We've taken Show HN out of the title now.
I started my first startup at 20. We were bootstrapped, so we started at $0 salaries, and didn’t pay ourselves more than 1k/month for a few years. We all lived together somewhere cheap to keep rent low.
Now I have a family and stuff… it would be very hard to go back to living like that. So the range of salary options practically available to me is totally different, regardless of where (in the US) I live, how much I raise, etc.
Did the $1M salary founders get paid $1M at Google previously? I’d expect there is a quite strong correlation here since it’s much easier to justify to your board/equity in that case.
And just because you’re 50, that doesn’t mean you made it past Senior. Similarly, you could get to Staff+ before 30 if you are exceptional.
Salary Range Bootstrapped VC-Backed
-------------- ----------- --------------
200k-249k 3% 6%
250k-299k 1% 3%
300k+ 6% 2%
That's also where you get into that bump at the end. If my bootstrapped company is earning 10M/yr, you bet I'm taking 1M+ salary guilt-free.
edit: accidentally swapped the headers on first post
Wouldn’t you prefer to take minimum salary and the rest as dividends? Seems like that would be the more tax advantaged approach and fully within your ability to do as majority owner.
EDIT: I'm not a tax person, obviously people aren't being illegal and dishonest. It's just smart to write off everything possible in a founder's life as a business expense. Maybe housing or this or that doesn't qualify where you live? Great that's what the minimal salary is for. Everything else goes on the company card.
2nd EDIT: I don't really understand why everyone is so cagey whenever this topic comes up. This isn't news. The IRS isn't reading this saying "gosh darn they figured out a new loophole". The laws are clearly spelled out, it's up to you to apply them to your situation. Remember, tax evasion is illegal. But minimizing tax liability is 100% okay and literally the name of the game. Otherwise, we wouldn't have tax breaks in the first place.
I'm not 100% sure I have too much comment on the salaries, but kudos on putting together some engaging content!!
Near the end, I had a happy hour or dinner with one of the co-founders. He told me that if he had to choose again (giving up his engineering job vs. starting up the company), he doesn't know if he would choose the start-up route again.
Just some food for thought. It's great playing the CEO or the founder and betting on yourself but at the end of the day, the financial trade-offs could be life changing (especially given the salary/stock options provided by top tech companies).
That is the life. I want to know what industry that is in.
Does anyone know if it shares how the answers were solicited?
Every survey of this size has substantial sampling bias (which doesn't invalidate the result, just helps us to more rationally interpret it).
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[edit] there's some color at the bottom, though I'm still curious to know more.
> The 2022 Founder Salary Survey was conducted over a five-week period starting in May 2022, during which we reached out to founders through our extended networks and elsewhere online.
> We received a total of 516 responses.
> Over 60% of our responses were from either remote Founders or Founders in the San Francisco Bay Area.
Leaning on a network is a good way to scale up quickly, although it's probably the principle limiting factor on the scope of conclusions, drawn from this report.
"How much do Founders, who are 0-1 degrees of separation from a company that uses Pilot, pay themselves?" is still a pretty interesting thing to read.
Also, any breakout for startup subtypes? (SAAS, fintech, web3, health tech, AI/ML etc.)
If I were an outside investor in my startup, I would demand this. If a founder was living high off my dime I would be very worried that they would cut and run the moment the gravy train dried up. Startups run better when all the players have significant 'skin in the game'.
Breakdown of Salaries by Geography -> NYC Area -> Highest Salary 300K
Breakdown of Salaries by Funding Level* -> $5M-$9.9M -> Highest Salary 400K for NYC
If you want to come work for a growing startup that's selling a service that every business needs (a good thing in a macroeconomic downturn!), with a wonderful, diverse team that cares about their users and each other -- I'd love to chat. Feel free to reach out :)
(Hiring in SF and US-remote. Full jobs page here: https://pilot.com/jobs, or feel free to email me at firstname @pilot.com. Our stack is fully typed Python 3.10 on the backend, Vue/TS on the frontend, and AWS)
> EDIT: I'm not a tax person
Most non-tech discussions on forums like this one should start and end with this disclaimer. Watching people here regularly talk about topics like law, "money laundering", write-offs and tax shelters is as hilarious and disconnected from reality as a hacking scene from CSI.
I'm making no moral or legal judgements, just commenting based on what I've encountered and witnessed. I'm not a founder and never consulted anybody with legal qualifications regarding this matter either in any specific instance. But, in my anecdotal experience, there is a rather broad spectrum of contexts and interpretations on how to do what's best for you and the business in your specific situation. On the flip side, it's not a big conspiracy, in the USA we heavily subsidize the pursuit of new enterprise. And the law reflects that. Smart people and successful businesses minimize their tax liability.
This is tax fraud. More realistic: cell phone bills, car expenses and home internet.
So as long as the benefit is reported on the founders taxes and taxes are paid, it would not be tax fraud.
1. First, it's perfectly legal for an employer to pay for housing, but it may be counted as income to an employee. It depends: https://www.corporatehousing.com/blog/corporate-housing-tax-...
2. The IRS also allows deductions for a home office. The rules about this are pretty strict, but again, there are gray areas here about what counts as an office.
Edit: in our early days, if one of the co-founders did this, we definitely would've parted ways.
Will let you decide how ethical that is (or not). After all, many/most companies allow their employees to keep points earned for business travel. But it's one thing for an employee to keep bonus points for expenses they themselves incurred, which is very different, I think, than putting tons of corporate-wide business expenses through one person's card.
In my experience CPAs consider it reasonable to take the square footage of the dedicated office area and divide it by the total square footage of your home and deduct that much from your rent.
https://www.irs.gov/businesses/small-businesses-self-employe...
