I'm the technical co-founder/CTO of a B2B startup. I created the product, our design, etc 6 years ago. Our board hired a CEO 4 years ago and they've been trying to get VC funding since they joined. They come from a very enterprise-heavy background/successful startups. We're successful with our customers which is why we've been able to stay afloat for so long without VC funding (we have taken other grants, though).

It has only been myself and another developer that I hired ~3 years ago (a friend that worked at the same company as me before) doing the development side of the company. I'd classify this other developer as "intermediate". Our company is close to getting $5 million in VC funding by early September. Or, that seems to be where the goal post has been moved to.

I have not had a salary increase in 3 years. I know that my salary for my skills/contributions is significantly lower than market rate. I have only about 2% of equity (or lower, see the comments of this question). I have received offers from other companies and I know I could be doing much better salary-wise... but my heart is very much in this product that I've created and I've been "holding out" for the VC funding.

The CEO has "promised" that once we get VC funding, my salary will "be adjusted accordingly". They have not mentioned actual numbers.

However, I've gotten pressure from the CEO that we need to start hiring more developers to scale/show the VCs why we need the money. We discussed hiring by market rate (or slightly more) because this job is more demanding than a typical "developer" enterprise job. The CEO says that we can pay by region as well (though, I disagree and think all developers should make equal pay regardless of where they choose to leave -- we shouldn't penalize that choice).

So, the CEO wants me to hire someone by end of April at market rate. I brought up that before we do this we need to make adjustments to both my salary and the other developers salary. The CEO laughed and said "welcome to management... I've been hiring people 2x my salary for all my previous companies... this is what management does!". They then explained: "all joking aside, there will be adjustments made with VC funding". They explained that they can't go to the board with adjustments because the money is physically not there. As a side note: I'm in the middle of also getting a $250K grant from the government that begins early May.

The CEO comes from a heavy sales/marketing background. Another point to this whole story is that other sales people/account executives that are being hired have 1.5x my salary.

I'm feeling very frustrated and hurt by this situation because I feel like I've created something and I don't have control of the compensation that I believe I should receive if this CEO wasn't the one running things.

I think both myself and the other developer should have salary increases before hiring any new developers and then on top of that I think I should be paid more because of the work that I did/still do as the creator as well as the "senior" developer.

What do I do?

Right now, you're being used, and the CEO is feeding you vague promises to convince you to let yourself keep being used. Demand appropriate guarantees. If you can't get them, walk.

If you had significant equity in the company, this would be fine, and even normal, but you don't, so it's not. Sure, the CEO might decide to up your pay once VC funding comes in... but he also might not, or he might "up your pay" in a way that doesn't amount to much, or doesn't pay you back for your years of investment. From the way he's talking, he's either running off of instincts that assume you do have a significant chunk of equity, or he's stringing you along and he knows he's stringing you along because thus far he's been able to get away with it and he doesn't see a good reason to stop. Neither of those is a good sign for your paycheck going forward.

Now, he's saying that right now, the company needs to burn as hot as it can, and it doesn't have the money for that, so it needs belt-tightening from its most invested personnel to make it happen. That's even a legitimate thing to say - but then he also needs to give you a reason to be invested. That's going to mean, at bare minimum, an actual contract promising a certain level of pay increase once the VCs come through (and some sort of guarantee that you get paid even if they drop you immediately thereafter). Even that can get pretty bad, because that stuff can keep getting put off, month after month. Better would be increasing your equity stake. if he won't (or can't) do one of those, and he won't (or can't) increase your salary... then walk. Just walk. go to one of those other jobs that will pay more. They clearly don't value you enough to actually give you a reason to stay, so don't. It's not worth it to martyr yourself on this thing just so someone else can get rich off of your baby.

It's in his best interests to keep you doing what you're doing for as little money as he can get away with for as long as he can get away with, and, as a CEO/people person, he's good at making that sound reasonable. Don't let him get away with it. As far as the board, it doesn't actually matter if it's the board or the CEO themselves that feels like you're not worth paying anything like what you're worth. That's a shell game. Whoever it is can take the blame for your departure once you're gone.

I hate to say it, but at this point it sounds like you're less of a founder/owner and more of a mid/upper manager. You have lost/given/sold 98% of the equity. You really don't have a lot of say in this.

Don't mean to be rude, but at this point, if the CEO says to do something, do it. Or leave. I don't see other any other options.

What do I do?

I think that's what you need to decide.

In an effort to help I will point out that a 2% stake in a company that was spun off from another one isn't horrible (like it would be if you founded it from the ground)

if your (~2%) shares cannot be diluted.

The CEO has "promised" that once we get VC funding, my salary will "be adjusted accordingly".

Your CEO has a sales background, so I'd advise you to discuss specific numbers.

If not you could hear, "Well I'd love to give you more, but the VC only provided X and our salaries (because of all the other new hires) is Y and that ratio is too high, so we just cannot give you a big bump right now."

Not to put to fine a point on it, but your negotiation leverage will never be higher than it is today.

Make sure that the amount is in writing and that it says in the paper that it will be approved by the VC in advance (otherwise the VC may have enough of the company to overrule the increase).

How can I deal with my CEO asking me to hire someone with a higher salary than me, a co-founder?

For better or worse,

There's only one simple two-way answer in the situation as described:

1. IF your 2% is now locked in and safe and in your hands (you've passed all cliffs, no dilution is possible, the "priority" bullshit is OK), then, just walk off.




2. IF your 2% is just theoretical (you might get it depending on blah blah) you're screwed. Write it off to experience, and walk off. (The CEO will by nature be a tough negotiator. He knows you're a soft negotiator so, he'll never give you any salary to speak of, so there's no hope of that.)

In situation 1. They'll soon realize they need you and, magically, the money will appear and you'll get a great salary. If they don't - so what? You can get a huge salary anywhere else by 2pm this afternoon. And you have the shares. So you've won.

In situation 2. There's no good outcome. You'll never actually get the 2%. (There'll always be some reason it's just out of reach for "another few years".) Unfortunately they know that you "have your heart in the product" which is equivalent to saying "can be ripped off to work for a low salary," so unfortunately they've got you there. I would honestly just forget the whole thing and move on. Again: you can get a huge salary anywhere else by 2pm this afternoon. You've got a great story for the grandkids about the "startup era".

Important...

One huge point here: OP mentions a couple times "promises..." that have been made.

Funnily enough, when I was reading the question at first, I just assumed OP was joking / being sarcastic.

In business, when someone does the funny mouth-talk wordy thing, you just look at their lips moving, and then laugh.

If one is still at the point in "business growth" where you actually hear the sounds when people do the mouthy-move thing ... one has serious problems. It's absolutely critical to get past that.

In business, when someone does the funny mouth-talk wordy thing, you just look at their lips moving, and then laugh.