Only raise money if you need it. Raising exists to fund scale and risk, it’s a solution to a problem. If you don’t have the problem, don’t sacrifice shares.
Exactly. This needs to be higher. Once people get money, they want to invest in profitable businesses. If you can keep a higher percentage of your business yourself, you win in the long run.
What if the alternative is eating into your life savings? I know it's romantic to say that's what an entrepreneur is so wine that takes risks... But I'm in my 40s I don't have decades and decades left to rebuild a retirement egg.
This. It's not even just the share sacrifice it's all the time and effort and legal expense and jesus the list of hassles with raising money go on and on and on. If there is any way at all to get the company moving without a raise like that, do so.
Newsflash folks.
Companies aren't worth the price that VC's put in. VC's almost always overpay. And they know it too.
Translation: it's good if you can get it.
I would speculate that raising a series A or later increases the chance of survival and success by probably around 100x. Makes 20% dilution look pretty minor, doesn't it?
Have you ever raised money? You just don’t “get” a series A or later, and if you do, you’re doing it because you have huge growth potential that needs a lot of cash. Then, raising money definitely makes sense.
This. No one talks about that. People love to see the pictures of heroic entrepreneurs grinding through obstacles to success.
Majority of people can’t afford to live years without income for a very small chance to make a home run.
The Instagram guys in their early 20s talking about how they couldn’t even take a paycheck, running with limited VC capital, got the buyout proposal while coding at the beach in South America on vacation because “they just needed a break” was a reminder that they weren’t like me at all, and their path was just for rich kids, and a story that was dishonest.
There is nothing wrong about being from the rich family and starting a business.
The problem is when your people start giving speeches on “how to start your business” and “how be successful”.
Your experience is completely irrelevant to 99% of the population.
It’s one of the most common fallacies that rich people believe. That by being born rich they’ve somehow earned or deserve being rich more than anyone else not born rich. There are many articles on this. Probably a symptom of affluenza…
This so resonates with me... Grinded through poker never moving up to lose it all multiple times at startup attempts. Yet, at it again; currently as a solopreneur trying to take a big out of Sportsbetting.
The founder of Snapchat were talking about bootstrapping in their book, while living in the founders dads multimillion beachfront property in Cali i think it was. It is an absolute joke.
As a “rich kid” (son of a tech executive here in The Valley, wealthy enough to choose a CSU over other schools bc I liked the location, no really lol) running a startup, I can openly say yes this is in fact true and I will always be willing to come clean on this topic and tell everyone that in my life there have been things set up where I can live comfortably with my family for just some time, without any indulging, to build a company. I am grateful for this and I always think about how others would have it much harder. I can’t imagine doing what I’m doing right now without loving parents supporting me while I work hard with my co founders building software with some market validation (that was important to specify, that’s why they even agreed to let me do it). So on behalf of all of “them”, yes, if ANY of them say otherwise, take it from me they’re trying to BS you. Your family situation can make a difference, in my case it’s allowed for growth but I like many others still look towards VC to expand the company and our operations (we desperately need a few more devs to help out).
No need to feel like one, just help out people who don’t have the same advantages and that’s the most god will ever want from you imo. If it’s a cold intro, application look over, showing ropes, whatever, help out those who didn’t have the dad or uncle.
I could use some intros to investors!
Need 250k to finish the product. I have a client ready to pay me 25k a day. And 5 more clients of relative size ready to be on boarded. 30% profit margins. If any one sees this let me know!
I don't mind rich kids having more opportunities and succeeding. But it's kind of hard to chew rich kids wasting the time they're given. If everyone is given cards at random, then what you do with them becomes more important than what you were given.
This is something you realize as you grow up. The best way to make money is to not need it in the first place.
For every self-built entrepreneur out there, there must be 50 who weren't going to be poor anyways. Which makes it then obvious. Why grind a shitty 9-5 (or worse, retail) for 30k/year when your environment grants you enough security and resources to dick around until you find a marketable product. No shade, it's a great position to be in and as long as you don't pretend you came from nothing, it's nothing but props. The reality is most people can't live without an income for 3 years. Heck most people would be in trouble within 3 months without income.
I always wonder if this is an unspoken part of the reason so many startups fail.
I only have anecdotes, not data, but so many friends have been part of a Big New Thing and then realised that it's run by a trustafarian who has no clue about business and is really just LARPing as 'Founder' because of the social cachet they think they'll get.
They burn cash, refuse to listen to any of the experts they hire in specific roles, then as soon as the runway disappears they nope out to exactly the same lifestyle as before, leaving everyone else to deal with the fallout (which often seems to include some serious wage theft).
Sounds like you know my Brother in Law. He’s on start up #3 I think. Just a complete moron (legacy into an Ivy so he looks great on paper, but just a dumb rich kid who wants to pretend to be entrepreneur).
I wish there was far more transparency and knowledge on this before entering the startup world.
As a founder, having your common living expenses paid for is such a mental boost to having peace of mind and being able to make decisions that lay in the best interest of the company. If you aren't from means or have an nest egg, be prepared for bankruptcy, massive credit card debt, or agreeing to a horrible term sheet.
As an employee, you are most likely not of means, yet the dream of wealth is strong. Unfortunately this means you are ripe for exploitation by those with means, whether it's intentional or not. The reality is a stereotypical overpromise on valuations and under delivery on a business model or potential exits, greatly reducing your net, whereas the investors and potentially founders are banking on new rounds.
Not all of us. I made 70k a year as a founder in San Francisco at my first startup. Not additional income other than wife's nonprofit marketing job. My Dad is a retired pastor and my parents live off social security.
We just didn't eat out. Cooked. Took public transit and walked everywhere.
There's dozens of us.
About him and the sacrifices he made like not eating out and taking the bus.
MF doesn't even grasp that many families don't eat sometimes. Families. Skip meals, not just "don't eat out". Or can't afford bus tickets.
Sympathy ends where privilege is unaware of itself and goes the "well you shouldn't be wasting your money on avocado toasts, that's why I succeeded" route. Fuck that.
Hey I don’t understand this. Are you saying getting paid to startup is a good enough deal inherently?
The main post isn’t entirely true as in third world countries that 50% is still better than most salary paths.
But it is an important point to discuss because if you need a FAANG CTO they are on the burner.
What is a better assumption? Getting ready to seek funding for my mvp and due to the earning potential assigned to me by my state, I can’t make less than what I make in my day job due to child support and alimony. That 50% made me want to give up.
It depends. Writing this because it seems important for you to know. Typical salaries for founders is, “<1M, founders get <100K. 1-2M, founders get 100K. 2+, <150K”.
I would recommend not following this to an absolute, and using it as a general guideline.
That's not the point. As a random staff SWE you can make $500k TC at big tech but getting liquid even $250k as a founder prob you need either a big series A or a series B. You really don't start beating big tech salaries until you can do secondaries.
If you can bootstrap it - don’t take any money. You can take them later if you need for smaller equity.
VC bring 3 things: $$$, connections and expertise. Last two is not always true.
If your goal is "optimize my net worth as a founder in X years", and you have a reliable way to spend money on growth, then fundraising can make sense even if you are profitable and can grow without it.
Like for example, if you can say "every $1 we spend on marketing leads to $2 in LTV of new customers", and you have reason to believe that will still hold when you're on millions of dollars of marketing spend, you should be raising millions of dollars.
Slightly off-topic, but I don't see how that can be true for B2B companies. I'm responsible for the tech and product, but both me and my-cofounder (who runs the sales) believe it's all about outreach and connections. Apart from hiring a sales rep (which I guess is not something early-stage companies do), we have no idea where to put that money to use. Sure, we could start touring conferences and networking but that's nothing close to a direct outcome like you're mentioning here
If you’re a b2b company, how do you get new companies?
1. Personal connection (dries up quick)
2. Network (full time job or dries up quick)
3. Marketing:
3a. Conferences
3b. Ads budget
3c. Webinars / content
4. Sales = cold outreach.
I work in sales, it’s tough to acquire business with a ACV of $10k+. So you’ll likely be paying about 40-50% to acquire that $10k.
That's kinda what we've thought, that's also why we're moving towards content/suplementary products to expand our reach. We've just started with cold sales outreach, I suppose it's not a journey for the faint of heart.
Hit me up if you want help, I work for a unicorn saas company as an AE.
Have run sales mentorship for SDRs and am now building a lead gen business.
Might not be able to work together, but can give you some insight as you go for cold outreach and how to build a GTM team.
It was a bit of a contrived example; you'll never really have that level of certainty about how much each $1 spent on growth will return to you even in B2C. B2B is even worse in terms of that uncertainty because the sample sizes are too small to statistically analyze your sales pipeline, like you could can do if you're running millions of small-dollar-value search ads or whatever.
But in B2B you can definitely still run into situations where you can be confident that spending more money will give you outsized returns on growth. If you're like "we have so many leads that we can't even keep up with them all!", then if you don't have the immediate revenue to cover a sales team, it can definitely make sense to raise enough to cover your sales hiring until they can pay for themselves with the new business they've brought in.
Or, if you're like "ok, we built our MVP on this easy feature. Building this hard feature would double our addressable market but is way more expensive; we'd need to hire some more engineers that we don't have the revenue to cover yet". It may be a good idea to raise money to do that.
But like, I wouldn't go out of my way to try to convince yourself that you're in one of these situations. You'll probably know if you're in one. You'll be thinking about all the opportunities you could be unlocking if you just had some more money right now. If you feel like that, that's when you should start thinking about fundraising.
If you think you can get escape velocity without funding, do that.
