Founders FAQ #4

The dups Founders’ FAQ is a compilation of the most common questions founders ask us about their startup, their fundraising or their relationship with investors.

What kind of compensation should be provided to founders? How to ensure that it keeps them motivated?

When launching a startup, founders often don’t get a salary out of their business, and if they do, it’s just a small amount. First, there isn’t much cash in the company and second, founders often own 100% of the company, being the only ones benefiting from their sales.

However, things change when an investor joins the mix, reshaping the shareholder structure. Frustration and demotivation may arise if their gains are not in line with market practices.

What kind of remuneration should be provided?

Firstly, a fixed remuneration should be provided. Often, this will be calculated based on the number of days completed for the company each year. This wage may be decided based on a benchmark remuneration applied in the same sector.

Secondly, it is standard practice to provide a variable remuneration based on objectives whose achievement benefits all stakeholders (founders, shareholders, company). Think, for example, of a variable remuneration corresponding to a percentage of pre-tax earnings. Sometimes, variable compensation takes the form of stock options or subscription rights enabling the beneficiary to acquire new shares at a competitive price.

You have a question about remuneration or other topics? Let’s have a chat, we’d be happy to help!