[nadaviv]

Many early stage startups can't afford to pay salaries prior to raising capital. When I started working at a full-time capacity on my current startup, I went through 6 months without pay.

"If a business cannot sustain itself, it has gone bankrupt" might work for some more traditional cash-flow businesses, but I don't think that it applies very well to startups.

[solve]

I'm a bit confused by the reasoning too. We worked 18 months and put in 10s of thousands of our own money in the early stages prior to our first funding - a hefty negative salary. I think the only logical way to view it is that the founders are ALWAYS taking a loss relative to what they could earn elsewhere, for the life of the startup, until the very late stages or acquisition.

Very few investors will see it as a good sign if the founders pay themselves at or above their market rates, or if they do at or below the market amount of work. Likewise, the competition will punish startups for slacking or blowing money too fast.

[Swizec]

You had to have lived off of something. As I said in another comment, if there is less in the bank than it takes to pay this month's expenses. Then the business has gone bankrupt and has failed.

It really is as simple as that.

[solve]

Reality is that many founders / writers / actors / band members / famous mathematicians and scientists have lived off of their spouses / girlfriends / family / side jobs / benefactors for a long time before making it big. Investors is no magic solution.

*Based on studies I've seen and hundreds of people I've talked to across these industries. Bankruptcy is a legal process that you have to initiate and won't happen if you refuse to initiate it.

[Swizec]

I agree. They have. And that was their spouse/girlfriend/family/benefactor investing in them. Or in case of side job, themselves investing in themselves.

And whether those investors wanted anything in return or not, doesn't matter. Said founder/writer/actor/bandmember/mathematician still could not do their work if somebody hadn't put food on the table.

You really do have to stay alive and relatively healthy, if you want any chance at success.

[steamy]

but I don't think that it applies very well to startups.

Do you mean contemporary tech startups? As you may know, startups are businesses after all and the rules governing their operations are the same. When your business runs out of cash , you need someone to throw you a lifeline (debt or equity), or sell some assets to raise money or unfortunately file for bankruptcy and let nature take its course and creditors to recoup some of their investments.