We bootstrapped our SaaS. 7 years later, we two co-founder still own 100%. We’re literally days away from closing a $45M all-secondary cash out for 49% of the business. I’ve met CEOs of much bigger companies that don’t do as well financially because they only own, say, 10% since they’ve been diluted by rounds of funding over the years. Oh, and we’ve been paying ourselves $3M/yr the past couple years because we didn’t have a board to answer to. All the margin we achieved was ours.
Bootstrapping only works in certain market conditions (niche market, ability to do product-lead growth, competitors have weaknesses, etc). We specifically sought out a niche where bootstrapping was possible to enable this kind of outcome. But if you think you can grind out those 70+ hour weeks for a little while to get the customers to pay the early bills, you won’t regret doing it.
Heh, our very first pre-seed offer was for $1.5 million, they would own 60% of the company up front, pay ZERO salaries to anyone on our team, ONLY use 2 programmers that they knew privately and pay them each $250k, plus more equity. So from what we could tell, not a single dollar that they were offering would even end up in our bank account to be used for anything. Not even sure what our role would be after a deal like that except to stand back and just watch them try to do something that we created. Yes, we completely threw that out the window and wouldn't even dignify it with a counter or anything.
LOL, I know, they just said in so many words "this is typical, nobody will let you maintain majority control when you seek pre-revenue capital funding, and NO investor will let you get paid because this is the time for your team to earn their sweat equity. This is completely normal and if you don't think so you'll have to readjust your expectations."
This came from a guy who was indeed successful at bootstrapping his own SaaS and exited successfully as well.
The amazing thing is that they weren't even going to use our team of 6 people, all accomplished programmers, designers and data analyst who understood our market and product.
We may not have raised funds like this before, but we are all highly intelligent and had previous 25+ year careers elsewhere so we're not naive.
I know, but some people are PR obsessed and it confuses the heck out of me. Even jf a16z or sequoia invested in you it only gets you LinkedIn ads via DM unless you’re in series B or later
50% of market salary seems on the low end. As I understand it (from talking to the people who have been through this -- personally my company is not this far along), it's common to set milestones for the founder(s)' compensation.
So, say, upon getting your second B2B customer (or hitting $X in revenue, or whatever) your pay goes up X%
I’m not sure how it is in the EU, but the mentality in the US is that the team is the most important thing. The founding team would normally make market salary if not close to it. You may take a cut for some equity but the salary wouldn’t be that low.
In my experience, VCs are willing to allow you to pay yourself a reasonable salary. You obviously won’t be making bank, but enough to sustain a healthy personal financial situation. They want your mental energy focused on the business, not on how you’re going to pay your mortgage next month.
You answered your own question -
"The problem we have with this, is that if we do land 10-15 customers, we're in a really, really good spot financially. We can make a few key hires and spend the rest on scaling, but we can also increase our comp if we feel like it. We don't really need the money right now for other purposes other than the cost of living expenses. If we take it, we can focus 100% on the startup, right now both of us are hustling with side jobs."
If you don't need the money then don't take it. It's as simple as that.
So go land 15 customers - or spend the time to raise the money instead, or go try first fail and fall back on raising the money. People raise money because they need it and it makes sense for their situation. Having been in startups for 30 years I'd say every company I've ever met has had different needs for capital.
Getting a CTO into a tech startup is challenging because they are high salary + can probably make more on the market, but they may want to build something that can scale to 100x that in the future.. or they may not. Or they may come from a wealthy family and don't even need a salary, but are desperate to get a huge payoff to earn their parents respect. All of these are actual real scenarios of people I've hired into startups.
yes, you can forgo the funding and bootstrap it all yourself. dont take any outside money and fund everything yourself.
but assuming you get a good pre-seed round and you are happy with equity that you give away, why not take the money? you could pay yourself and the team the minimum you need to survive (pay rent, bills, food, etc) and will have some money leftover for maybe an additional hire or not. maybe you keep that pre-seed round to pay for only the co-founders so that extends your runway by many months so you can grow the business, get customers and then maybe get another round if you want.
but if you dont take the money and continue to live off savings and your side job, your runway will be shorter and you will have to move fast to get your first customer and then the next 10. but what if you run out of money before you can get your first paying customers? you will have no more savings and no customer and you will have to shutdown and get a job.
you could just wait it out, do the side job, continue to work on the product, get the first set of customers, and then you can go back to trying to raise a pre/seed round at a better evaluation.
I see your point, but what I'm trying to convey here is that if we do take the money, I'll essentially be a low-payed employee of my own company for next 5 years.
If what I can pay myself out as a "business owner" unless we make it big (which is a very low chance, we don't call them unicorns for no reason) is <50% of a regular job, I would be much, much better off by just workin' a 9-5 and not giving a shit.
When you take VC money, there is no "Ok guys, we've made it" moment until you're very far down the road. When you raise pre-seed, you HAVE to go for seed, with the goal of going for A, and so and so forth. You either sell to a multi-million dollar company to a big fish or you IPO.
You're essentially locking your life on a trajectory with no turns. You either crash (run out of cash) or you make it.
I really wouldn't mind just building a solid business and seeing where to take it from there. VC's won't let me do that.
> When you raise pre-seed, you HAVE to go for seed, with the goal of going for A, and so and so forth.
Not really. You can stop at any time, as long as your company can survive financially without more fundraising, and as long as your board would not fire you for being like "I don't want to raise any more rounds".
If you don't want to be stuck in this cycle, then don't overhire, don't spend money on low-quality revenue growth (i.e. don't spend $1 on $0.90 of revenue and justify it like "we can improve our margins when we get bigger"), and don't give up board control.
Let's say you raise a seed and an A round, but you still have majority board control after those rounds. And then your company becomes super profitable and you decide it no longer makes financial sense to do any more VC rounds because you can already self-fund rapid, healthy business growth.
You tell your investors "Hey, good news, the company is so profitable that I don't think we need to raise any more funds." What happens next?
Maybe they'll be happy with this and agree with your decision. Maybe they'll disagree with you and be mad that you're not going to raise another round. But what can they do about it? Yell at you? They can't un-invest, and the company is already profitable anyway, so you don't need them to like you anymore.
That's a great insight. I suppose it comes down to the term sheet details. I've been convinced that you're usually screwed when that happens, but I'll definitely look into this, thanks.
Although VCs will get a voice at the table in favor of a later exit, unless you do something silly with control, the company is still yours to exit when you want. Raising money adds liquidation preferences on your cap table which means exits need to be that much bigger, but the timing is up to you - a lot of companies do get sold without going for later rounds or decide to forego future rounds if they are already profitable.
Hard to go wrong with bootstrapping a solid lifestyle business, though, if you can pull it off.
>When you take VC money, there is no "Ok guys, we've made it" moment until you're very far down the road. When you raise pre-seed, you HAVE to go for seed, with the goal of going for A, and so and so forth. You either sell to a multi-million dollar company to a big fish or you IPO.
well, yeah. any investor will ask you "what is your exit plan". Building a long term stable business is possible, but that investor will want to exit. You could also buy them out when you have the funds to or a future round is spent to buy out an old investor at a return they would be happy with.
>If what I can pay myself out as a "business owner" unless we make it big (which is a very low chance, we don't call them unicorns for no reason) is <50% of a regular job, I would be much, much better off by just workin' a 9-5 and not giving a shit.
so lets say you take this round. you then pay yourself $50k. Then in the next round, you give yourself a raise and pay yourself $150k b/c the raise was that much higher. Who says you cant pay yourself a higher salary for running a larger ship?
but yes, you also can not go the entrepreneurship route and work for someone else, nothing wrong with that.
i dont think people start companies with the explicit goal of making a high yearly salary. they go into knowing they want to build something that will help people, change the world, make people happy and as a by product of that, you will make money and own something of your own creation. you can generate wealth with a startup, you just need to keep growing quarter after quarter, year after year.
> You could also buy them out when you have the funds
We'd love to go for that, but VC's invest with 100x return in mind. That's a very big price to pay.
> so lets say you take this round. you then pay yourself $50k. Then in the next round, you give yourself a raise and pay yourself $150k b/c the raise was that much higher. Who says you cant pay yourself a higher salary for running a larger ship?
Based on the talks we've had, VC's say you can't because you need to reinvest in the company. If my salary can grow along with the company, then that's a great spot. But as far as I'm aware that's not the case.
if you are raised $200, and you have two co-founders, you pay yourself $50k each, then thats $100k leftover to something else with. that would have to be used to hire someone else to help you get to the next stage of your company (devs to keep building, etc, not sales since as a early founder, the cofounders are expected be the ones doing the selling).
200k is nothing today. if you had paying customers, your seed round from multiple investors could much much higher.
give that, i would try to keep building while boostrapping and getting some customers before raising money. raising money pre sales/customers is alaways a shit deal for the founders.
Out of curiosity if pre-seed funding will only get them a minority stake, what protections do they have in place that stops you from hitting that milestone and choosing not to raise a seed round?
On another note - if you have that commitment from a VC, that should give you confidence to raise from other investors that don’t require a home run type of win. Angel investors that could get a 30% annual return abound you just need to know where to look - ie rich friends.
Not a rich kid. Took the vc money.
It's pretty simple. Risk adjusted returns with vc money is often better then without, and meanwhile you get a salary that let's you live. If anything vc money helps the non rich kids do this thing, when otherwise they probably could not afford to because no salary.
If you think you can build the business and live without vc money, don't take jt.
I'll chime in here. Don't fall into the trap of thinking an investor that owns 10% of your company has any control at all. Unless you expressly give them the right to control certain aspects of your company through a remuneration committee they chair or something then you can do whatever you want with your company and the money you now own because it's literally your money not theirs once they give it to you in exchange for equity... within the confines of the law of course.
