How startup founders make money? is the question that arises in many people’s mind. Establishing a company is not a hard task but growing, modernization, and balancing a positive cash flow stood to be a big challenge.
In most cases, the startup founders in India make money by selling their shares to someone. And make a company’s growth out of it which is called ‘Liquidation’.
How Startup Founders Make Money?
Do you know? The question of how startup founders make money depends on how well the startup itself does.
Here you need to have an exact blueprint on how the business will do well and successfully enforce. The money-making opinion depends on what exactly the business model is.
If the startup is doing well and even making a profit, then the money-making choice has to come from cash-flow sources.
As we all know, the Founders at its initials, don’t take out salaries but in comparison, the Employees do.
Why the founder should be paid a salary? Are the founder are employees or they hired from the outside? The answer is no, as the gained money is utilized for business growth and it’s development.
As the business does not hold any growth-oriented investors then they can pay a dividend on their shares. Practically speaking, this is not done as the capital is to be reinvested in the business to make it grow.
Startup Sources of money
Enlarging the goodwill of the company, gives a hand on hand progress to generate the best of best revenue.
According to the assumption, startups have high growth rates.
Via the vast acknowledgement of shares, the founders can generate massive money. The founder can sell some shares at a higher price to turn holding into dollars.
Commonly, the startup founders in India manage to support equity and pay cash as in salary.
As there prevails an investment, founders initially opt for a smaller salary.
It’s always assumed that the Founder’s salary will never be at a market rate, and stands last to get paid in return for holding the most equity.
Later on, when the company reaches the height of success, every aspect modifies. Here the salaries increase and similarly, the shares can be liquidated via acquisition, further investment.
Primarily the founders generate less in salary as compared to others in the company until the company generates handsome revenues over fixed costs.
Also, the Startup founder would make money by using the most common method of selling shares either privately or publicly (IPO).
Privately, the founders can continue selling some shares during a funding round, liquidity, either by selling all shares or the entire business to another company.
Publicly, the founder can do so by inaugurating business and shares to trade on the stock market (IPO) to public investors.
How do startup founders make money in India
The startup founders in India attitude towards money making and investing varies according to their financial situation,. Let’s try to briefly understand those Startup founders who are financially self-sufficient and the founder who are not financially self-sufficient.
- Financially self-sufficient founders
The Financially self-sufficient founders primarily opt to raise funds as initial investments from their pocket and accordingly give up the attitude to pay yourself from their bank account.
- Not financially self-sufficient founder
Not financially self-sufficient founders manage to raise the funds from friends and family and contribute sufficient salaries from the funds that they raise.
Two Approaches on part of Founder
A Startup founder in India divides Income into two parts:
- Siphon cash out
- Invest the same cash for business growth
A founder expecting a proper rate at the outlay of initial.
To establish, develop it, puts up with all the time, responsibility, family help, stamina, proficiency, and additional aspects to accomplish.
Each founder may or may not be financially independent. We need to view the founder’s financial needs as well as know the founder’s contribution to the company.
At startup, the founder is selling short term compensation to hold the business as well as get a benefit from the growth value of the business.
Remember a thing, the Startup Founder is not going to get rich from a startup income until the founder invests the same income in the development of business and furtherly gets additional revenue out of it.