Advisory shares: How much equity should you give your advisor?
Startups commonly give 1% equity to General Advisors paid only in equity, who work less than 2 days a month. Discover m...
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The early days of building your vision requires sacrifices. And often, for founders, part of that sacrifice is your salary. Some bootstrapped founders don’t pay themselves a salary at all and some finally have cash in the business bank account but no idea what’s fair to pay themselves. 🤷♀️
Luckily, we’ve gathered data from tens of thousands of UK funding rounds done on SeedLegals to give you some guidance on:
✅The median founder salary in the UK in 2024/25
✅How the value of an early stage company correlates to founder salary
✅How founder shares can be fairly distributed and earned
Do startup founders take a salary?
During term sheet negotiations, founders and investors agree how much the founders will be compensated.
Usually founders receive shares and most founders also receive a salary. When the company pays founders a salary, this means the founders won’t need to moonlight (have another job on the side) and can stay focused on growing the business.
On the other hand, if the founders don’t take a salary, the extra money could go a long way to growing the business in the early stages.
This is what our users are deciding in their first funding rounds 👇
Our data shows that the decision to take a salary very much depends on the size of the round. For rounds of £150,000 or below, around half of founders secure a salary.
This proportion increases for round sizes between £150,000 and £1 million, with three quarters successfully negotiating a salary. Interestingly, this proportion remains consistent above £150,000, whether the round size is £200,000 or approaching £1 million. There’s a slight increase above the £1M mark.
What’s the median salary for startup founders?
When they do take a salary, what are startup founders getting paid?
The data shows that it can vary a lot. But there is a trend. In the last 12 months, the median annual salary for startup founders was around £50,000. This has increased by around £10,000 over the last five years.
Do founder salaries depend on company valuation?
When it’s agreed that the founder will earn a salary, we’ve discovered that the amount mostly correlates with the pre-money valuation of the company. The data tells us that the higher the pre-money valuation of the company, the higher the founder salary.
Perhaps you could try using our results to predict your own salary (or for investors, the founders salaries).
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Are founder shares subject to vesting?
Yes, we’ve found that 84% of the time, founders shares are subject to vesting. Mean – they have to be earned.
A key point in term sheet negotiations is how much equity the founder still owns after the investment, and the conditions those shares are subject to. After all, it’s in the investors’ interest to make sure that founders stay with the company, and don’t walk away with a sizable chunk of the equity, rendering the company essentially uninvestible for future rounds.
On the other side of the table however, founders have worked hard to build their company from the ground up. The question of ownership is a hotly debated issue. A common way to satisfy both parties is to use founder share vesting, where both founders and investors agree that part or all of the founder(s) shares are withheld for a certain amount of time after the investment.
What’s the usual vesting period for founder shares?
The ‘vesting period’ is the length of time it’s agreed that the founder(s) needs to stay with the company for their shares to be fully returned to them.
The most common vesting period for founder shares is three years
Interestingly, we also found that the inclusion of founder share vesting did not correlate with whether or not the founder will earn a salary after the investment.
Do founders shares have a cliff period?
During the vesting period, shares are returned to founders bit by bit, usually monthly or quarterly.
However sometimes companies build in a delay to the vesting schedule, known as a ‘cliff’, where the first tranche of shares is only released after an agreed amount of time.
The cliff is designed to make sure founders are committed to staying in the company for at least the initial cliff period – if they left before this, they would leave without any shares vested.
Our data shows almost half of funding rounds include a cliff period in vesting schedules. And of those with a vesting schedule, the vast majority opt to do the first share release at the 12 month mark.
When does the vesting period begin?
The date at which the shares start to vest is also agreed in the term sheet. Vesting usually starts on the date the investment closes. Our data shows that this is the most commonly chosen option, at almost 60%.
Counter-intuitively, we also noticed that the earlier the date at which shares start to vest, the longer the vesting period. So, if you ask your investor for your vesting to start earlier, expect them to push for a three or four year vesting period.
Talk to an expert
Got questions about founder compensation for your funding round? Want to know more about our services? We’d love to help. Book a a free call below with one of our specialists.
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