Founder salaries fell 43%—but why?

This year’s Founder Salary Report was not like the others. Over the five years we’ve been running this survey, salaries have consistently risen and fewer and fewer founders have paid themselves less than $100k. This year, everything changed.

In this article, we explore three reasons we believe salaries fell. It may seem like a sign of the times, but it also might not necessarily mean everyone’s earning less. We end with ideas on how to make your case for higher pay to your board and investors.

It’s the era of “growth and profitability”

In the SaaS revolution of the 2010s, growth was everything and founders pursued it at all cost. Companies routinely lost money acquiring as many users as possible to the point where if you attended events around San Francisco, you’d run into brand ambassadors hawking flyers for discount ride-hailing or food delivery apps shouting with a smirk, “Get your free VC money, c’mon and get your VC money.” 

That worked for many but now the party is over. Money grew expensive. Last year, the design software InVision which had raised $350 million ran out of momentum and simply closed. Growth-stage VCs like OpenView shut their doors. Covid-era remote work startup darlings Hopin and Clubhouse sold for parts. The so-called funding winter led to down rounds and pain in the startup community, and this year, we believe we’re seeing the results.

Last year, 37% of founders paid themselves less than $100k. This year, 60% did. This isn’t true for every founder. But many appear to be slashing their burn rate, extending their runway, and staying alive until conditions improve.

Calculate your own burn rate with our calculator → 

More founders are also bootstrapping

Nowadays, it’s in vogue to question the wisdom of taking venture money. Investors themselves are getting in on the critique, posting self-referential memes about other investors being unhelpful. Perhaps everyone’s frustrated that there aren’t more deals to be made and that investors have grown choosier. Whatever the cause, it is harder to raise capital and more founders are starting up using their own money.

Compared to last year, bootstrapping was up 77% in this year’s report—from 10% to 18%.

As one might expect, bootstrapped founders are far more careful when it’s their own money. They pay themselves less. Though this is probably not as clear-cut as it appears. Anyone using their own money to start a business likely has the personal finances to cover their cost of living. So their “salary” still exists, just not on the business books. (We did not ask how people supported themselves, and plan to next year.)

It really was a salary cut

Lest you think this report’s 1,844 respondents were all brand new, those startups were an average of seven years old. This is particularly interesting given that last year, 14% of respondents ran AI companies, and this year, 40% did. These are largely the same companies, recently having pivoted. And running an AI startup is more expensive.

AI startups are exactly like SaaS startups except with extra costs: compute, data licensing, and counterintuitively, more people.

It stands to reason that given the age of most startups in our sample, the extreme decline really was a self-imposed pay cut, and not just new startups beginning with nothing in a garage.

Pictured, founders’ write-in responses for why they chose their respective salaries.

How to make a case for more than this year’s average, $98k

This one’s simple: Pay yourself what the business can afford crossed with what you can personally afford and still be effective and focused. There is no sense in asking for so much that it shortens your runway, which suggests you don’t buy your own equity story. But there is also no sense in taking so little it causes you to lose sleep stressing about rent, bills, and childcare. An unfocused founder is a less good investment.

I recommend reading this year’s salary report and making the case based on those charts—showing what other founders pay themselves based on funding, revenue, growth, company phase, and geography.