With flush of early-stage capital, tech founder salaries are tasting less like instant ramen

CAROUSELL co-founder Quek Siu Rui didn’t tell his parents for the longest time that he wasn’t drawing a salary as he built his classifieds platform with friends.

The founders of travel startup Traveloka paid themselves just 1.5 million rupiah (S$140.50) a month when they started out, equivalent to the minimum wage in Jakarta at the time.

But all that was 10 years ago, and Carousell and Traveloka are now tech unicorns. While startup founders today still face the standard tribulations, a flush of early-stage capital into the ecosystem over the years has meant that fewer have to struggle for a prolonged period before they can live comfortably.

Increasingly, the Silicon Valley image of entrepreneurs having to survive on cheap instant ramen is holding less true. Still, how do founders decide how much to pay themselves?

Insurtech entrepreneur and co-founder of Surer, Gordon Tay, was faced with this question after raising seed funding at the start of the year. Extensive Googling didn’t help – most benchmarks he found were more applicable to the United States.

In the end, the 4 co-founders of Surer decided that basing their salaries on the median income in Singapore, around S$4,000, seemed reasonable after taking into account the company’s projections and runway.

They agreed to pay themselves the same salary regardless of individual life situations. So if someone needed more money, that would become the salary floor, said Tay.

“My perspective has always been that first and foremost, you want to concentrate on the business. But you also want to be able to dedicate a good enough headspace for that. You’re not realistically going to be able to do that if you’re worrying about your next meal,” he said.

JJ Chai, an ex-Carousell and AirBnb executive who founded e-commerce brand aggregator Rainforest, said he and his co-founders started drawing a salary after the startup’s first sizable funding round.

“I think the way we thought about it was, hey, let’s make sure the banks will still give us a credit card,” said Chai.

US-focused Kruze Consulting analysed over 250 early-stage companies and found that the average annual CEO salary increased 2.7 per cent to US$150,000 in 2022. The best-paid founders were in biotech/pharma and e-commerce. Kruze also flagged a gender pay gap, with female CEOs making US$20,000 less than males.

Within South-east Asia, Glints and Monk’s Hill Ventures last year found that CEOs that have raised up to US$5 million have a median salary of US$2,600 a month. This grew to US$11,250, at US$10 million to US$50 million raised.

The analysis was based on data points from Singapore, Vietnam and Indonesia, and could have been affected by the cost of living in each country.

AngelCentral co-founder Lim Der Shing said there is generally a salary market range for startups that have raised from Singapore investors. That’s S$1,000 to S$3,000 at pre-funding, S$3,000 to S$4,500 with seed investment, and S$5,000 to S$8,000 for up to Series A rounds.

“Personally as a founder, my salary is very much an afterthought,” said Deng Yuying, a former lawyer who went through a series of lifestyle changes after becoming an entrepreneur. Deng treats her manpower management startup Esevel as a labour of love – every cent taken out of the company was originally hers anyway, she said.

Still, Deng was surprised the topic of salaries didn’t warrant more of a conversation with investors.

In general, investors don’t bat an eyelid unless founders demand an outrageous salary. These cases do surface from time to time – Bloomberg reported that Zilingo founder Ankiti Bose was questioned about her S$50,000 monthly pay, while former Honestbee CEO Joel Sng spent company funds extravagantly, according to Tech In Asia.

But the instances are rare, founders and investors told The Business Times. Salaries are not crucial for a tech founder; instead, their large paydays stem from their ownership in their companies.

In Singapore, a slew of entrepreneurs have reinvested their money in traditional asset classes after cashing out from their startups’ rising valuations. Grab’s Anthony Tan and Secretlab’s Ian Ang are among buyers of good class bungalows, the most prestigious form of housing in the city-state.

A new trend of founder compensation is emerging in Silicon Valley. Before a public listing, founders of companies like Robinhood and DoorDash received multimillion-dollar special stock awards far exceeding the pay packages of CEOs at top American companies. These stock awards are tied to growth targets and perpetuated by how closely tech companies’ identities are intertwined with their founders.

South-east Asia has yet to see a meaningful wave of public listings, but chances for founders and employees to partly cash out their stock have become common. “Equity doesn’t pay the bills,” said Cameron Priest, who sold his startup TradeGecko to software major Intuit.

There are some principles around how such liquidity events should occur. A recent investigation by tech news outlet The Information revealed some Silicon Valley founders cashed out at the peak of valuations, but employees weren’t offered the same opportunity.

Kelvin Teo, whose fintech company Funding Societies has had 4 rounds of liquidity events, said he and his co-founder make it a point to let employees sell their stock before they do.

“If founders actually do sell, we make sure that all the team members and everyone who wants to sell manage to sell first. Then only will the founders take whatever’s left over,” he said.

If founders cash out a significantly larger percentage compared to employees, said Teo, that could point to misalignment of interests and is likely a major red flag.