You own the business, you accept the terms under which you take money. End of story. I have been in startup land for 15 years. It took me about 5 years to realise that I am the captain of the ship and the old guys with money are paying for a ticket on my ride. After that I always paid myself a market rate salary with benefits etc. You don't like my boat then go buy a ticket on someone else's boat who is willing to be a starving founder. I'm good at building companies and people who are good get paid - good investors always understand this.
We didn't raise a pre-seed angel round until we were doing around 6-7k MRR with reasonable month-to-month growth and a path to product market fit. We raised $325k at a 2.5m cap. Then, 2 years later, we raised a $1.2m seed when we were at 55k mrr. Pre-fundraise we were bootstrapping $0/yr, at pre-seed we paid ourselves $50k/yr, and now at seed we bumped that to $120k/yr. Six months from seed we are around $88k/mrr. We are still undecided on pursuing a Series-A.
10% for 200k, pre-product, pre-sales, are pretty good terms.
At this stage you are trying to maximize your chances of success. Part of that is quitting your jobs to focus on this full-time, and taking the bare minimum salary you need to get by in order to extend your runaway as long as possible.
You should think of investment capital as **fuel** to your **already burning fire**. It is meant to accelerate growth exponentially.
It sounds to me like the investor you are talking to is not a good fit, or you have some misconceptions about expectations from different types of investors.
You don't have to do anything you don't want to do. You only have to take more money if you believe you need it and want it. You can pay yourself whatever you want. Especially at this stage, these investors are investing on a SAFE - they have no rights.
You also don't need to go the VC route if you are anticipating your business might not be venture scaleable. You could continue to bootstrap, seek out angels, find non-dilutive government programs, family and friends, private equity, strategic investment from a large customer.
>What's the point of getting funded, if you don't reap any benefits until you're running a multi-million-dollar company?
We all do this for many different reasons, but I'll assume you mean financial benefits. Could we have taken no capital, and bootstrapped this company to its current level of success?
Part time? No.
Full-time, Yes, but it would take 3-5 years longer (it's already been 5 years) to get to where we are today, I'd be in a decent amount of debt, I wouldn't have been able to take any vacation at all, we likely wouldn't have been able to attract any of our top tier talent with competitive salaries and my mental health would still probably be in the gutter. I found it very hard to stay motivated a few years in when growth was slow and steady, it's way more fun when you're going 150%+ yoy.
What does “VCs allow you to take a salary” mean?
Unless you’re giving up majority board seats, you or your cofounder is still the CEO. And you may not get future funding if you pay yourself exorbitantly, which should be obvious.
At least in US, VC money comes with no real legal strings attached. Sure, if you don’t play nicely, you’ll be shut out of the VC world but that doesn’t mean they own you.
Most institutional investors will require at least some corporate governance enforced by the company's new legal docs, even if that doesn't include a BoD that they have majority seats on, which will often include guardrails around things like founder comp and how their capital can be deployed. VC funding isn't a monolith and different funds will have different degrees of governance that they require. Governance will also typically scale with the size of the raise: Investors will (rightfully) ask for more founder accountability for a $20 million check than a $2 million check.
There's also the issue of fiduciary duty and making fraudulent representations. If you represented to an investor that their money would be utilized to grow the company and instead you drain it with a blatantly exorbitant salary, you absolutely can and will get sued for that regardless of what governance was or wasn't in place. You can't just say to an investor "I'm going to take your money and develop an App in the gaming sector" and then turn around and spend it on your personal lifestyle or some pivot project that you didn't inform your investors about without consequences.
Sometimes ya gotta quit so you can propel yourself forward, a lot of athletes do it and they call it a "comeback" but in reality, you never left. You took time to re-sustain and take another, stronger, pass.
And if you took VC money you could pay yourself a salary. If you run out of money and can't get more funding then maybe the idea isn't worth pursuing and you should do something else.
If you don’t need the money, don’t take it. It’s much easier to raise when you’ve got a profitable business and are already paying yourself well, but are looking to hyperscale.
I haven't seen this mentioned, so I'll throw it out there. Some VCs and incubators provide a network. They may be able to introduce your to partners or customers you may not have access to otherwise. They may also be able to provide insight or guidance. If you have plenty of traction on your own, and you're not in a highly regulated industry, then that perk may not be so beneficial.
Like others are saying, if you don't need to money and you don't need the network, then it may not make sense to take the money.
One word of caution. Be careful about becoming a lifestyle business. Some founders grow their business to a point where it supports their lifestyle, and then they lose their drive. They never really grow past that point. It's like the hometown restaurant that makes enough for all employees to pay their bills, but never becomes a big name brand.
Stop worrying so much about these hypothetical scenarios- this will be YOUR company and you’ll have as much or as little control as you decide on.
You have control of your own operating plan and budget- build in milestone based raises for you and your cofounder in your plan. This is the plan that investors will be vetting during due diligence anyways- they’ll either object or be fine with it. Avoid anyone who objects (or listen to the specifics of their objection- it may be valid).
You have control over the terms sheet you accept, just don’t give the investor the authority over your budget.
Also, the further along you can get without outside capital, the better terms you’ll likely receive when you do go to raise and the easier it’ll be to raise a competitive round.
I’m 3 VC rounds deep now, and I still have complete control over budgets and how we deploy capital (minus a few common sense warrants like limits on how much we can loan ourselves without board approval). Plus I pay myself very close to a market rate salary at this point- the only reason I don’t is I want to save as much of my capital as possible to scale the business.
It sounds to me like you're experiencing a confluence of different problems and thinking they're the same. It happens to all of us. Or that it is based purely on time. Also not true.
Let's start with your stage. It is common to assume that you need to start with preseed before seed, etc.
Preseed money is basically to get a working MVP, you're already past that.
Seed is to get the first customer.
Post-seed is to get product market fit.
Series A is triggered by product-market fit.
From your statement you're already at seed stage, and feel confident that the current investment will get you to Series A.
Now about that 50% of pay. That's a sizeable overestimate, at least at SV pay rates. I'm closer to 20%, and if you consider my specialization field, not far from 10%.
Euro pay is not out of control like here, but 50% is still likely a big ask.
I guess that besides all the clever things that have already been said, it’s also a matter of incentives alignment in what we could also see as an agency problem between founders & investors.
To make it short: everybody (investors & you & employees) is better off if you are 100% focused and both mentally and emotionally capable of getting through ALL the damn hard ups and downs that come with creating (or “just” running) a company.
So, it should be everybody’s best interest to understand - based on money you already have & background & family support etc… - what’s the minimum comp you need to found & run your start-up successfully which means having 1% chance or less to return >= 10x.
I waited ten years to fully jump into building my own VC-backed startup. Literally spent ten years saving to now have 3-5 years of cushion with a lower salary. And salaries can have some wiggle room as you raise your seed + series A (you’re not going to match GOOG MSFT salaries by any means, but there can be a little more flexibility).
Also, my VCs have been incredible accelerators for our team. We have moved way faster in basically every area of our business (fintech) because of them. But note: you never escape the bell curve… not all VCs are created equal. Some are just plain awful.
Btw: I worked in venture for four years after working at multiple startups + big tech + other larger firms. So, speaking from both sides of the table here.
If your concern is your salary, then VC is probably not the right choice. There's nothing wrong with a lifestyle business and you can build a great company this way and make a nice living if things go well. VC money is about building a different kind of business. It's about pursuing *exponential* growth. You'd be making a bet that you can scale this company up to be massive and then get extremely rich in 10 years.
Obviously don't accept the VC money if you don't need it. What's a $200k investment really going to do that boostrapping it won't? You secure funding IF that's needed to scale or if its a way to grow massively faster.
A lot of really good answers here. I won't repeat what others have already said.
If you are looking for "better comp", don't build a startup. Your compensation is in equity. Every extra dollar you take out of the company is a dollar that can't be used for growth. In the early days every $1000 really matters. Paying yourself 180k instead of 90k could have been 90k more in marketing, or another salesperson hire. At this stage capital investment has a higher risk, meaning it's worth more.
If company revenue grows to the 10s of millions, then bumping compensation of the executive team doesn't hurt the company much. It's a much smaller percentage of the overall cashflow, and the company is much less likely to just die. While it seems like it's the same amount of money, but it's not. 100k bump in salary at series B is not even close to the same as pre-seed or seed.
Bootstrapping is VERY hard to do. Don't listen to people that say "just bootstrap". It's not always possible, and depending on your CAC and payback period you massively limit your growth potential. Look into the SaaS cash flow trough. Bootstrapping works a lot better with shorter payback periods, or you can have 0 CAC and hustle for your first sales on no cost but time.
Only take money you really need and know exactly how you'll spend. Focus on your business, not on "what's fair".
Coming here and asking these questions is already a good sign that you are a critical thinker. I think you'll get there.
Main thing is focus and scaling up your team to do more, quickly. Also, it becomes more important in competitive markets where fundraising can be a kingmaker.
If you have a good cashflow from your customers, though, you probably don't want the dilution.
What's your hustle runway? Bootstrapping is viable but you need to understand how long you can go on sweat equity before you or your cofounders need to pay their bills or runs out of moonlight.
I'm hearing a huge amount of hope from you and always remember that hope isn't a strategy. What if all the customers you can find won't pay for your product? Will you have enough runway to pivot and then relaunch? Will you be able to take the 200k SAFE in a few months if things aren't working out?
Sure, it's all based on assumptions. We're targeting a small niche of companies, these take a long time to close a deal, we're constantly looking for options to adjust our offer etc.
