'Stop performing poverty': Investor calls out start-up founder who pays himself Rs 50,000 despite having Rs 5 crore in bank

He says that such underpayment can signify financial risk factors to potential investors.

A LinkedIn post addressing the ups and downs of start-up management has taken the internet by storm, as the user ignited discussions around founders paying themselves.

Investor Aditya Arora took to LinkedIn to comment his perspective on a start-up founder paying himself Rs 50,000 despite his company having Rs 5 crore in bank.

"A founder I met last week pitching for Series A pays himself Rs 50,000 a month," his post began, as he said that the founder may be thinking that underpaying himself signals discipline, but "investors read it as a red flag".

"The founder of a Series A startup cannot cover rent, EMIs and family in any Tier 1 city on that. Three things break when founder pay is too low," he wrote.

As he said that Rs 50,000 a month is below entry-level engineer pay in Bengaluru. He also noted that this underpayment could signify financial risk factors to potential investors.

He listed the three areas that "break" when the pay of the founder is too low.

"First, his personal stress eats half his bandwidth. Customer calls get cancelled because he is sorting out a bank issue at home," he wrote, emphasising the pressure on personal regulation.

"Second, his spouse stops believing in the company. The "I will pay you back when we exit" line works for 6 months. By month 18 it is the only conversation at home."

And, as a part of the financial math, Arora added, "Third, the cap table review flags it. Across the 130+ companies in my book, founders paying themselves under Rs 12 lakh raise Series A at lower valuations almost as often as founders pulling above Rs 50 lakh," saying that investors "price in the instability".

He suggested an alternative: "Pay yourself Rs 24 lakh a year. Cover your mortgage. Cover your kids' school. Cover the family. That is 5 percent of your Rs 5 crore bank balance. Enough to live without distraction. Not enough to feel rich."

"The founders who closed Series A on the strongest terms paid themselves between Rs 18 lakh and Rs 30 lakh. Almost none under Rs 12 lakh. He pays himself Rs 6 lakh for the comfort of looking serious," the post read.

Requesting founders to stop indulging in "performing poverty for investor optics", Arora said that the salary is real, and the "frugality" framing costs him focus, family and the next round".

"Pay yourself Tier 1 cost-of-living plus 30 percent," the post concluded.

Netizens seemed to have mixed reactions to his claims. Many seemed to praise him for bringing this to notice, while others brought out the fact that he may be generalising the landscape.

A user wrote, "Must be difficult managing 130+ companies and still a founder managed to sneak through to the Series A table, isn’t it? Maybe ask the risk and assessment team to rework the pre-screening filters. Might help." The uses suggested a different perspective, saying that the founder must be mature enough to decide personally.

Another user, commenting on the generalisation, wrote, "Respect for the post — but this take has a dangerous blind spot bro. You’re essentially telling each & every Founder: 'Raise your salary or investors will penalise you'."