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What should be the salaries of a Series A startup management team?

Let's say the company has not gotten to the point of break even, it is located in NYC and it has 4 members on the management team after raising $5M in funding.

9 Replies

Martin Omansky
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Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
Below market rate (maybe 25%-33%) plus options. Sent from my iPhone
Arthur Lipper
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Arthur Lipper Entrepreneur
Chairman of British Far East Holdings Ltd.
Assuming the members of the management team are substantial shareholders at very little cash investment cost, then it should really be that which the cash paying investors believe necessary and desirable. Arthur
Brett A. Cenkus
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Brett A. Cenkus Entrepreneur
Owner at Cenkus Law
Agreed with Martin, about 25% below market. From an investor standpoint, you want management to be able to pay their bills and not worry about day-to-day financial matters. At the same time, you don't want any of them to be satisfied with what they are making. The incentive still needs to be almost entirely on their equity upside. When people draw very comfortable salaries, it takes away a little of the fire in the belly. What this means is that, although I don't think I have ever said this to a management team, the salaries depend somewhat on how old the founders are or, more accurately, on what other responsibilities they have. Four founders in their early 20s, all unmarried without kids, even in NYC, don't need $150K/each to be okay. They need something like half that. We can argue exact numbers, although my point is that if I see founders trying to pay themselves a lot more than I think they need following a Series A, I won't negotiate with them, I will pass on the investment. The round represents the starting gate, not the finish line. Founders well into their 30s with families have different needs. Is this philosophically fair to younger founders or older founders without the same responsibilities (after all, we each make our own choices), perhaps not. But, it is the practical reality of wanting your portfolio company management to stop stressing their ability to pay next month's rent, but still not feel like they've arrived.
Dane H. Madsen
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Dane H. Madsen Entrepreneur • Advisor
CEO, SVP Business Development | Domestic & International, Product Marketing | Open to new connections
Because not all management teams are founders, and not all founders are on management teams, not all management teams have significant ownership and if they do, it is likely in uneven amounts. If you have a series A, chances are you are recruiting to fill holes. These roles will be at market rates. For example, a good CFO in NYC will not leave an existing role for a start up with a nebulous future for a 25% hit to compensation and some unvested equity grant of a few percent. You really need to frame the question better with some details, starting with if all members of the team founders. Do they have significant equity? Has that equity vested? What roles do each fill? What has the investor's position on this?
Philip S. Miller
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Philip S. Miller Entrepreneur
Founder at Hempies™ Paper Inc.
As always... whatever the market will bare. Supply, Demand, negotiation, astrology, these are all factors that must go into the blender to make the best smoothie.
John Mousseau
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John Mousseau Advisor
Proven Management & Marketing Consultant | I Focus on My Passions So You Can Focus on Yours.
I completely agree with Brett. If anyone joining a start-up thinks they should be getting market rate in salary, then I would not hire them as not sure they'd be the ideal candidate. As the name implies, it's a start-up and there is risk and your taking a risk with the upside being in options as the business grows. I've experienced too many start-ups where partners want market rate salaries and in my experience, they don't have enough skin in the game and it's seldom works.
Chandni Sahgal
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Chandni Sahgal Entrepreneur
Director Management Consulting,Business Strategy,M&A Advisory Firm, Start-Up-Mentor,
I would be comfortable with allot ting generous options and stock with just about adequate salary to cover expenses on a modest scale....
Arthur Lipper
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Arthur Lipper Entrepreneur
Chairman of British Far East Holdings Ltd.
As it is investors who are really paying the salaries of a pre-revenue company salaries over an agreed amount should be subject to investor approval.
Jim Newcomer, 4ma - preparing local entrepreneurs for funding via Community Public Offerings
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4ma - Advisers for startup and business growth
There seems to be something missing here, and that has to do with excitement about what the new company is offering or doing - and with commitment to the team and its cause. If people you bring on board are more interested in salary than in the joy of playing the game, then I would hope you could find other, equally talented people who just want to play and can get along on survival income till the company is profitable enough that everyone can take home some money and equity.
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