0
AKSHAY DUDANI Entrepreneur
Full Stack Web Developer
@ken

I'm asking generally, not in particular business field. When do the founder take money from their startup?
Ken Hollowell
0
0
Ken Hollowell Advisor
Ken Hollowell President/CEO at Profran
When all expenses are paid including employees. General a founder may go 6 to 9 months without a salary. Expenses are general covered though. If the principals are taking funds from investors, they general are restricted from taking salaries that are not approved by the investors. There's a lot of variables to consider and without specific information and knowledge the answers may not be reasonable. Ken
AKSHAY DUDANI
0
0
AKSHAY DUDANI Entrepreneur
Full Stack Web Developer
@ken

Consider, all the expenses are paid. Then can we take remaining money? Also, if founder doesn't take salary for 6 to 9 months, then how should I explain my parents this situation?

I won't be able to give specific information, because I'm in the planning period. It's just I want to know how things work.
Venkateswaran Selvan
2
0
Venkateswaran Selvan Entrepreneur
Founder at Groufye
Please take a look into the article http://www.paulgraham.com/ramenprofitable.html
Ken Hollowell
2
0
Ken Hollowell Advisor
Ken Hollowell President/CEO at Profran
My answer is very simple, how do you explain to your parents if by taking money as salary out of the company the company fails? A founder or principal is the LAST person to take any money. I've had clients that build their salaries into their budget but if the income isn't there, they don't take money. As I said before, a budget of 5 years is necessary. If you take $100,000 USD from an investor and you end of taking 50% of that as salary and only have $20,000 within the first year as income you have now doomed the company to failure. No salary can be taken until income is earned unless it is built into the budget. Ken
Thomas J. Kaled
4
0
Thomas J. Kaled Advisor
Business Development Consultant @ thomas.kaled@gmail.com
Since you are asking a general question allow me to give you a general answer. A Founder's pay is increasing valuation of equity. Having said that Venkateswaran Selvan provides some insight into a good rule of thumb 'pre investment capital'-take only what you need to live unless your venture is flush with cash in which you will require no outside investors nor any consultants to advise you...take all the cash you want if that is the case.
Joseph Wang
3
0
Joseph Wang Entrepreneur
Chief Science Officer at Bitquant Research Laboratories
For a bootstrap seed stage company, the general answer is the minimum you can without going crazy and burning out. Passion is great, but it doesn't pay the rent or for food.

Unless you are really, really lucky, you will be making almost no revenue from your company at the beginning, and if no revenue is coming in, then what you pay yourself is something of a moot point.

At the very beginning, you will be relying on investors to fund the company. Those investors may be either your own savings or friends, family, and fools. One of the milestones would be to set up the company so that you are making some minimal salary so that you don't burn out. If you don't take the money from the company, you'll be taking it from somewhere else, and that will become a de-facto investment.




AKSHAY DUDANI
0
0
AKSHAY DUDANI Entrepreneur
Full Stack Web Developer
Thank you everyone for great insights, @joseph, @thomas, @ken, @Venkateswaran.
Nishith Gupta
2
1
Nishith Gupta Entrepreneur
Digital Entrepreneur | Consultant for startups in Product, CRM, Growth & Analytics areas
Hi Akshay,

Not a standard rule. Just some learning and knowledge which I have gained over the years -
1. Have a thumb rule the difference between the lowest paid person and highest paid person is not beyond 40 fold. So if let's say being the founder, you want to take the maximum salary. use this rule to determine how much you should take home.
2. As per above advice, ensure that all expenses are taken care of before you take your cut.

Regards,
Nishith
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