Venture capitalists generally advise startup founders to take about 75% of the market salary once their company has raised several million dollars, according to saastr.com. This guideline helps balance founder compensation with preserving runway, especially in early funding stages. Before significant funding, founders often take minimal or no salary to extend operational cash flow.
The 75% rule varies depending on the startup's stage and funding amount. For very early startups with no cash, founders might take as little as $10,000 a year. After raising a seed round of a few million, a modest salary of around $10,000 a month is common. Once the startup reaches scale and profitability, founders typically earn market salaries. The advice comes from experiences shared by founders who have raised seed rounds ranging from $2.6 million to $9.2 million.
This compensation approach reflects the need to balance founder incentives with startup sustainability. If founders are the highest paid employees before reaching $10 million in annual recurring revenue (ARR), it may signal misaligned priorities. The rule aligns with broader venture capital practices that prioritize runway extension and team growth over founder pay in early stages, shifting to market rates as the company matures.
The guidance on founder salaries underscores the importance of financial discipline in startup growth. Founders who follow this approach can maintain longer runways and attract key talent. The advice is based on multiple founder experiences and VC perspectives shared on saastr.com, emphasizing that salary decisions should adapt to funding levels and company milestones.