Dual Compensation for Startup Founders

In building a startup, there is a fundamental economic at play that is helpful to remember from time to time:

In return for taking on the risk, liability, opportunity cost, and sheer elbow grease of creating a startup, founders have the opportunity to build two forms of compensation for themselves: 1) the cash that the business spins off to them as it operates, and 2) the value of the business asset itself.

There is nothing surprising in that statement; but sometimes as founders get into the weeds, they forget they are actually building a double-compensation plan for themselves. If they had chosen instead a BigCo job, their compensation from that job would end with the job. They only have #1, not #2.

However, the dual nature of startup compensation for founders often means that large value comes after a life of building the startup asset. Many startup founders I know chuckle at the thought of retirement accounts. Their startup asset is their retirement account.

Yesterday I wrote about the explosive growth of startups. Effectively that growth means that more people are carving out assets from their markets for themselves, rather than working to bake those assets onto the balance sheets of BigCos.

What are your thoughts on the dual compensation for startup founders?

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