special thanks to Jeff Lu and Meredith Pitkoff for their help and edits to this article.

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Great article.

Couple of points, which are implicit though not explicit in your article.

A founder may not want higher cash comp.

A founder with say $25,000,000 (market value) in equity might well prefer to see company stock go up by 5% ($1,250,000) than get an incremental $250,000 in cash.

5% appreciation is reasonable, because in addition to the incremental retained earnings of $250,000, not demanding the $250,000 would likely instill investor confidence, not just due to better cashflow, but appearance of higher fiduciary standards.

Taken to an extreme of obviously below market founder comp, some of the benefits might wear thin. As below market comp amounts to knowingly overstate true organic income of the business.

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Sadly, many VCs outside the valley are nowhere near as keen on providing founder liquidity along the way. It sets up an 'all or nothing' outcome for the Founders, where the VCs have the ability to mitigate their downside risk through terms and their portfolios.

We all believe in the long term upside of equity, and since nearly alll startups (minus unicorns) are cash constrained, it's easy for boards to say 's/he should be motivated enough by their founder stake'. Be your own best advocate and force a thoughtful conversation on the issue.

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It boils down to simple truth - better have 1mil actual money in the bank, than 50mil dream paper.

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What would be an average package for a replacement at year 5 or later?

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