“The Glengarry Glen Ross” School of Motivation
I am frequently asked what sort of salary a founder should expect following a funding round-a very tricky question to answer. With any startup there has to be a certain degree of variability based on what the company has raised and how much it can afford to pay, however I was surprised to learn that my outlook on this subject seems to be contrary to many investors that I have met with. Based on my experience, UK investors seems to be at least 10-20 years behind the Silicon Valley on this matter and still subscribing to the “Glengarry Glen Ross” school of motivation-where keeping an entrepreneur hungry should yield the best results.
This reminds me of a time in the early 90’s when I was studying and looking for a bit of extra income. I came across an advert for a car dealership offering part time and flexible hours sales jobs so put together the (rather limited) resume and applied. Stereotypes of the used car salesman aside, the reason I decided to pursue this opportunity was based on the position being largely commission-based compensation, perfect I was hungry (literally and figuratively). Plus, even with my limited work experience, I did not lack confidence in my ability to sell.
As fate would have it I received the call for an interview. I don’t recall exactly what I did to prepare, but nothing could have readied me for this. Instead of asking me questions about sales strategy, product knowledge (very limited), etc, the questions were all about me. Was I married? Did I have a house? Did I have loans? It turns out, the profile that they wanted was not the young, hungry go-getter, but rather the desperate sales guy that needed to sell or presumably go into debt/on the run. As I had already started investing and, beer drinking aside had a financial plan for the future, I was immediately rejected as an unsuitable candidate!
This is what I call “The Glengarry Glen Ross” (1992) school of motivation- an approach to personal motivation which seems pretty dated in the 2016 world of high growth UK SME’s. It appears to me that US investors picked this up quite some time ago, based up the responses of the Quora question from 2011 and Ryan Holmes, CEO of Hootsuite’s good take on the subject here. Perhaps it is time for UK investors to get with the times.
Trying to starve founders to save a bit of company cash may allow a company to survive a little bit longer, but the repercussions on the business can be much more pronounced. Sure, cash strapped SME’s need to bootstrap to avoid cutting key personnel or making a bad deal, but desperate founders just appear, well, desperate. Ironically, it is rarely the self-made investors that hold to this antiquated strategy, perhaps because they have been through the good and bad times and know that when you are really strapped for cash you can be prone to making bad, unsustainable decisions for the business.
The same can be said about the investor approach ‘sweat equity’. A budding entrepreneur that forgoes a high salary is contributing to a new business in the same way as if they tallied up £30-£40K schlepping it with one of the Big 4 first. Don’t overlook a growth opportunity just because the founder doesn’t have ‘skin in the game’. Many of these entrepreneurs have more on the line through years of low salary and have learned more about success and failure in the process. Just because someone put a bit a cash into the business doesn’t mean there isn’t a high probability that they will walk away when the going gets tough!
I am not saying that founders should be getting the same compensation as they would working for a large firm. Founders tend to be major shareholders and are going on this journey with the expectation of the long play. Just don’t make salary requirements or lack of cash investment the killer on an otherwise killer deal.
Stephen Mooney is CEO of Synoptic Technologies Ltd and is a regular contributor to The Synoptic Eye. To learn more about his company visit: www.staging.synoptica.com