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Would investors be ok with paying myself deferred payment post-financing?

Imagine being without market salary for 2 years. Would it be ok if I were to pay myself the deferred payment I should have been entitled to or what that be a huge turn off for the investor?

12 Replies

Lane Campbell
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0
Lane Campbell Advisor
Lifelong Entrepreneur
That's what your equity is for. If you would rather have market rate salary and less stock go find a job with a company that has a good options plan and don't do a startup.
Martin Aitchison
1
0
Martin Aitchison Entrepreneur
Business Partner to SMEs in Southeast Asia
Investors will not be impressed with their funds used to pay "market rate" salaries

It is sweat equity is the play




Kaustubh Prasad
2
0
Kaustubh Prasad Entrepreneur
Founder & CEO at TruMoney
It is the same thing if the investor asks - Will you be okay if I invest at the valuation you would've had when you just started?

An investor wants to put money into the company, not into founders' pockets. Having said that, there is a balance between how much founders want to draw as salary and how much investors are comfortable with them drawing - it is best to be upfront to your potential investor about your personal situation.
John OHanlon
0
1
John OHanlon Entrepreneur
Owner of Banks Printers
If you make it clear to the investors at the first instance it should not be considered unreasonable. *Banks Printers * John O'Hanlon, 13 Church Road, Banks, Southport PR9 8ET Tel/Fax: 01704 229697 Home: 01704 232620 Mobile: 07717 518167 [removed to protect privacy] www.banksprinters.com
Ian Shearer
1
0
Ian Shearer Advisor
Executive Chairman at Parakeetplay
In general Investors have a rule that they don't "back-fill" past liabilities, and that's what you are asking them to do here. However there are exceptions to every rule.
So I think trying to get your full salary fully back-filled would indeed be a huge turn off for any investor because of the message it would send. As others have stated, you are really trying to have your cake and eat it. On the other hand most investors don't want you so broke that your personal financial problems are impeding your ability to execute. So it would be reasonable to say "look after 2 years of no salary I am really struggling financially and a one off payment of $X would really help me focus on the business". Thats a much more acceptable message.
I don't know how much $X should be but its likely to be a lot less than 24 months salary!

Martin Omansky
1
0
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
It would turn us off of you paid yourself generously and out of investment funds. Pay yourself a below market rate until you make a substantial profit. Consider your equity share a part of your compensation. Sent from my iPhone
Robert Warren
1
0
Robert Warren Entrepreneur
Founder and Managing Director, Mean Eyed Cat Venture Labs
The investment is to grow the business. We expect you to earn something to stay in the business but this will be below market rates. Think of your past work as a sunk cost. You will recoup it in your equity but not from an investment.
Rob Gropper
0
0
Rob Gropper Entrepreneur
Director at PetHero, SPC - Member at Eastside Incubator - Principal at Tuxedo Technologies Group
"should have been entitled to" is called a "job". welcome to entrepreneurship. You can pay yourself a below market salary going forward - i would make that clear upfront before you take the investment, but not to pay back 'wages'.
Arthur Lipper
0
1
Arthur Lipper Entrepreneur
Chairman of British Far East Holdings Ltd.
Salaries are part of operating expenses. No one would expect managers to work for nothing. However, the promotional shares received are thought to represent compensation. Arthur
Sidney Sclar
0
1
Sidney Sclar Entrepreneur
SID the SECURITY PRO at sidthesecuritypro.com
This decision to pay or not to pay really needs a written directive from all Investors/BOD.
One does not want to be accused of embezzlement unless the payment of deferred $$$ is denied.





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