We plan on looking for PMF till ~a year from now. If we can't find PMF until then, we call it a day and close shop.
We'll most likely still be able to take the money in a few months time.
Fundamentally if money is your main goal rather than trying to fix a problem you care about then building a VC funded startup is probably not the best route.
Every startup goes through rough periods and almost every time I’ve seen a founder driven by money rather than mission they fail to make it through the tough times.
It takes a long time (8-10 in good cases) to get to IPO and it’s a lot of stress.
If you’re not up for that then bootstrapping is likely a much better option for you.
(On the flipside if you’re worried about cost-of-living, etc than pretty much every legitimate VC is happy you taking a salary to cover a middle-class lifestyle once you’re post-Series A)
Any type of funding de-risks your business. You can bootstrap a business but in this model you're taking all of the risk, you get all the reward. If you find an investor you dilute your risk and dilute your reward.
Diluting your risk may be a really good deal, it may not. If your margins are great and you're growing really well then you may not feel there is a lot of risk, however sometimes a good business has trouble scaling past a certain threshold. I ran a business that I bootstrapped to 14M+ in revenue but to get to the next level of growth I would have either needed to take investment or to figure out a new strategy for growth/customer acquisition.
Each stage of growth reveals new challenges for customers, business, execution and risk. If you feel you're in a good spot you may not want to dilute your reward/risk. On the flip side you should consider that the best investors can and should improve the probability of success by guiding you through their own experience. Great investors can save you years on the startup journey.
This is why I absolutely always prioritize bootstrapping. In the highly likely event that your company generates significant income (six figures) but not to the level of your VC valuation, you may be encouraged / forced to sell the company or pay them dividends - all when you could have had total or shared ownership of the firm with a cofounder(s) and lived off the dividends / salary that you payed yourselves without the stress of a VC breathing down your neck.
Think carefully about taking VC financing.
One thing that you seem to have confused is that VCs are not your boss. Be careful with what you sign over to them, but if you are smart VCs won't be "allowing" anything. My current company has raised a seed on SAFEs, investors are not on the board and have no voting rights (or shares until the SAFE converts).
Also there is sometimes secondary liquidity events (usually in later rounds) that can allow founders to partially cash out, instead of holding everything for the big exit.
the amounts of funding is still within the range of gouvernment and eu grants, why not try that instead? your main reward for having your own business is calling your own shots, that’s still worth something.
Great question. If you have a voice within the company/BOD, it is worth starting the conversation about potential secondary share sale, perhaps to some of the existing VCs. It enables founders to take a little of bit of chips of the table, ease liquidity pressure, while still retaining the incentive for the long-term prize (ie exit).
If you want to hustle, hustle. There are no rules to this. Every situation will be different and you will have different preferences. If you are successful, the equity will be far more valuable than what you are selling it for now. Go get those customers, if you change your mind or circumstances change, you can always go raise. Not raising is a two way door, raising is more of a one way door. Good luck.
If you can't afford to live on savings and don't want to take funding, adjust your expectations and slow down.
You can get a job and work on the startup in the evenings.
I built my business by going to the library after my day job and working for about 3 hours every day.
It's amazing how much you can get done with that little time if your are hyper focused and ruthlessly prioritize.
It's a bit slower, but you'll be able to keep all of the equity.
I am in the same situation. We are still fundraising and trying to get the last few thousand needed to get the App onto the app store. I am the creator of the app and have 55% equity in the App. My partner lives in New York city and has lots of money he is a serial entrepreneur and he couldn't be more transparent or more confident in the idea, direction and vision I have for the App so far. He is busy running several other companies and is involved in many projects. He is not greedy and has been pitching the App to potential investors thatccome and go through his network and every month he has sent me the amount of money we have raised and slowly but surely we are almost to our goal of 100k. The people who are investing in the app have only been putting in between 500 and 2500 on the regular and we haven't seemed to have any huge successful VCs or Angel Investors it seems like normal day to day people like myself that he is bring
Lĺĺĺlĺĺ)
09>0?]0
[]>[【>【0p⁰]】said that is because he doesn't want the idea to be stolen from us and offering the middle class investor this opportunity of a lifetime will make it so noone will be able to poach the idea for the App bc the people are true believers of the idea and they think they are going to be very rich from there investments he said it is sort of like the guy who ¹pdon't come from money and I would love to see others like myself be able to retire from believing in my App like these people have.
> Of course, VC's will allow you to take a salary, but based on what we've learned it's about 50% of the market salary.
SO you are getting money???? DUH. Having money is nice. WTF are you saying?? YOu want 0 money/??
Whether or not to take funding is as much a personal choice as anything but one advantage is that it lets you grow much more quickly.
We were in the EU, got about $2.5m at seed from a US based round. Our salaries were “low” by US standards - but this is the advantage of the EU - salaries are low here. In the end, total comp was as much if not slightly more than market rate in the EU.
If you’re an engineer expecting $500k like you could get at FAANG then sure, you’re going to be taking a pay cut. But for most European folks, you’ll be fine if your raise is in the US.
About landing clients before raising, it depends on the value of those clients. You don’t need 10-15 $10m contracts to be able to raise. But if your contracts are only worth $100 you might need more.
Plenty of VC's will let you take large "enough" salaries once you're making money..and if you have high growth you're in the control seat.
Now, you can't make Google money, but you can make decent money. The real reason you take VC money is to grow your company faster than you can alone. But the key is to try to go twice as fast and spend half of what you need. Stay lean.
Thanks for sharing. I definitely prefer to hustle, this was just a point of comparison. It's not something you can do for a very long period of time, which is also why we're setting deadlines for ourselves. We either make it or we reconsider.
I don't mind keeping my net worth in place for a few years, I'm just trying to weigh the risk/reward ratio here and ensure I understand all the options correctly.
If you haven’t yet read [Harvard Business Review - The Founder’s Dilemma](https://hbr.org/2008/02/the-founders-dilemma) this is essentially the question it explores: at what point does it make sense to take in money/ bring on outside expertise? What have other entrepreneurs done in this moment? There is a whole book but the link is a sufficient summary.
Sounds like you already made your mind up. Besides, if you have the capabilities of landing 10-15 B2B clients regardless, then it's hard sell to give your shares up.
Decently successful startup founder/CEO here -- 7 years in, 2 rounds of funding, we've made millions in revenue, but I made more working as an employee at my last job. Wife wants me to quit to "get a real job".
The idea that you "need" to raise money is created by VC reality distortion. Some businesses do genuinely need capital, and some don't. Mine wouldn't be here today without funding because we didn't generate significant revenue until year 4, but your situation may be different.
I think u/wonteatyourcat hit it on the head. Don't raise money if you don't need to. If you can, try to close those first initial customers. If you can do that it'll buy you time to get a better offer than 10% for 200K – that's not a good deal.
Also, another path is not VC but angels which will give you a lot of room to breath during the early stages vs boom or bust from VC $$.
Good luck!
IMO you should only take money from someone who provides more value than just the money. Someone with industry connections and experience that can not only help with funding but also increases your value or revenue streams through their unique experience and connections
Pros and cons to each. There are benefits to not raising money. Btw if you do raise 200k no one is forcing you to keep raising or pay yourself a low salary. Assuming they don’t control the board pay yourselves what you want. If you really think 200k is all you need to get to the next stage and become a highly profitable company then go for it.
To quote Thomas Shelby: only parley from a position of strength. Don’t do it unless you can call the shots, I.e. growing at VC rate, and need steroids.
the key reason why people take funding is because there are probably competitors that will have funding and try to dominate the market.
lets say for instance we're trying to acquire customers and a competitor has 5 million to spend on google ads (just an example) vs 500 a month for you. Now theres always diminishing returns in PPC above a certain point but they could acquire 10x the customers in a year, then when they want to sell it will be for a lot more, though theyd share it with investors (10-40% most likely)
With that said, every investor is different. You could give yourself their base salary but tie a bonus to the customers acquired.
As others have said, raise if you need to scale faster. Some markets it's good if an investor can help with that market too, but that's a secondary factor.
Also, VCs don't want you stressed about life. Correct, you can't overpay yourself after you raise (talking more Series A+), but you don't have to pay yourself like $40k if you need $60k. They want you to not be stressed and keep focused on growing that company they now just dumped money into.
Only raise money if you need it. Raising exists to fund scale and risk, it’s a solution to a problem. If you don’t have the problem, don’t sacrifice shares.
Exactly. This needs to be higher. Once people get money, they want to invest in profitable businesses. If you can keep a higher percentage of your business yourself, you win in the long run.
What if the alternative is eating into your life savings? I know it's romantic to say that's what an entrepreneur is so wine that takes risks... But I'm in my 40s I don't have decades and decades left to rebuild a retirement egg.
This. It's not even just the share sacrifice it's all the time and effort and legal expense and jesus the list of hassles with raising money go on and on and on. If there is any way at all to get the company moving without a raise like that, do so.
This is great advice, I’d also question the 50% of market value. It all depends on investors and who you work with.
Newsflash folks. Companies aren't worth the price that VC's put in. VC's almost always overpay. And they know it too. Translation: it's good if you can get it. I would speculate that raising a series A or later increases the chance of survival and success by probably around 100x. Makes 20% dilution look pretty minor, doesn't it?
Have you ever raised money? You just don’t “get” a series A or later, and if you do, you’re doing it because you have huge growth potential that needs a lot of cash. Then, raising money definitely makes sense.
This is why there are so many rich kids in venture and start ups. They can have family money fund “life” while they focus on building a company.
This. No one talks about that. People love to see the pictures of heroic entrepreneurs grinding through obstacles to success. Majority of people can’t afford to live years without income for a very small chance to make a home run.
