On start-ups and paying CEOs at diversity.net.nz

At the TechCrunch 50 conference Peter Thiel, Silicon Valley uber investor was quoted as saying that there is a ceiling in terms of CEO salary for a startup, beyond which you begin to “have issues”. For a more general take on CEO salaries (not tech specific) check out this article.

After spending a few days with a bunch of boot-strapped start-ups at the Office 2.0 conference I have to agree to a certain extent with his thoughts although I’d extend them further to include spending generally – not just C level remuneration.

But first a disclaimer – I’m not suggesting that startups should scrimp and save every penny – it costs money to build a brand and sometimes there are things you just have to do (spending up to go to tech conferences for example) – but startups that let go of the reins – paying themselves high salaries and hosting lots of launch parties – run the risk of burning through their cash before they have a product.

The fact is that a startup should act like a startup – leave the top shelf partying to those who’re actually making the revenue.

My role model for sensible expenditure is a SaaS business that I’ve been following for awhile – rather than being located in high rent silicon valley, they’re domiciled in a much more affordable location. Rather than big ticket offices with plush sofa and carpets, they’re working out of a converted garage. They’re also scaling pretty fast, making good revenue and deriving profits from their endeavours – while their startup brethren are out partying on their investors dollars.

I wonder who will still be around in a few years time?

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5 Responses to “On start-ups and paying CEOs”

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1 juliejulie
Sep 24th, 2008 at 8:05 am

Very good post, good advice. We’ve been shopping our boot-strapped startup (financial web apps) around to angels and they all say the same thing: keep bootstrapping! I can see how it’s better to stay lean and keep a higher % in the long run. We’re frugal in real life, so it’s not too hard.
2 Jason Kemp
Sep 24th, 2008 at 12:41 pm

In the old days people opted to hire hungry East Germans to work on their projects because motivation is often very closely mirrored by need and that is a stronger driver for projects.

At the risk of drawing the bow too wide you might enjoy a post by Mark Cuban saying that part of the issue for todays’s uber business is that CEO’s get paid in lottery tickets with no personal accountability – at the risk of misquoting him – see link below.

http://blogmaverick.com/2008/09/15/stock-market-meltdowns-why-they-will-happen-again-and-again-and-again/
3 julian Stone
Sep 24th, 2008 at 1:21 pm

Call me old fashioned, but I was bought up to understand that if you “Haven’t got it – then don’t spend it”
4 Stephen Knightly
Sep 24th, 2008 at 2:35 pm

The problem is with people who “have got it” and do spend it, but it’s actually someone else’s money.
5 Miki
Sep 24th, 2008 at 11:22 pm

Nice post – the limit of $150 k USD is a good one. Basically you start getting people at this point who are in it to maintain a current lifestyle than strive to achieve a better one through building a business.

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