In what situation would a founder have a company with meaningful investor backing and not use that money to pay for an office for employees and instead use it to pay for their rent?
The tone and insinuation of your message is that founders pay themselves $50k/year but then splurge excessively using company funds on "fancy SF and NYC apartments" (which, depending on how fancy you mean, could go for $10-2k/month), which would almost certainly qualify as both tax fraud and fraud against the company. Your edit doesn't really do anything to alleviate the messaging, because you basically say (a) founders often commit fraud (b) ok maybe not, but I'm not erasing my earlier statement.
FWIW when I started a company in SF in 2012, my cofounders and I did indeed pay ourselves $50k/year and pretty much 100% of that money after taxes went to rent and living costs (maybe saved $5k/year, I wasn't keeping track that closely). This was after paying ourselves $0 for a while of course. We did not live in fancy apartments or use a penny of company funds to expense rent or any other personal living costs. In fact, even after we raised $35m for our company, we still only paid ourselves $90k for another couple years.
If you expense your cell phone bill every month, then it's reasonable for other employees to expect the same, if they're also using it for work.
Better to get the board to sign off on a slightly higher salary to offset these expenses, IMO.
I’m married with two children, and my spouse effectively[1] doesn’t earn an income. I’d consider running a startup, but my life situation requires that I have a reasonably steady annual income of ~$125k.
That doesn’t mean I have a lower risk tolerance, or at least not exactly. It means I have a higher risk floor that I had fifteen years ago.
[1]: they have a small business that I’d reasonably say is their life’s work. Because of my income they don’t have to make it a steadily profitable business and can therefore reinvest the profit it produces. It’s a business serving children and is parts of the burgeoning local arts community. It’s very helpful to be able to waive fees and offer small scholarships for children in our area, where the median family annual income is <$30k. It’s also been a blessing to be able to hire teenage students from time to time; more than once that’s turned an extracurricular activity that the kid is passionate about from a cost to a small source of income for a family of very limited means./
Of course you wouldn't have fancy VC dinner on your personal dime but if you're meeting VCs to raise a round, talking to a potential customer, etc., those are legitimate business expenses.
No VC is going to be paying for your rent or your car lease, which is what you implied above. That's patently false.
My point is simply that the low founder salaries are not because the founders are being particularly frugal or living humbly. The low salaries exist simply to pay for the things that the business’ accountant can’t expense. In every respect, the founder lives their business.
A founder using the company to pay for their own housing is subject to income tax on the value of the housing provided. Full stop. There are no defensible situations that will survive a tax audit in which the founder gets away with using the startup to pay for their housing without getting taxed on it.
And the IRS no longer allows a deduction for home offices for employees, and won't allow this deduction again until 2025. The home office deduction is strictly for those running a separate business out of their home, and may only be used to offset income reported on the return from that separate business.
And turns your start-up failing (or firing you) into a financial end game.
A HELOC loan would be a pedestrian example of this. You put house equity up as collateral to get money without selling the house. Fail to pay, bank sells house. When using your business as collateral, bank sells business.
The question isn't what the company is worth or how likely it is to fail, the question is what demand there is for the shares. If an asset is in high demand, and is relatively easy to sell (like company shares), you can get an ELOC against it at a great rate.
They won't give you 100% of the valuation of the company in the form of an ELOC (you may only be able to pull out 10-20c/$1 of startup equity you have), but they will give you a good rate.
https://money.usnews.com/money/personal-finance/taxes/articl...
However, the IRS has very little staff to audit or enforce, you can probably get away with breaking the rules... until you don't.
The statute of limitations is currently 3 years from when the return is filed, 6 years if the deficiency (between the reported amount and the tax calculated due by the IRS) is 25% or more and the disparity is unintentional or the result of good faith efforts by the taxpayer to report their liability.
However, if a deficiency is deliberate, there is no statute of limitations on how far back the IRS can go to audit the tax year and assess penalties (and possibly also refer to the DOJ for criminal charges).
I mean, I'm not a lawyer or CPA, and I'd advise any HN readers to consult such before deciding on a tax strategy based on HN thread. Because, also, yeah, no.
Honestly, if you are sleeping in an actual office as your primary residence, you probably technically have to include the fair market value as income on your personal taxes, but if you're really on a couch in an office building maybe you can get away with it (until the landlord of the office building kicks you out because it's not zoned for or up to code for residential and thus illegal for them to rent to you for that purpose). If it's a residential apartment... sounds like out and out tax fraud to me. I am not a lawyer and this is not legal or tax advice.
And if you tried to claim your entire residence, that would definitely not fly, and would be much more likely to be found out by tax authorities.
The home office deduction is available to qualifying self-employed taxpayers, independent contractors and those working in the gig economy. However, the Tax Cuts and Jobs Act suspended the business use of home deduction from 2018 through 2025 for employees. Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home.
https://www.irs.gov/newsroom/irs-reminds-taxpayers-of-the-ho...
For a more fun take: Watch WeCrash and notice how the protagonist magics 100mil for personal use after raising the huge Softbank round … and what happens to that liquidity when an IPO doesn’t materialize.
Sounds like a different thing than just trying to deduct 100% of your apartment as a business expense because you don't have an office yet though. Which is what I thought we were talking about from the GP. Like, maybe lots of people are doing that, but maybe lots of people are committing tax fraud, the IRS instructions are not too fuzzy here.
The logistics aren't really the point. No I don’t know how exactly founders do their taxes. But I do know that when you work 24/7, a lot of things look like business expenses.
My point is just that the IRS has standards for what you can deduct or treat as a business expense (rather than wages), and it is not "when you work 24/7 a lot of things look like business expenses".
Not paying for your own apartment and instead treating it like a business expense still sounds like tax fraud to me, whether or not the business has it's own office yet.