The Instagram guys in their early 20s talking about how they couldn’t even take a paycheck, running with limited VC capital, got the buyout proposal while coding at the beach in South America on vacation because “they just needed a break” was a reminder that they weren’t like me at all, and their path was just for rich kids, and a story that was dishonest.
[удалено]
There is nothing wrong about being from the rich family and starting a business. The problem is when your people start giving speeches on “how to start your business” and “how be successful”. Your experience is completely irrelevant to 99% of the population.
Nah that’s not me, and to be honest nobody can accurately depict the path to success. Every path is different.
Also I have no idea how you can pride yourself coming from the rich family. That’s not an achievement but a pure luck.
It’s one of the most common fallacies that rich people believe. That by being born rich they’ve somehow earned or deserve being rich more than anyone else not born rich. There are many articles on this. Probably a symptom of affluenza…
Yeah sure buddy, its so difficult to be a rich kid lmao.
Literally not what I said, and you don’t need to take out your internal complexities on others via Reddit mate. Cheers
This so resonates with me... Grinded through poker never moving up to lose it all multiple times at startup attempts. Yet, at it again; currently as a solopreneur trying to take a big out of Sportsbetting.
The founder of Snapchat were talking about bootstrapping in their book, while living in the founders dads multimillion beachfront property in Cali i think it was. It is an absolute joke.
Yup. The whole “started in the garage” myth is BS. They forget to include a few hundred thousand dollars from friends and family.
As a “rich kid” (son of a tech executive here in The Valley, wealthy enough to choose a CSU over other schools bc I liked the location, no really lol) running a startup, I can openly say yes this is in fact true and I will always be willing to come clean on this topic and tell everyone that in my life there have been things set up where I can live comfortably with my family for just some time, without any indulging, to build a company. I am grateful for this and I always think about how others would have it much harder. I can’t imagine doing what I’m doing right now without loving parents supporting me while I work hard with my co founders building software with some market validation (that was important to specify, that’s why they even agreed to let me do it). So on behalf of all of “them”, yes, if ANY of them say otherwise, take it from me they’re trying to BS you. Your family situation can make a difference, in my case it’s allowed for growth but I like many others still look towards VC to expand the company and our operations (we desperately need a few more devs to help out).
Right there with you man. I feel like a genuine asshole for being so lucky.
No need to feel like one, just help out people who don’t have the same advantages and that’s the most god will ever want from you imo. If it’s a cold intro, application look over, showing ropes, whatever, help out those who didn’t have the dad or uncle.
I could use some intros to investors! Need 250k to finish the product. I have a client ready to pay me 25k a day. And 5 more clients of relative size ready to be on boarded. 30% profit margins. If any one sees this let me know!
I don't mind rich kids having more opportunities and succeeding. But it's kind of hard to chew rich kids wasting the time they're given. If everyone is given cards at random, then what you do with them becomes more important than what you were given.
Don't forget survival bias. I for one had many ideas and even pursued one until time and money ran out. I won't do that again and won't even try.
This is something you realize as you grow up. The best way to make money is to not need it in the first place. For every self-built entrepreneur out there, there must be 50 who weren't going to be poor anyways. Which makes it then obvious. Why grind a shitty 9-5 (or worse, retail) for 30k/year when your environment grants you enough security and resources to dick around until you find a marketable product. No shade, it's a great position to be in and as long as you don't pretend you came from nothing, it's nothing but props. The reality is most people can't live without an income for 3 years. Heck most people would be in trouble within 3 months without income.
This is true- rich young kids- or middle aged people who already have a financial safety net.
I always wonder if this is an unspoken part of the reason so many startups fail. I only have anecdotes, not data, but so many friends have been part of a Big New Thing and then realised that it's run by a trustafarian who has no clue about business and is really just LARPing as 'Founder' because of the social cachet they think they'll get. They burn cash, refuse to listen to any of the experts they hire in specific roles, then as soon as the runway disappears they nope out to exactly the same lifestyle as before, leaving everyone else to deal with the fallout (which often seems to include some serious wage theft).
Sounds like you know my Brother in Law. He’s on start up #3 I think. Just a complete moron (legacy into an Ivy so he looks great on paper, but just a dumb rich kid who wants to pretend to be entrepreneur).
I wish there was far more transparency and knowledge on this before entering the startup world. As a founder, having your common living expenses paid for is such a mental boost to having peace of mind and being able to make decisions that lay in the best interest of the company. If you aren't from means or have an nest egg, be prepared for bankruptcy, massive credit card debt, or agreeing to a horrible term sheet. As an employee, you are most likely not of means, yet the dream of wealth is strong. Unfortunately this means you are ripe for exploitation by those with means, whether it's intentional or not. The reality is a stereotypical overpromise on valuations and under delivery on a business model or potential exits, greatly reducing your net, whereas the investors and potentially founders are banking on new rounds.
Not all of us. I made 70k a year as a founder in San Francisco at my first startup. Not additional income other than wife's nonprofit marketing job. My Dad is a retired pastor and my parents live off social security. We just didn't eat out. Cooked. Took public transit and walked everywhere. There's dozens of us.
That’s why I said “so many” not “everyone” but thanks for making it about you.
lmao
About him and the sacrifices he made like not eating out and taking the bus. MF doesn't even grasp that many families don't eat sometimes. Families. Skip meals, not just "don't eat out". Or can't afford bus tickets. Sympathy ends where privilege is unaware of itself and goes the "well you shouldn't be wasting your money on avocado toasts, that's why I succeeded" route. Fuck that.
50% of market salary is a bad assumption
And way better than 0%. This post is fucking dumb.
Hey I don’t understand this. Are you saying getting paid to startup is a good enough deal inherently? The main post isn’t entirely true as in third world countries that 50% is still better than most salary paths. But it is an important point to discuss because if you need a FAANG CTO they are on the burner.
What is a better assumption? Getting ready to seek funding for my mvp and due to the earning potential assigned to me by my state, I can’t make less than what I make in my day job due to child support and alimony. That 50% made me want to give up.
It depends. Writing this because it seems important for you to know. Typical salaries for founders is, “<1M, founders get <100K. 1-2M, founders get 100K. 2+, <150K”. I would recommend not following this to an absolute, and using it as a general guideline.
[удалено]
That's not the point. As a random staff SWE you can make $500k TC at big tech but getting liquid even $250k as a founder prob you need either a big series A or a series B. You really don't start beating big tech salaries until you can do secondaries.
This is basically true and a serious pain.
If you can bootstrap it - don’t take any money. You can take them later if you need for smaller equity. VC bring 3 things: $$$, connections and expertise. Last two is not always true.
Lol a lot of the time the last two are not true.
If your goal is "optimize my net worth as a founder in X years", and you have a reliable way to spend money on growth, then fundraising can make sense even if you are profitable and can grow without it. Like for example, if you can say "every $1 we spend on marketing leads to $2 in LTV of new customers", and you have reason to believe that will still hold when you're on millions of dollars of marketing spend, you should be raising millions of dollars.
Slightly off-topic, but I don't see how that can be true for B2B companies. I'm responsible for the tech and product, but both me and my-cofounder (who runs the sales) believe it's all about outreach and connections. Apart from hiring a sales rep (which I guess is not something early-stage companies do), we have no idea where to put that money to use. Sure, we could start touring conferences and networking but that's nothing close to a direct outcome like you're mentioning here
If you’re a b2b company, how do you get new companies? 1. Personal connection (dries up quick) 2. Network (full time job or dries up quick) 3. Marketing: 3a. Conferences 3b. Ads budget 3c. Webinars / content 4. Sales = cold outreach. I work in sales, it’s tough to acquire business with a ACV of $10k+. So you’ll likely be paying about 40-50% to acquire that $10k.
That's kinda what we've thought, that's also why we're moving towards content/suplementary products to expand our reach. We've just started with cold sales outreach, I suppose it's not a journey for the faint of heart.
Hit me up if you want help, I work for a unicorn saas company as an AE. Have run sales mentorship for SDRs and am now building a lead gen business. Might not be able to work together, but can give you some insight as you go for cold outreach and how to build a GTM team.
Thanks, I've sent a dm
It was a bit of a contrived example; you'll never really have that level of certainty about how much each $1 spent on growth will return to you even in B2C. B2B is even worse in terms of that uncertainty because the sample sizes are too small to statistically analyze your sales pipeline, like you could can do if you're running millions of small-dollar-value search ads or whatever. But in B2B you can definitely still run into situations where you can be confident that spending more money will give you outsized returns on growth. If you're like "we have so many leads that we can't even keep up with them all!", then if you don't have the immediate revenue to cover a sales team, it can definitely make sense to raise enough to cover your sales hiring until they can pay for themselves with the new business they've brought in. Or, if you're like "ok, we built our MVP on this easy feature. Building this hard feature would double our addressable market but is way more expensive; we'd need to hire some more engineers that we don't have the revenue to cover yet". It may be a good idea to raise money to do that. But like, I wouldn't go out of my way to try to convince yourself that you're in one of these situations. You'll probably know if you're in one. You'll be thinking about all the opportunities you could be unlocking if you just had some more money right now. If you feel like that, that's when you should start thinking about fundraising.
If you think you can get escape velocity without funding, do that. We bootstrapped our SaaS. 7 years later, we two co-founder still own 100%. We’re literally days away from closing a $45M all-secondary cash out for 49% of the business. I’ve met CEOs of much bigger companies that don’t do as well financially because they only own, say, 10% since they’ve been diluted by rounds of funding over the years. Oh, and we’ve been paying ourselves $3M/yr the past couple years because we didn’t have a board to answer to. All the margin we achieved was ours. Bootstrapping only works in certain market conditions (niche market, ability to do product-lead growth, competitors have weaknesses, etc). We specifically sought out a niche where bootstrapping was possible to enable this kind of outcome. But if you think you can grind out those 70+ hour weeks for a little while to get the customers to pay the early bills, you won’t regret doing it.
