The Wrong Reasons To Pursue Venture Capital: Founder Salaries

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There are a lot of good reasons why entrepreneurs pursue venture capital, including scaling your company more rapidly, developing complex technologies or entering new markets. There are, however, bad reasons to pursue venture capital.

Two of the most common wrong reasons to pursue venture capital (in my opinion) are the pursuit of a steady paycheck for the founders and personal credibility.

Raising VC for the sole purpose of obtaining a salary, however, is typically not the right approach. Raising venture capital is commitment to far more than just raising money, it’s a commitment to manage your company for growth (not profits), to work towards ends that are consistent with the needs of your venture partners. If all you need is a suitable salary, you may be able to achieve this objective by raising smaller amounts of capital from angels or non-traditional capital sources, which may require less of a shift in your business strategy. Or, better yet, build your business to provide sufficient profit to pay yourself what you deserve.

To be clear, I don’t believe that founders expose themselves to financial distress in pursuing their venture as doing so can put their endeavor at risk. While founders should receive salaries, they should pursue capital sources that align with their needs. If the only need is some cash for founder salaries, other sources are almost certainly more suitable.

I will address the ‘personal credibility’ topic in my next post…