Over the last year, the free flow of venture capital funding that propped up hundreds of new startups in the late 2010s started drying up. Founders reported that investment capital became much harder to come by.
That has left new companies with much tighter budgets than startups enjoyed in the last decade, leading many founders to ponder a difficult question: At what point should you start taking a salary from the company you founded?
It’s a question with no consensus, but it elicits strong opinions from the business community. The general trend is that founders are paying themselves more in 2024. A report conducted by accounting firm Pilot in May found that startup founders are paying themselves an average of $142,000 annually, a 17% increase from last year’s average of $121,000. Glossy spoke with founders of fashion and fashion-adjacent startups at various stages of their lives about when they started taking a salary and how much they decided to pay themselves.
Jonathan Goldberg, founder of the Toronto-based jewelry company Kimberfire, said he didn’t start taking an official salary from the company until its second year. That first year, all the money was going to the company to cover expenses like marketing costs and business operations.
“For me, it was crucial to establish a steady flow of orders and ensure that the business had reached a level of stability where it could consistently support my salary without compromising reinvestment into growth,” Goldberg said. “The decision was based on finding the right balance between rewarding myself for the hard work and ensuring that the company had enough capital to expand.”
Goldberg said it was more important to ensure the business could cover its own expenses first.
Some founders have a set revenue goal they must meet before taking a salary. Lauren Stephens, CEO and co-founder of the fashion brand Dudley Stephens, told Glossy she didn’t take a salary for the first three years of its business until it reached profitability in 2018. Alyson Austin, co-founder of PR firm Gaffney Austin, said she and her co-founder agreed to have $100,000 in the company’s bank account before either would start taking a salary.
“I gave the company a personal loan of $10,000 to start the company, and the loan was repaid to me at the end of one year,” she said. “We used early retainer payments from our initial clients to pay our startup bills — website, logo design, marketing platforms, etcetera. At the end of the first year, we had $100,000 in the bank and began drawing a meager salary each.”
Average founder salaries may be increasing, but there’s also an increase in the number of founders who continue to opt out of paying themselves a salary, from 7% last year to 9% in 2024. That could reflect the decrease in available external investment dollars as well as the generally more volatile market this year.
Peter Dering, the founder of the bags and accessories brand Peak Design, said he still doesn’t take a salary even 14 years after founding the brand.
“I only take out what I need,” he said. “I hit up my finance guy and say, ‘Hey, I need some money to take care of a healthcare situation,’ for example. It’s as little as possible to meet the needs of my life. The wise founder waits for material rewards until they can afford it. The wise founder takes care of their employees because that’s what gets you loyalty and longevity.”
Gina Kuyers, co-founder of the New York-based womenswear brand Luxeire, also doesn’t take a salary from her brand.
“Margot [Adams], my co-founder, is compensated for the work she does, which historically has been based on a percentage of sales and ad spend,” Kuyers said. “When we founded the brand in 2020, we made a choice to prioritize growth over immediate profitability. Over the years, I’ve learned from the ‘experts’ that profitability and some level of owner compensation should ideally be built into a business model from the start. But as a self-funded, evolving, family-run business, that wasn’t the path we took.”
But Kuyers is cautious about recommending this approach to other founders. While taking too big of a salary too early can put your company’s health at risk, not taking enough of a salary to cover personal expenses can put undue stress on a founder during an already stressful critical period of a brand’s growth.
“Transparency with co-founders is [also] key,” Kuyers said. “If you have a co-founder, open conversations about compensation are essential. Make sure you’re aligned on who gets paid, when and how, especially if compensation is tied to specific roles or performance metrics.”
Julia O’Mara and Brian McMahon, co-founders of the 3-year-old peer-to-peer rental app Pickle, are another pair who took different approaches to taking salaries from their company.
“When we left [investment management company] Blackstone to start Pickle in 2021, neither of us took a salary,” McMahon said. “I’m a few years older than Julia and had more time in the workforce when we started. We started paying her six months in to cover her rent and expenses plus extra. I had more savings, so I only started taking a salary last year when we raised our first funding round.”
Rachel Drori, founder of the smoothie and wellness brand Daily Harvest, told Glossy she didn’t take a salary until the brand raised its series B funding round in 2017, two years after its launch.
“It’s important for founders to strike a balance,” Drori said. “While it’s critical to invest in the business, investors also understand that founders need to be paid appropriately so they can focus on growth without being distracted by personal financial concerns.”
