If you are a startup founder or considering becoming one, you have most likely heard about founders living on bare minimum, working eighty hours per week and skipping paychecks to keep the business running. That story is much more real than ever before in 2025.
In the U.S, a lot of startup founders are cutting pay - or perhaps not getting paid, to help their businesses survive and flourish in a changing economy.
But why? Is it an intelligent move, a requirement or part of the startup hustle? This article outlines trends in founder compensation, exactly why salary cuts are popular, and how you can adjust to the new marketplace.
Why Are Startup Founders Cutting Pay In 2025?
First, the big picture. The economy is currently recovering from a rollercoaster few years. Inflation, higher interest rates along with a far more conservative investment climate has made it tougher for startups to raise cash. In 2021 and 2022, money was flowing freely. That flow has slowed in 2023 and after.
Investors are pickier, i.e, they want lean operations, smart spending and dedicated founders - not huge salaries, chasing big wages. This has produced increased pressure on startup leaders like you to cut your salary to keep the business going and prove you are in.
Reasons Behind Startup Founder Pay Cuts in 2025
Here are some key reasons behind the trend:
1. Tougher Fundraising Conditions
Raising cash in 2025 isn't what it once was. Venture capital (VC) firms are carrying out fewer deals and taking longer to make decisions. You have to demonstrate they are supporting you by utilizing funds wisely. That means keeping your own salary reasonable or cutting it altogether.
2. Cash Flow Challenges
Many startups are struggling to remain cash positive despite a solid service or product. Whenever funds are tight, founders will take pay cuts to pay workers, fund development, and extend their company's runway.
3. Signaling Commitment
Taking a pay cut may also tell investors, co-founders and employees that you are serious, focused and prepared to take the pain when times are difficult. For worse or better, it has become a "walk the talk."
What Will the Typical Founder Pay Look Like In 2025?
Let's understand this clearly. According to new reports from VC firms and startup salary trackers:
- Seed Stage Startups: Founders at this time usually make between $40,000 and $75,000 yearly. Some take no salary whatsoever.
- Series A Startups: Whenever you raise a larger round, salaries generally go up - but modestly. Founders here usually generate $80,000 and $120,000.
- Series B and Beyond: If your company is expanding rapidly and you have great funding you may make $130,000 to $180,000 but still a great deal less than somebody in a company C-level position.
Those are averages, however. Your real pay could be lower or higher based on the place you work, your market and your personal circumstance. As an example, a tech founder in San Francisco may make more than a hardware startup founder in Ohio.
Importantly, most founders also have significant stakes in company equity (shares in the company). So even in case you make less today, you will receive a payoff whenever the company comes or goes public. But this reward often takes years and it is not guaranteed.
How Founders Are Adjusting to Lower Pay
If you are reducing a pay cut or considering taking one, you are not alone. Several startup leaders are making similar choices. Some ways founders are coping are:
1. Living Lean
Founders are cutting personal spending and sticking to tighter budgets. That might mean downsizing, putting off large purchases or even finding cheaper living circumstances. It ain't glamorous, but it sure helps stretch every dollar.
2. Using side Hustles or freelance Work
Some founders work side gigs like writing code, consulting or even driving for Uber, to supplement personal spending. It is not ideal, but it is able to let you continue to grow your startup without investing a lot of cash outside.
3. Deferring Salaries instead of Eliminating Them
Rather than eliminating your salary completely, postpone your salary. You can agree with your board or investors to pay yourself later when the company reaches some milestone or even raises new funding.
4. Getting More Equity as Opposed to Cash
Some founders receive much more equity compared to cash compensation. This provides you with ownership in the company but with risk - you gain just when the company succeeds after a while.
What Do Investors Think About Founders’ Pay?
You might be wondering: Will cutting my pay impress investors? The answer is yes and also no- to a point. Most investors want to see careful money-handlers who are prepared to sacrifice. However additionally, they do not want you so broke you begin feeling stressed out, distracted or even unable to concentrate on the business.
In fact, most VCs say exactly the same thing: We would like you being frugal but not miserable, What that means in practice:
- A small, modest salary is completely fine (and expected), provided it helps you focus.
- Transparency about your personal situation and compensation generates trust with investors.
- Pay cuts are okay but not in case your mental or physical health is affected.
Remember, burnout does nothing. In case you're the brains behind the company, your overall health also matters.
Should You Cut Your Pay? The Key Questions to Ask
Ask yourself before you cut your pay:
- Is the business short on cash?
If so, cutting your salary might be needed to stretch your runway.
- Are other team members sacrificing?
If your team is cutting corners or even working additional hours, perhaps you ought to as well.
- Will this decision change my performance?
Don't cut pay so much that you become continually stressed or even distracted by money problems.
- Are there plans to restore my salary?
If you're deferring pay, create milestones or timelines to revisit and perhaps raise it later.
Alternatives to Pay Cuts in 2025
You do not always need to make a huge cut. Some alternatives are:
- Expense Cuts First: Before cutting your own pay, examine other savings potential- software subscriptions, travel, office space.
- Smaller Gradual Reductions: Rather than moving from $100K to zero overnight drop to $70K or $ 60K first.
- Equity Bonuses: Give yourself extra shares in the company to cover your lower salary.
- Board Approval of Temporary Changes: In case you have investors or a board make sure any compensation changes are approved and documented. Transparency is key.
Also Read | How Offshore Accounting Helps US Startups Save Time & Money
Conclusion
Startup founder pay cuts in 2025 are more common - not because it is trendy but because the startup world is changing. Now leaner operations, smarter spending and founder sacrifice are part of the playbook. As a founder, you are bound to face tough choices regarding your compensation at some stage.
That does not mean you ought to starve or suffer. It means being realistic, strategic and truthful with yourselves and your investors and team. Remember that your time and effort is among your most precious startup resources. Cutting your salary buys you time but burning out might cost you everything.
So ask tough questions, weigh the options, consult other founders, advisors and mentors. And most importantly, pick choices which help your startup survive and keep you strong enough to move forward. After all, you are not just creating a company; you are building your future. For any concerns, contact our experts at The Fino Partners.
