Ask HN: Co-Founder Salary Dispute
5 comments
Are you doing development? Is it just you two? What are they doing during this time, aside from having originally provided capital? Are they smart money? Do you need them aside from their money? Do they have connections, a network, or something else compelling they bring to the table? If you're sure you're going to raise a seed you could give them a larger cut of that "not too far away" as you said.
To answer your questions more directly:
What's stopping you from getting a job and doing this part-time on your own, retaining all equity?
To answer your questions more directly:
> 1. Is it reasonable for a Technical Founder to take a Median HCOL salary (due to strict financial constraints) while the Non-technical Founder takes €0?
> 2. Does the "Fairness" argument (matching salaries) trump the "Runway" argument (survival) in early-stage startups?
> 3. Did they waive the right to claim "unfairness" by joining the partnership with full prior knowledge of this asymmetry?
What's stopping you from getting a job and doing this part-time on your own, retaining all equity?
I’m doing all of the development and he’s handling product and business. It’s just the two of us. Now that we’re entering an accelerator, it’s basically all or nothing for both of us.
Maybe the better question is this: is it ethically acceptable to expect him to take 0 salary until seed without additional compensation, given that this is the only way we can realistically reach a seed round? In my mindset if he doesn't do this sacrifice he already loses 100% of everything.
Maybe the better question is this: is it ethically acceptable to expect him to take 0 salary until seed without additional compensation, given that this is the only way we can realistically reach a seed round? In my mindset if he doesn't do this sacrifice he already loses 100% of everything.
Personally, I think you may have already gotten a great deal if the angel/co-founder is willing to do a 50-50 split and not take a salary (or get paid in equity in lieu of salary.) Is your co-founder now demanding to be paid in salary/equity after they agreed (I assume this is written down somewhere?) otherwise? If this is a "handshake agreement" situation, then I guess you are in the process of learning an important business lesson...
That said, fairness in business has nothing to do with your or your co-founder's personal financial situation, other than the constraints of reality (i.e., you simply can't work without a minimum amount of salary.) Frankly your co-founder should be paid in something (equity) if they are not drawing a salary. Theoretically, ownership and compensation should reflect what each of you are bringing to the company. In fact, your co-founder is actually getting compensated less than you while investing their own money - that means you are already better compensated than them. Is that "fair"? Maybe, maybe not, you guys have to agree.
But get a written agreement - if this already exists than just stand by it.
That said, fairness in business has nothing to do with your or your co-founder's personal financial situation, other than the constraints of reality (i.e., you simply can't work without a minimum amount of salary.) Frankly your co-founder should be paid in something (equity) if they are not drawing a salary. Theoretically, ownership and compensation should reflect what each of you are bringing to the company. In fact, your co-founder is actually getting compensated less than you while investing their own money - that means you are already better compensated than them. Is that "fair"? Maybe, maybe not, you guys have to agree.
But get a written agreement - if this already exists than just stand by it.
Our arrangement over the past year was implied, so yes, effectively a handshake agreement. I don’t have an issue with him taking a salary when we can afford it. The problem is that for the company to maintain runway and keep me full-time, he would likely need to forgo a salary that he doesn’t actually need.
What confused me was how he framed it. First it was about “recouping some of his investment,” and when I pushed back that this isn’t how early-stage compensation works, it shifted to “saving money for family and legacy.” Both are understandable personal goals, but taking salary for those reasons directly increases the company’s risk at a stage where survival comes first. That mismatch is what I’m trying to sort out.
What confused me was how he framed it. First it was about “recouping some of his investment,” and when I pushed back that this isn’t how early-stage compensation works, it shifted to “saving money for family and legacy.” Both are understandable personal goals, but taking salary for those reasons directly increases the company’s risk at a stage where survival comes first. That mismatch is what I’m trying to sort out.
Again, forget about who "needs" what. The basic problem is that you don't have a written agreement. Time to negotiate with your co founder and get something signed. I obviously don't know anything about each of you, but if you are truly each contributing 50% to the success of the company then your angel investor co-founder is not getting 50% of the value at present, so has, in this scenario, a point.
I've seen lots of best friend co-founders end up not being able to be in the same room together eventually. Most of these situations boil down to fundamental misunderstandings that could have been addressed at the beginning. That's why signed employee agreements (where compensation, equity, vesting, and expectations are clearly laid out in black and white) are a must.
I've seen lots of best friend co-founders end up not being able to be in the same room together eventually. Most of these situations boil down to fundamental misunderstandings that could have been addressed at the beginning. That's why signed employee agreements (where compensation, equity, vesting, and expectations are clearly laid out in black and white) are a must.
Me (Founder A): Technical founder. I started the company originally. I live in a very high-cost-of-living (HCOL) city. I have unavoidable fixed costs (debt + family) and literally cannot work on the startup unless I draw a salary to cover these. I am aiming for slightly higher than the median market rate for a Senior SWE in my city. It is high in absolute terms because the city is expensive, but it is the minimum I need to not take a corporate job (which I am actively interviewing for as a Plan B).
Co-founder (Founder B): Non-technical. Angel invested first, joined as co-founder later. Financially secure (previous exit). Lives in a Medium Cost of Living (MCOL) city where market salaries are roughly 50% of mine. They do not need a salary to survive right now. They knew my financial situation, debt, and burn rate before they joined and before they invested his initial angel ticket. They knew the company would need to support me while they worked for free. We operated this way successfully for the past year using angel funds.
We are hitting a wall regarding founder compensation that threatens to kill the company. We are looking for a salary solution until we can raise a seed round which is not too far away.
My Position (Survival): In pre-seed, salary is a burn-rate constraint. I take the minimum viable amount I need to work. They take €0 because they can afford to. This maximizes runway. Since they own 50%, keeping the burn low is the best way to protect their equity. If I don't take this salary, I have to take a job, and the company dies.
His Position (Fairness): They argue that since I am taking a "market-level" salary, I am effectively extracting value while they subsidize me. They are demanding that to be "fair," we must either:
1. Pay them a proportional market salary (drastically shortens runway).
2. Or give them more equity to compensate for the salary asymmetry. (destroys equity balance)
My Questions:
1. Is it reasonable for a Technical Founder to take a Median HCOL salary (due to strict financial constraints) while the Non-technical Founder takes €0?
2. Does the "Fairness" argument (matching salaries) trump the "Runway" argument (survival) in early-stage startups?
3. Did they waive the right to claim "unfairness" by joining the partnership with full prior knowledge of this asymmetry?