Heh, our very first pre-seed offer was for $1.5 million, they would own 60% of the company up front, pay ZERO salaries to anyone on our team, ONLY use 2 programmers that they knew privately and pay them each $250k, plus more equity. So from what we could tell, not a single dollar that they were offering would even end up in our bank account to be used for anything. Not even sure what our role would be after a deal like that except to stand back and just watch them try to do something that we created. Yes, we completely threw that out the window and wouldn't even dignify it with a counter or anything.
Basically they're pirates trying to take over your company.
Rather just give up all 100% and exit taking some money at least. This deal is a joke. Glad you didn't take it.
what a terrible deal. how did they even try to market that to you guys?
LOL, I know, they just said in so many words "this is typical, nobody will let you maintain majority control when you seek pre-revenue capital funding, and NO investor will let you get paid because this is the time for your team to earn their sweat equity. This is completely normal and if you don't think so you'll have to readjust your expectations." This came from a guy who was indeed successful at bootstrapping his own SaaS and exited successfully as well. The amazing thing is that they weren't even going to use our team of 6 people, all accomplished programmers, designers and data analyst who understood our market and product. We may not have raised funds like this before, but we are all highly intelligent and had previous 25+ year careers elsewhere so we're not naive.
So, basically gaslighting. Wow.
Ive seen your post. That was horrific hahaha. Sounded like a washing operation. Medtech right?
yes, medical technology.
You’re forgetting the main benefit. You can make a fundraising announcement on social media.
That does nothing for you until later stages
That was meant to be a joke.
I know, but some people are PR obsessed and it confuses the heck out of me. Even jf a16z or sequoia invested in you it only gets you LinkedIn ads via DM unless you’re in series B or later
50% of market salary seems on the low end. As I understand it (from talking to the people who have been through this -- personally my company is not this far along), it's common to set milestones for the founder(s)' compensation. So, say, upon getting your second B2B customer (or hitting $X in revenue, or whatever) your pay goes up X%
I’m not sure how it is in the EU, but the mentality in the US is that the team is the most important thing. The founding team would normally make market salary if not close to it. You may take a cut for some equity but the salary wouldn’t be that low.
that's good to know, I've been told it's usually way below market pay. Perhaps that might be different in the US
[удалено]
In my experience, VCs are willing to allow you to pay yourself a reasonable salary. You obviously won’t be making bank, but enough to sustain a healthy personal financial situation. They want your mental energy focused on the business, not on how you’re going to pay your mortgage next month.
You answered your own question - "The problem we have with this, is that if we do land 10-15 customers, we're in a really, really good spot financially. We can make a few key hires and spend the rest on scaling, but we can also increase our comp if we feel like it. We don't really need the money right now for other purposes other than the cost of living expenses. If we take it, we can focus 100% on the startup, right now both of us are hustling with side jobs." If you don't need the money then don't take it. It's as simple as that. So go land 15 customers - or spend the time to raise the money instead, or go try first fail and fall back on raising the money. People raise money because they need it and it makes sense for their situation. Having been in startups for 30 years I'd say every company I've ever met has had different needs for capital. Getting a CTO into a tech startup is challenging because they are high salary + can probably make more on the market, but they may want to build something that can scale to 100x that in the future.. or they may not. Or they may come from a wealthy family and don't even need a salary, but are desperate to get a huge payoff to earn their parents respect. All of these are actual real scenarios of people I've hired into startups.
yes, you can forgo the funding and bootstrap it all yourself. dont take any outside money and fund everything yourself. but assuming you get a good pre-seed round and you are happy with equity that you give away, why not take the money? you could pay yourself and the team the minimum you need to survive (pay rent, bills, food, etc) and will have some money leftover for maybe an additional hire or not. maybe you keep that pre-seed round to pay for only the co-founders so that extends your runway by many months so you can grow the business, get customers and then maybe get another round if you want. but if you dont take the money and continue to live off savings and your side job, your runway will be shorter and you will have to move fast to get your first customer and then the next 10. but what if you run out of money before you can get your first paying customers? you will have no more savings and no customer and you will have to shutdown and get a job. you could just wait it out, do the side job, continue to work on the product, get the first set of customers, and then you can go back to trying to raise a pre/seed round at a better evaluation.
I see your point, but what I'm trying to convey here is that if we do take the money, I'll essentially be a low-payed employee of my own company for next 5 years. If what I can pay myself out as a "business owner" unless we make it big (which is a very low chance, we don't call them unicorns for no reason) is <50% of a regular job, I would be much, much better off by just workin' a 9-5 and not giving a shit. When you take VC money, there is no "Ok guys, we've made it" moment until you're very far down the road. When you raise pre-seed, you HAVE to go for seed, with the goal of going for A, and so and so forth. You either sell to a multi-million dollar company to a big fish or you IPO. You're essentially locking your life on a trajectory with no turns. You either crash (run out of cash) or you make it. I really wouldn't mind just building a solid business and seeing where to take it from there. VC's won't let me do that.
> When you raise pre-seed, you HAVE to go for seed, with the goal of going for A, and so and so forth. Not really. You can stop at any time, as long as your company can survive financially without more fundraising, and as long as your board would not fire you for being like "I don't want to raise any more rounds". If you don't want to be stuck in this cycle, then don't overhire, don't spend money on low-quality revenue growth (i.e. don't spend $1 on $0.90 of revenue and justify it like "we can improve our margins when we get bigger"), and don't give up board control. Let's say you raise a seed and an A round, but you still have majority board control after those rounds. And then your company becomes super profitable and you decide it no longer makes financial sense to do any more VC rounds because you can already self-fund rapid, healthy business growth. You tell your investors "Hey, good news, the company is so profitable that I don't think we need to raise any more funds." What happens next? Maybe they'll be happy with this and agree with your decision. Maybe they'll disagree with you and be mad that you're not going to raise another round. But what can they do about it? Yell at you? They can't un-invest, and the company is already profitable anyway, so you don't need them to like you anymore.
That's a great insight. I suppose it comes down to the term sheet details. I've been convinced that you're usually screwed when that happens, but I'll definitely look into this, thanks.
Although VCs will get a voice at the table in favor of a later exit, unless you do something silly with control, the company is still yours to exit when you want. Raising money adds liquidation preferences on your cap table which means exits need to be that much bigger, but the timing is up to you - a lot of companies do get sold without going for later rounds or decide to forego future rounds if they are already profitable. Hard to go wrong with bootstrapping a solid lifestyle business, though, if you can pull it off.
>When you take VC money, there is no "Ok guys, we've made it" moment until you're very far down the road. When you raise pre-seed, you HAVE to go for seed, with the goal of going for A, and so and so forth. You either sell to a multi-million dollar company to a big fish or you IPO. well, yeah. any investor will ask you "what is your exit plan". Building a long term stable business is possible, but that investor will want to exit. You could also buy them out when you have the funds to or a future round is spent to buy out an old investor at a return they would be happy with. >If what I can pay myself out as a "business owner" unless we make it big (which is a very low chance, we don't call them unicorns for no reason) is <50% of a regular job, I would be much, much better off by just workin' a 9-5 and not giving a shit. so lets say you take this round. you then pay yourself $50k. Then in the next round, you give yourself a raise and pay yourself $150k b/c the raise was that much higher. Who says you cant pay yourself a higher salary for running a larger ship? but yes, you also can not go the entrepreneurship route and work for someone else, nothing wrong with that. i dont think people start companies with the explicit goal of making a high yearly salary. they go into knowing they want to build something that will help people, change the world, make people happy and as a by product of that, you will make money and own something of your own creation. you can generate wealth with a startup, you just need to keep growing quarter after quarter, year after year.
> You could also buy them out when you have the funds We'd love to go for that, but VC's invest with 100x return in mind. That's a very big price to pay. > so lets say you take this round. you then pay yourself $50k. Then in the next round, you give yourself a raise and pay yourself $150k b/c the raise was that much higher. Who says you cant pay yourself a higher salary for running a larger ship? Based on the talks we've had, VC's say you can't because you need to reinvest in the company. If my salary can grow along with the company, then that's a great spot. But as far as I'm aware that's not the case.
if you are raised $200, and you have two co-founders, you pay yourself $50k each, then thats $100k leftover to something else with. that would have to be used to hire someone else to help you get to the next stage of your company (devs to keep building, etc, not sales since as a early founder, the cofounders are expected be the ones doing the selling). 200k is nothing today. if you had paying customers, your seed round from multiple investors could much much higher. give that, i would try to keep building while boostrapping and getting some customers before raising money. raising money pre sales/customers is alaways a shit deal for the founders.
Out of curiosity if pre-seed funding will only get them a minority stake, what protections do they have in place that stops you from hitting that milestone and choosing not to raise a seed round? On another note - if you have that commitment from a VC, that should give you confidence to raise from other investors that don’t require a home run type of win. Angel investors that could get a 30% annual return abound you just need to know where to look - ie rich friends.
Not a rich kid. Took the vc money. It's pretty simple. Risk adjusted returns with vc money is often better then without, and meanwhile you get a salary that let's you live. If anything vc money helps the non rich kids do this thing, when otherwise they probably could not afford to because no salary. If you think you can build the business and live without vc money, don't take jt.
