StartupJourney #FounderFinance #Entrepreneurship
Hey everyone! 👋 Let’s dive into a thought-provoking question – at what point do "normal" founders strike it rich?
So, imagine a founder who’s not doing anything shady, but their company is growing, yet still losing money for the foreseeable future. When do they start rolling in the dough without having sold their business?
I’m curious because we often hear about founders living large, but shouldn’t they be reinvesting in their business instead of taking huge salaries? 🤔 Where does all that wealth come from?
Here are a few possible reasons why some founders seem to be living the high life while their company is still in the red:
- Stock options: Founders often receive equity in their own company, which can be worth a lot if the business becomes successful.
- Side projects: Some founders have other income streams or investments that fund their lifestyle.
- Smart spending: It’s possible that these founders are simply managing their finances wisely.
Can anyone share more insights on this topic? Let’s discuss and learn from each other! 💡
Thanks in advance for your input! 🚀
Stop watching biz bro porn. You’ll feel better in the morning.
A lot of founders come from rich families.
You have a business that is losing money now. It has the potential to make money later. You can realize that potential by selling the business, but you have written off that option. The remaining choice is to take the investor’s gamble yourself, waiting for the business to be profitable, and then waiting for enough profits that you are now rich. Or losing everything if the potential for profit does not become profit before you run out of funding.
Founders may have lavish lifestyles for two reasons: primarily, because they are rich and the company is more of a hobby, secondarily, because they have investors and are drawing a significant salary from those investments, and tertiarilly, because like the mouse from that one movie about the koala who wanted to be in show business, they believed they were about to become rich and got themselves a credit card.
Never. Most businesses fail
I was first hire at a start-up that raised an $11m Series A in 2012, then a $20m Series B in 2015, and today is valued at over $1b with a couple hundred employees. I’m currently raising a pre-seed round for my own start-up.
As a founder, you can pay yourself a market salary at Series A (though not all founders do). You can sell some of your own stock to investors starting around Series C (though not all founders do).
There shouldn’t be an expectation of being “super rich” off of a company that hasn’t demonstrated itself to be a good business, but that’s not necessarily about being profitable today.
I’m a founder. I’m not rockstar rich, but nobody is writing any sad songs for me either.
For a normal founder of a normal business, it takes years of working hard while keeping your eyes on the future. Striking a balance between paying down your startup debts, while also keeping enough cash to grow the business and manage your way through the potholes.
For each big flashy success story, there are literally millions of small and mid-sized business that you’ve never heard of, run by regular honest people whom you’ve also never heard of. That’s what our economy is built on, and those are the people who keep things moving forward IMO.
Anyway, you stay focused and work hard and then one day you find yourself on the plus side. With some luck, it keeps growing from there. Once you get into the upper six-figures/lower seven-figs invested, it suddenly becomes a self-growing thing.
Most founders, and successful business people underplay the role of luck and timing in their successes (for all his faults, it’s one of the reasons I like Mark Cuban, because he’s always been honest about the role that luck played in his financial success).
I started my first business in my 20’s and it failed. Started my second in my thirties, and will be handing the keys to my employees – who helped me grow it – very soon.
Took me 25ish years to reach the point where money isn’t my main worry.
I don’t think your average founder strikes it rich….your average founder is forced to shut down the business because it’s not making any money.
You’re thinking of successful companies not unsuccessful ones. If your company is successful you will attract tons of money in profit or in investment and be able to cash out on your equity as the founder. It’s not like Bezos pays himself a salary of millions he makes 70-80k a year as his salary. The company profits pay him the rest.
Normal founders go broke. The failure rate of new ventures is very high
I didn’t have any investors so I couldn’t steal money from investors. I got decently rich 2 years after launching.
I don’t think there’s a formula for when you get rich though. You may never. It’s dependant on the company.
My software company never lost money. I ran it lean so I made a lot of money paying myself in dividends only. We were the number one company in our industry despite not spending tons of money on PR and marketing like our VC competitors.