One Reason You Shouldn’t Worry About Getting Venture Capital

Dileep Rao posted an interesting article entitled: Why 99.95% Of Entrepreneurs Should Stop Wasting Time Seeking Venture Capital. It was posted in Forbes Entrepreneur Blog.

It is an interesting analysis stating that odds are likely you will grow your business without Venture Capital.  It simply reinforces the notion that working on your business to build and please customers might do you better than chasing the odds of gaining traction with a VC, at least in the early stages of your company.  Still, the VC community, as Rao contends, is a formidable PR machine and the populace (i.e. press) seems to look their direction for validation and guidance.  Is this the right place to look?  If it is not, where should entrepreneurs (and policy makers) seek a “gold standard” to pursue?

Should Funded Entrepreneurs be paid a “Living Wage”?

So, you’ve reached seed funding or even Series “A”.  Have you built in any compensation for yourself?  Should there be? If not, why not?

Do investors demand no salary of the founders as they perceive this as a sign of commitment by the entrepreneurs? Would they still fund it if you proposed your own salary?  Does salary or no salary make the difference in an early stage company?  Sure, there’s items such as dilution (because you are burning more investor cash), and other considerations, but I would like to focus primarily on the salary idea…

This thought rambled through my mind recently.  The national press frequently posts on minimum wage and how or if it is important to pay people to “live” at a certain standard.  There’s now a significant movement at the city level to move minimum wage higher absent of activity at the national level.

I’d like to ask this question of the entrepreneurial and investor community, and extend this as a challenge to those who study entrepreneurship.  Does paying founders at the early stage make a positive or negative difference on the outcome of the enterprise?  Does it help or hurt the disposition of the founding team?  Does it accelerate or hinder timing to a milestone event?

It’s interesting. There’s a lot of postings on what the “average” CEO and founding team gets paid in certain rounds of funding, but does not posit any reasoning or research supporting this.  Just what to expect, on average, using historical data.

Many questions, but not much data.  Should founders get some sort of income after seed rounds just to help pay the bills? Should it be a “standard rate”?  What’s your impression?