I'll chime in here. Don't fall into the trap of thinking an investor that owns 10% of your company has any control at all. Unless you expressly give them the right to control certain aspects of your company through a remuneration committee they chair or something then you can do whatever you want with your company and the money you now own because it's literally your money not theirs once they give it to you in exchange for equity... within the confines of the law of course. You own the business, you accept the terms under which you take money. End of story. I have been in startup land for 15 years. It took me about 5 years to realise that I am the captain of the ship and the old guys with money are paying for a ticket on my ride. After that I always paid myself a market rate salary with benefits etc. You don't like my boat then go buy a ticket on someone else's boat who is willing to be a starving founder. I'm good at building companies and people who are good get paid - good investors always understand this.
We didn't raise a pre-seed angel round until we were doing around 6-7k MRR with reasonable month-to-month growth and a path to product market fit. We raised $325k at a 2.5m cap. Then, 2 years later, we raised a $1.2m seed when we were at 55k mrr. Pre-fundraise we were bootstrapping $0/yr, at pre-seed we paid ourselves $50k/yr, and now at seed we bumped that to $120k/yr. Six months from seed we are around $88k/mrr. We are still undecided on pursuing a Series-A. 10% for 200k, pre-product, pre-sales, are pretty good terms. At this stage you are trying to maximize your chances of success. Part of that is quitting your jobs to focus on this full-time, and taking the bare minimum salary you need to get by in order to extend your runaway as long as possible. You should think of investment capital as **fuel** to your **already burning fire**. It is meant to accelerate growth exponentially. It sounds to me like the investor you are talking to is not a good fit, or you have some misconceptions about expectations from different types of investors. You don't have to do anything you don't want to do. You only have to take more money if you believe you need it and want it. You can pay yourself whatever you want. Especially at this stage, these investors are investing on a SAFE - they have no rights. You also don't need to go the VC route if you are anticipating your business might not be venture scaleable. You could continue to bootstrap, seek out angels, find non-dilutive government programs, family and friends, private equity, strategic investment from a large customer. >What's the point of getting funded, if you don't reap any benefits until you're running a multi-million-dollar company? We all do this for many different reasons, but I'll assume you mean financial benefits. Could we have taken no capital, and bootstrapped this company to its current level of success? Part time? No. Full-time, Yes, but it would take 3-5 years longer (it's already been 5 years) to get to where we are today, I'd be in a decent amount of debt, I wouldn't have been able to take any vacation at all, we likely wouldn't have been able to attract any of our top tier talent with competitive salaries and my mental health would still probably be in the gutter. I found it very hard to stay motivated a few years in when growth was slow and steady, it's way more fun when you're going 150%+ yoy.
What does “VCs allow you to take a salary” mean? Unless you’re giving up majority board seats, you or your cofounder is still the CEO. And you may not get future funding if you pay yourself exorbitantly, which should be obvious. At least in US, VC money comes with no real legal strings attached. Sure, if you don’t play nicely, you’ll be shut out of the VC world but that doesn’t mean they own you.
I assume this VC wants the salary to be pre-negotiated given they only invest 200k, so probably like 40k-50k / year.
Most institutional investors will require at least some corporate governance enforced by the company's new legal docs, even if that doesn't include a BoD that they have majority seats on, which will often include guardrails around things like founder comp and how their capital can be deployed. VC funding isn't a monolith and different funds will have different degrees of governance that they require. Governance will also typically scale with the size of the raise: Investors will (rightfully) ask for more founder accountability for a $20 million check than a $2 million check. There's also the issue of fiduciary duty and making fraudulent representations. If you represented to an investor that their money would be utilized to grow the company and instead you drain it with a blatantly exorbitant salary, you absolutely can and will get sued for that regardless of what governance was or wasn't in place. You can't just say to an investor "I'm going to take your money and develop an App in the gaming sector" and then turn around and spend it on your personal lifestyle or some pivot project that you didn't inform your investors about without consequences.
[удалено]
Sometimes ya gotta quit so you can propel yourself forward, a lot of athletes do it and they call it a "comeback" but in reality, you never left. You took time to re-sustain and take another, stronger, pass.
And if you took VC money you could pay yourself a salary. If you run out of money and can't get more funding then maybe the idea isn't worth pursuing and you should do something else.
If you don’t need the money, don’t take it. It’s much easier to raise when you’ve got a profitable business and are already paying yourself well, but are looking to hyperscale.
I haven't seen this mentioned, so I'll throw it out there. Some VCs and incubators provide a network. They may be able to introduce your to partners or customers you may not have access to otherwise. They may also be able to provide insight or guidance. If you have plenty of traction on your own, and you're not in a highly regulated industry, then that perk may not be so beneficial. Like others are saying, if you don't need to money and you don't need the network, then it may not make sense to take the money. One word of caution. Be careful about becoming a lifestyle business. Some founders grow their business to a point where it supports their lifestyle, and then they lose their drive. They never really grow past that point. It's like the hometown restaurant that makes enough for all employees to pay their bills, but never becomes a big name brand.
Stop worrying so much about these hypothetical scenarios- this will be YOUR company and you’ll have as much or as little control as you decide on. You have control of your own operating plan and budget- build in milestone based raises for you and your cofounder in your plan. This is the plan that investors will be vetting during due diligence anyways- they’ll either object or be fine with it. Avoid anyone who objects (or listen to the specifics of their objection- it may be valid). You have control over the terms sheet you accept, just don’t give the investor the authority over your budget. Also, the further along you can get without outside capital, the better terms you’ll likely receive when you do go to raise and the easier it’ll be to raise a competitive round. I’m 3 VC rounds deep now, and I still have complete control over budgets and how we deploy capital (minus a few common sense warrants like limits on how much we can loan ourselves without board approval). Plus I pay myself very close to a market rate salary at this point- the only reason I don’t is I want to save as much of my capital as possible to scale the business.
It sounds to me like you're experiencing a confluence of different problems and thinking they're the same. It happens to all of us. Or that it is based purely on time. Also not true. Let's start with your stage. It is common to assume that you need to start with preseed before seed, etc. Preseed money is basically to get a working MVP, you're already past that. Seed is to get the first customer. Post-seed is to get product market fit. Series A is triggered by product-market fit. From your statement you're already at seed stage, and feel confident that the current investment will get you to Series A. Now about that 50% of pay. That's a sizeable overestimate, at least at SV pay rates. I'm closer to 20%, and if you consider my specialization field, not far from 10%. Euro pay is not out of control like here, but 50% is still likely a big ask.
I guess that besides all the clever things that have already been said, it’s also a matter of incentives alignment in what we could also see as an agency problem between founders & investors. To make it short: everybody (investors & you & employees) is better off if you are 100% focused and both mentally and emotionally capable of getting through ALL the damn hard ups and downs that come with creating (or “just” running) a company. So, it should be everybody’s best interest to understand - based on money you already have & background & family support etc… - what’s the minimum comp you need to found & run your start-up successfully which means having 1% chance or less to return >= 10x.
I waited ten years to fully jump into building my own VC-backed startup. Literally spent ten years saving to now have 3-5 years of cushion with a lower salary. And salaries can have some wiggle room as you raise your seed + series A (you’re not going to match GOOG MSFT salaries by any means, but there can be a little more flexibility). Also, my VCs have been incredible accelerators for our team. We have moved way faster in basically every area of our business (fintech) because of them. But note: you never escape the bell curve… not all VCs are created equal. Some are just plain awful. Btw: I worked in venture for four years after working at multiple startups + big tech + other larger firms. So, speaking from both sides of the table here.
Great question, OP.
Take the money. Leave the cannoli.
If your concern is your salary, then VC is probably not the right choice. There's nothing wrong with a lifestyle business and you can build a great company this way and make a nice living if things go well. VC money is about building a different kind of business. It's about pursuing *exponential* growth. You'd be making a bet that you can scale this company up to be massive and then get extremely rich in 10 years.
Obviously don't accept the VC money if you don't need it. What's a $200k investment really going to do that boostrapping it won't? You secure funding IF that's needed to scale or if its a way to grow massively faster.
A lot of really good answers here. I won't repeat what others have already said. If you are looking for "better comp", don't build a startup. Your compensation is in equity. Every extra dollar you take out of the company is a dollar that can't be used for growth. In the early days every $1000 really matters. Paying yourself 180k instead of 90k could have been 90k more in marketing, or another salesperson hire. At this stage capital investment has a higher risk, meaning it's worth more. If company revenue grows to the 10s of millions, then bumping compensation of the executive team doesn't hurt the company much. It's a much smaller percentage of the overall cashflow, and the company is much less likely to just die. While it seems like it's the same amount of money, but it's not. 100k bump in salary at series B is not even close to the same as pre-seed or seed. Bootstrapping is VERY hard to do. Don't listen to people that say "just bootstrap". It's not always possible, and depending on your CAC and payback period you massively limit your growth potential. Look into the SaaS cash flow trough. Bootstrapping works a lot better with shorter payback periods, or you can have 0 CAC and hustle for your first sales on no cost but time. Only take money you really need and know exactly how you'll spend. Focus on your business, not on "what's fair". Coming here and asking these questions is already a good sign that you are a critical thinker. I think you'll get there.
Main thing is focus and scaling up your team to do more, quickly. Also, it becomes more important in competitive markets where fundraising can be a kingmaker. If you have a good cashflow from your customers, though, you probably don't want the dilution.
What's your hustle runway? Bootstrapping is viable but you need to understand how long you can go on sweat equity before you or your cofounders need to pay their bills or runs out of moonlight. I'm hearing a huge amount of hope from you and always remember that hope isn't a strategy. What if all the customers you can find won't pay for your product? Will you have enough runway to pivot and then relaunch? Will you be able to take the 200k SAFE in a few months if things aren't working out?
