[muzani]

Why is it insane? Some founders take zero salary since the start, and part of the reason for raising funds is that they have to eat too. Anyone who is an "early employee" usually get lower salary than market, and some stock. It's only fair they get to cash out a little early on, or hold on if they're liquid and think it's worth a lot more.

It also works well for everyone involved if they're selling their shares to the investors for Series A - investors get shares for cheaper, founders get paid based around the value of those shares, more cash & runway in the bank.

[adastra22]

In my industry the series A occurs in the first year of operation, and before the company has really achieved anything. A founder taking money off the table then is ludicrous.

[criddell]

Founders who have no need for money in the first year or two are fortunate people who are either already wealthy or have a spouse or family supporting them. Surely those aren't the only types of people worth backing.

[muzani]

I see. Here, the first stage is seed, which is around the level of YC and then Series A, which is around the level of getting money from YC's Demo Day investors.

We also see pre-seed, where the goal is to get into an accelerator. It's like $2000 for 3%. Enough for a domain name, a laptop, a babysitter, something that gives you the space to do a proof of concept, but not a full MVP.

Here where VC funding is dry, we also have some stage between seed and Series A, where the startup raises from friends, angels, crowdfunding. It's not really given a name because it's a signal that the company has already burned through seed and yet hasn't done enough to raise Series A from proper "professionals".

But here, by the time you've raised Series A, you're expected to be #1 in a market - best language app, best tax app, etc. And Series A is just to prove it works in other markets. Worst case I've seen was a guy raising US$500k seed (not Series A), but they had to prove they could be #1 in five countries.

US is a market of 300M people and even top companies like Amazon don't have to go far, but many countries have both low population and low spending, and investment is still US-centric.

[kelnos]

In SV-style tech companies it's common for the first round of funding to be considered a "seed" round; it usually comes from angel investors and/or friends and family, though it's not unheard of for larger institutions to get involved at this point.

By the time they're ready for a series A (VCs/larger institutional investors, though sometimes angel investors from the seed round participate as well) they'll very often have something to show for it, and may even have paying customers. The A round can come during the first year of operation, or later.

Given this, it's not uncommon for founders to be able to have some liquidity during their series A. Granted, it's usually not going to be a ton of money, but it can be a nice bonus that allows the founders to pay off debt they might have accrued during the first stages of the company, or perhaps move out of their 1BR apartment and put a down payment on a larger house, etc.

[owlstuffing]

Correct answer