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Pervasive Startup Myth: Don’t Work for Free

Startup myth: The one about founders having to work for free to impress angel investors. This supposedly shows passion. Don’t believe it. Investors want people committed to working their startups, and that usually takes getting them paid. I’ve been getting a lot of upvotes on my answer to this question in Quora:

How do entrepreneurs live without a salary to sustain their families and pay bills?

My Answer

That startup founders are supposed to work for free, and that investors want them to work for free, even as there is capital to work with. That’s just a myth. IMO.

As an entrepreneur, I built a business and supported my family at the same time by continuing to consult in the same field I was developing software for. That’s not unusual. I did not have the luxury of not making an income. When I started Palo Alto Software, we already had four kids and a mortgage. Not making money was not an option.

So that was a lot of work. It was hard. But it’s what really happens most of the time … entrepreneurs do a lot of work on the side, in between, to build their business without the luxury of working full time for free.

As an angel investor, I expect founders to work without formal compensation only during the very earliest phases, because they have to. I expect that to be temporary. And when I invest in them, I want there to be enough money to pay them. I don’t believe startup founders working for free is a sustainable idea as they grow a business. People have lives. They need money.

I don’t like it when founders promise to work for free over any extended period. It doesn’t work. They burn out. They need jobs and income so they quit.

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  • Francesco De Santis says:

    Thanks for sharing such a nice information about angel investor and startups

    Keep Sharing..

  • Tim Berry says:

    Lesley, as an investor, I want the founders paid but to be honest I’m also uncomfortable with founders being paid going market rates. Some discount seems appropriate to me when you are a founder using other people’s money to build your own future. Some kind of common sense compromise between what you need to earn and what you would earn as an employee with no equity. Just my opinion. Thanks for the comment, you add something here.

  • Lesley Haenel says:

    I agree with this, however I cut my salary in half to what i was earning in my previous company and one Investor said salaries were to high yet I have business debit orders coming off my personal account but that was OK.

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