Demanding an acceptable Wage/Salary from an Angel Investor
By Venture Giants
When starting a new company, the reality of business often dictates the Founder will have to go a period of time without taking a regular salary until profits allow for it. If a new company is using a considerable portion of debt or angel investor funds to finance their salary without the company showing any profits - this will be a red flag to Angel investors’.
When an Angel investor will choose to invest in your investment proposal and will risk their money, they will expect the Entrepreneur/Founder(s) to also assume some level of risk in the business.
The rationale behind this is that an Entrepreneur/Founder may have mainly invested their time into the development and commercialisation of the company ('sweat equity') but may not have invested their own cash into the business. Most Angel Investor's will readily agree that once the company starts to show positive signs of growth or if it is well financed, including cash or personally secured loans from the entrepreneur or Founder, a reasonable salary would be expected. It is important for an entrepreneur to make this clear in the ensuing negotiations from Day 1 that this is their expectation - if of course it is!
Calculating an acceptable wage/salary to charge your company at early-stage, seed or concept stage is no mean feat, however, as a rule of thumb, and taking into consideration the financials listed in your investment proposal, and your financial ability, it would be viewed positively by an Angel Investor (who is serious about investing in your company) to only take an initial salary of £0 - £15,000 per annum out of the company, and it should not impact their decision to invest in your company.
Bear in mind that demanding anything above £25,000.00 will most likely require additional consideration on your part.
Venture Giants Insider Edge:
There are a number of different services available to research and confirm proposed salaries. This is important when trying to justify to a potential investor where the salary figure came from.
Venture Giants is a premier UK business Angel investment network and small to mid sized business networking portal that matches active business angel investors with entrepreneurs' seeking investment capital and business funding.
Written for and behalf of Venture Giants Enterprises Ltd. All rights reserved 2009
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