[funkwyrm]

"An employees risk is several magnitudes less than the founders across many factors. "

I read often about founder risk, but I think it is overstated for non-bootstrapped companies. If you are a founder of a funded company, you get a salary the same as everyone else. In that case, what exactly is your "magnitudes greater" risk?

[brianfitz]

The risk is on future rounds as these aren't guaranteed. The founders will be the ones to take the lowest salaries when cash gets low and possibly float the company on their own savings. Two very successful companies I'm familiar with (both with billion dollar exits) saw the founders max out their credit cards through the lean times. Not all success stories are just a straight line up and to the right -- those are the just the exceptions that get the most attention.

[sillysaurus3]

Founders shouldn't take on personal credit risk in order to do a startup. Even pg says not to do it.

[hnnewguy]

>Founders shouldn't take on personal credit risk in order to do a startup.

Only in the Silicon Valley bubble, where everyone is all about "other people's money", would someone actually believe this. Back in the real world, entrepreneurship involves personal credit risk. You don't get anything for free.

[walshemj]

But not open-ended liability that's the point of a Joint Stock company you might ante up some capital but not so much as to bankrupt you.

[brianfitz]

Those who drink alcohol shouldn't become alcoholics. However, it's a risk. It's easy to say that a founder shouldn't go into debt to keep their dream afloat and protect their employees, but the reality of it is very hard. If it weren't a risk, pg wouldn't have written about it. Going back to the original question, a founder reaching into their own pocket might not involve acquiring debt, but rather cutting their own salary. When faced with making a payroll, the founder(s) are likely simply not to pay themselves to get through a cash squeeze.

[AndrewKemendo]

>If you are a founder of a funded company, you get a salary the same as everyone else.

Depends on the stage from what I have seen. Most of the other founders I know, including myself, take 10-15% less salary than many of the employees. Also once funded, investors will expect founders will take a haircut for a while.

[dean]

10-15% less salary does not equal "several magnitudes" more risk. To my mind, for a funded company, the risk is the same for founders and employees. The worst that can happen for both is unemployment.

[rco8786]

First, you're ignoring all the risk a founder has already taken just to get to a funded state.

Second, many times(always?) a founder has personal savings wrapped up in the company.

Third, an employee can always just quit and find a new job. The founder is much more tightly bound to his/her company because of obligations to investors, other employees, clients, etc. To say that "the worst case scenario" for both is unemployment is true, but you're ignoring many other factors that make it far more likely for the founder to be stuck going down with the ship while employee walks away Scott free.

[dottedmag]

How many of those factors are purely emotional/psychological/imagined ones?

One trick to figure it out is to imagine founder being hit by bus: who will be hurt? Will family be hurt (besides losing the founder himself)? Employees? Clients? Investors? Anyone else?

[mbesto]

Agreed. Most founders I know (in SV) take $50-80k in the first 1-2 years.

[dottedmag]

Well, one funded startup I know pays founders 250% of the typical engineer's pay. But it is a wildly successful enterprise though (to say the least).

[SandersAK]

It definitely varies. We started our corp entity in 2011 and founders didn't take a salary till 2014. Needless to say, I have a lot of credit card miles.

[rsp1984]

It's because most companies start before they are getting funded and before there is funding for the company the founders quite often put a lot of work into the company for no compensation. Sometimes they even put their savings into the company.

[mehrdada]

Adding to this, founders have more information than employees, reducing their uncertainties.