Hi everyone, Damii here, I'm curious about what founders who have raised some money and are still in pre-revenue pay themselves. Long story short 😅: A friend of mine in the logistics business had a disagreement with his investor because he placed himself on a $5k monthly salary and bought a new MacBook. They are set to launch and become profitable by November, but there's high tension, and the investor-founder relationship doesn't look good. Another question: should investors even interfere with how company money is spent for operations? I'm curious to know your thoughts on this. 💭

It seems these are just the symptoms of a bad relationship and lack of alignment on the goals Founder salary should have been discussed during the initial budgeting. Also every expense should be tracked. How could this be a surprise? I think it's just a matter of communication. In my company we all have visibility of the company's budget for the next two years, it gets updated monthly and we have trust that we're managing the company for its best

Hmm, interesting POV, but another question I have is, should a founder discuss budgeting with investors? I thought that's a matter agreed upon among co-founders... Please elaborate on the aspect of visibility of company budget.

Well it depends on what agreements have been done before starting the company. There are investors who want to have more control of the company, usually business angels. Is the founder the CEO of the company? What threshold of money could he/she spend in autonomy? These are all things to be discussed before such a situation occurs

Salaries and tool budgets should be in the cashflow plan, which should be updated as required and if changed significantly, reviewed/approved at the next board meeting.

Does this apply to founders who have recently raised money from angel investors, or is it specifically for those who have received funding from VC firms? @Daniel Chaffelson

my experience is VC/public grant, where most things are audited. I think if I was doing a raise from friends & family or angels the money is going to be raised against a particular plan, even an informal one, and if the plan changes then I would discuss it with them if I ever wanted to raise from them again, because it would erode trust to say I want 100k to hire a complementary skillset (for example) but actually spent it paying myself instead.

@Giustino Borzacchiello don't you think that at the earliest stages, the company's operating structure would be too chaotic to put such measures in place, especially if they have raised funds from angel investors?

oh for sure, there are reasonable costs of doing business - I've seen people who move countries for startups get their rent and car least paid for the first year or so to smooth the transition. I think specifically I would question the communication that happened about the change in expenditure plan, whether it was communicated before it happened, and what the money was actually marked for. There's also a specific worry when founders use money for themselves that was intended for other things - if you have to pay a surprise AWS bill and delay recruiting the new marketing person, that's one thing, but a founder not having enough visibility of their own personal cashflow needs without explaining a surprise event like losing their home situation is always going to raise eyebrows about personal responsibility

Good point you have there; transparency is key. However, the environment actually differs. I am bootstrapping an edutech SaaS product right now, and I can say the environment has really affected my operational costs. For instance, in Nigeria, we have regular power outages, high data costs, and a general high cost of living. Building without having a 9-5 job to support is very challenging. I feel that if someone raises money from an investor, be it an angel or a VC, under these conditions, they shouldn't have to explain so much about how they sort out all these problems.

makes perfect sense 🙂

@Dennison Hyde it’s just a matter of clarity. If there’s chaos your job as a founder is to remove as much of it as possible. You wear a lot of hats in a startup and the financial part is really important to avoid finding yourself without money

Hello! I have an angel investor and had to pass on a few other ones due to this issue. Honestly, it sounds like this investor has over leveraged themselves so they feel the need to micromanage how their funds get spent. I'd spend some time connecting heart to heart to build trust so the investor feels like they can let go of control. Also, if there is a plan to bring on any more, I'd make sure that they are accredited investors.