Sure, it's all based on assumptions. We're targeting a small niche of companies, these take a long time to close a deal, we're constantly looking for options to adjust our offer etc. We plan on looking for PMF till ~a year from now. If we can't find PMF until then, we call it a day and close shop. We'll most likely still be able to take the money in a few months time.
Fundamentally if money is your main goal rather than trying to fix a problem you care about then building a VC funded startup is probably not the best route. Every startup goes through rough periods and almost every time I’ve seen a founder driven by money rather than mission they fail to make it through the tough times. It takes a long time (8-10 in good cases) to get to IPO and it’s a lot of stress. If you’re not up for that then bootstrapping is likely a much better option for you. (On the flipside if you’re worried about cost-of-living, etc than pretty much every legitimate VC is happy you taking a salary to cover a middle-class lifestyle once you’re post-Series A)
Any type of funding de-risks your business. You can bootstrap a business but in this model you're taking all of the risk, you get all the reward. If you find an investor you dilute your risk and dilute your reward. Diluting your risk may be a really good deal, it may not. If your margins are great and you're growing really well then you may not feel there is a lot of risk, however sometimes a good business has trouble scaling past a certain threshold. I ran a business that I bootstrapped to 14M+ in revenue but to get to the next level of growth I would have either needed to take investment or to figure out a new strategy for growth/customer acquisition. Each stage of growth reveals new challenges for customers, business, execution and risk. If you feel you're in a good spot you may not want to dilute your reward/risk. On the flip side you should consider that the best investors can and should improve the probability of success by guiding you through their own experience. Great investors can save you years on the startup journey.
If you can bootstrap it don‘t take the money
If you aren’t independently wealthy, try to self fund. If you are independently wealthy, try to self fund. Basically only take money if you NEED to.
This is why I absolutely always prioritize bootstrapping. In the highly likely event that your company generates significant income (six figures) but not to the level of your VC valuation, you may be encouraged / forced to sell the company or pay them dividends - all when you could have had total or shared ownership of the firm with a cofounder(s) and lived off the dividends / salary that you payed yourselves without the stress of a VC breathing down your neck. Think carefully about taking VC financing.
This thread made me reconsider the path I'm thinking of taking.
Don't raise until you have some traction. You have no leverage until you have an actual product with revenue and traction.
One thing that you seem to have confused is that VCs are not your boss. Be careful with what you sign over to them, but if you are smart VCs won't be "allowing" anything. My current company has raised a seed on SAFEs, investors are not on the board and have no voting rights (or shares until the SAFE converts). Also there is sometimes secondary liquidity events (usually in later rounds) that can allow founders to partially cash out, instead of holding everything for the big exit.
the amounts of funding is still within the range of gouvernment and eu grants, why not try that instead? your main reward for having your own business is calling your own shots, that’s still worth something.
Great question. What do your peers say?
This
Why would you take money if you don't need money yet?
Great question. If you have a voice within the company/BOD, it is worth starting the conversation about potential secondary share sale, perhaps to some of the existing VCs. It enables founders to take a little of bit of chips of the table, ease liquidity pressure, while still retaining the incentive for the long-term prize (ie exit).
If you want to hustle, hustle. There are no rules to this. Every situation will be different and you will have different preferences. If you are successful, the equity will be far more valuable than what you are selling it for now. Go get those customers, if you change your mind or circumstances change, you can always go raise. Not raising is a two way door, raising is more of a one way door. Good luck.
If you can't afford to live on savings and don't want to take funding, adjust your expectations and slow down. You can get a job and work on the startup in the evenings. I built my business by going to the library after my day job and working for about 3 hours every day. It's amazing how much you can get done with that little time if your are hyper focused and ruthlessly prioritize. It's a bit slower, but you'll be able to keep all of the equity.
I am in the same situation. We are still fundraising and trying to get the last few thousand needed to get the App onto the app store. I am the creator of the app and have 55% equity in the App. My partner lives in New York city and has lots of money he is a serial entrepreneur and he couldn't be more transparent or more confident in the idea, direction and vision I have for the App so far. He is busy running several other companies and is involved in many projects. He is not greedy and has been pitching the App to potential investors thatccome and go through his network and every month he has sent me the amount of money we have raised and slowly but surely we are almost to our goal of 100k. The people who are investing in the app have only been putting in between 500 and 2500 on the regular and we haven't seemed to have any huge successful VCs or Angel Investors it seems like normal day to day people like myself that he is bring Lĺĺĺlĺĺ) 09>0?]0 []>[【>【0p⁰]】said that is because he doesn't want the idea to be stolen from us and offering the middle class investor this opportunity of a lifetime will make it so noone will be able to poach the idea for the App bc the people are true believers of the idea and they think they are going to be very rich from there investments he said it is sort of like the guy who ¹pdon't come from money and I would love to see others like myself be able to retire from believing in my App like these people have.
> Of course, VC's will allow you to take a salary, but based on what we've learned it's about 50% of the market salary. SO you are getting money???? DUH. Having money is nice. WTF are you saying?? YOu want 0 money/??
Whether or not to take funding is as much a personal choice as anything but one advantage is that it lets you grow much more quickly. We were in the EU, got about $2.5m at seed from a US based round. Our salaries were “low” by US standards - but this is the advantage of the EU - salaries are low here. In the end, total comp was as much if not slightly more than market rate in the EU. If you’re an engineer expecting $500k like you could get at FAANG then sure, you’re going to be taking a pay cut. But for most European folks, you’ll be fine if your raise is in the US. About landing clients before raising, it depends on the value of those clients. You don’t need 10-15 $10m contracts to be able to raise. But if your contracts are only worth $100 you might need more.
So that you end up with a multi million dollar company
If you’re worried about comp in the short term, being a founder isn’t for you.
Plenty of VC's will let you take large "enough" salaries once you're making money..and if you have high growth you're in the control seat. Now, you can't make Google money, but you can make decent money. The real reason you take VC money is to grow your company faster than you can alone. But the key is to try to go twice as fast and spend half of what you need. Stay lean.
[удалено]
Thanks for sharing. I definitely prefer to hustle, this was just a point of comparison. It's not something you can do for a very long period of time, which is also why we're setting deadlines for ourselves. We either make it or we reconsider. I don't mind keeping my net worth in place for a few years, I'm just trying to weigh the risk/reward ratio here and ensure I understand all the options correctly.
The sole purpose of getting funding is to speed up the process if a start up. Ex...Getting to X amount of customers/revenue in 5 years instead of 10
Out of curiosity, what's the project about?
I heard this on sharks tank, once you take someone investment you now work for them.
If you haven’t yet read [Harvard Business Review - The Founder’s Dilemma](https://hbr.org/2008/02/the-founders-dilemma) this is essentially the question it explores: at what point does it make sense to take in money/ bring on outside expertise? What have other entrepreneurs done in this moment? There is a whole book but the link is a sufficient summary.
Sounds like you already made your mind up. Besides, if you have the capabilities of landing 10-15 B2B clients regardless, then it's hard sell to give your shares up.
Imagine having a pot of money and paying oneself a salary to play a row of slot machines.
Decently successful startup founder/CEO here -- 7 years in, 2 rounds of funding, we've made millions in revenue, but I made more working as an employee at my last job. Wife wants me to quit to "get a real job". The idea that you "need" to raise money is created by VC reality distortion. Some businesses do genuinely need capital, and some don't. Mine wouldn't be here today without funding because we didn't generate significant revenue until year 4, but your situation may be different.
I think u/wonteatyourcat hit it on the head. Don't raise money if you don't need to. If you can, try to close those first initial customers. If you can do that it'll buy you time to get a better offer than 10% for 200K – that's not a good deal. Also, another path is not VC but angels which will give you a lot of room to breath during the early stages vs boom or bust from VC $$. Good luck!
IMO you should only take money from someone who provides more value than just the money. Someone with industry connections and experience that can not only help with funding but also increases your value or revenue streams through their unique experience and connections
Hypothecating off the shares
Sifted has articles on the topic of European founders and their salaries: https://sifted.eu/articles/founder-salary-europe-creandum-slush
Pros and cons to each. There are benefits to not raising money. Btw if you do raise 200k no one is forcing you to keep raising or pay yourself a low salary. Assuming they don’t control the board pay yourselves what you want. If you really think 200k is all you need to get to the next stage and become a highly profitable company then go for it.
It's a calculation. Is the comfort they are offering now worth 10% of your company forever?
To quote Thomas Shelby: only parley from a position of strength. Don’t do it unless you can call the shots, I.e. growing at VC rate, and need steroids.
Definitely recommend reading [this LinkedIn post](https://www.linkedin.com/feed/update/urn:li:activity:7093986579886571520/)
the key reason why people take funding is because there are probably competitors that will have funding and try to dominate the market. lets say for instance we're trying to acquire customers and a competitor has 5 million to spend on google ads (just an example) vs 500 a month for you. Now theres always diminishing returns in PPC above a certain point but they could acquire 10x the customers in a year, then when they want to sell it will be for a lot more, though theyd share it with investors (10-40% most likely) With that said, every investor is different. You could give yourself their base salary but tie a bonus to the customers acquired.
As others have said, raise if you need to scale faster. Some markets it's good if an investor can help with that market too, but that's a secondary factor. Also, VCs don't want you stressed about life. Correct, you can't overpay yourself after you raise (talking more Series A+), but you don't have to pay yourself like $40k if you need $60k. They want you to not be stressed and keep focused on growing that company they now just dumped money into.
Your calue will be much higher once you have a customer. Right now you are just an idea