Except the founder gets paid either way, and paid more than anyone else usually. If the business goes bust nobody takes his house, or his things - he just finds another job or starts another business with VC welfare.
I don't know if that's always true (at least, not for founders I want to work for). I worked at a startup where the founder totally ruined his personal credit, and was paid a small portion of what everyone else was making until well into profitability. I bought a beautiful house in a good neighborhood while working for him. He _still_ lives in a tiny rented condo.
If things work out, I'll walk away with enough to pay down some of my mortgage, and he'll be set for a life of luxury. But if things don't work out, then I still have a great house, and plenty of savings. He'll have no credit, and no savings.
It seems like a poor use of funding to pay the founder a great salary (i.e. more than key employees) at an early stage startup: before profitability, or even early into profitability.
If things work out, I'll walk away with enough to pay down some of my mortgage, and he'll be set for a life of luxury. But if things don't work out, then I still have a great house, and plenty of savings. He'll have no credit, and no savings.
It seems like a poor use of funding to pay the founder a great salary (i.e. more than key employees) at an early stage startup: before profitability, or even early into profitability.