It’s a test to see if the founder values their equity more or less than the salary gap. If not even the founder values equity more than the gap, then they should close down and go get jobs.
This sounds good but the math makes no sense. The salary gap we're talking about here is minuscule compared to non-trivial amounts of equity in a successful company. $400K vs $200K per year for 5 years is $1M total. If the company is successful at VC scale, $1M will be dwarfed by the value of the equity. And how much better of a founder can you buy for $400k vs $200k? I can think of a ton of people in the Bay Area for whom $200K is a non-starter but $400k is "tell me more".
You aren't paying yourself for 5 years out of your first raise if you succeed.
But if your first raise is 2M and you want to hire a few people with it and make it last a year, an extra 200k might be a big dent in your runway. Or get your investor to give you 10% more.
Yes, the founder should be valuing their equity far more than the salary gap. If they don’t, then something is gravely wrong with the business as they are essentially valuing it near zero.
Yes of course, but what I'm saying is that's not actually an argument for any particular base salary amount.
Think of it this way. We assume higher quality founders would be attracted by higher base salaries. Higher quality founders have a higher probability of successful exits. What is the optimal founder salary level to incentivize talent and maximize the total value of exits by startups? We can put some bounds on it. It's not $0, because then only already-wealthy people create companies. It's not $10m/yr, because that's not affordable by investors.
Is there any particular reason it should be ~$200K/yr instead of ~$400K/yr, or even higher? It's well known that older more experienced founders have a higher probability of success. Should we be recruiting 50 yo founders with decades of experience by guaranteeing $500K base? This is OP's point.
