Underpaying yourself

Hi Everyone,

How long a CEO's personal savings last shapes their decisions more than how long the company's cash lasts. Deals get priced for a quick yes, hiring gets frozen to protect the salary line, and the fundraise opens early, from a position of need.

Mo Yehia co-founded Sqoot and kept burn low while running up tens of thousands of dollars in personal debt. When Sqoot sold in 2013, the buyers could see he couldn't walk away, and he watched "a seven-figure deal evaporate into thin air."

Today, we're sharing how to calculate your personal cash runway, and what to do if it comes up short.

Money worry is different from stress

In a well-known 2013 experiment, people who were reminded of their money problems before a test performed as if they'd skipped a full night of sleep.

General stress didn't explain the drop. Money worry specifically was what occupied people's working memory.

The study covered low-income households, not founders, and one published critique challenged its statistics. But the worry works the same way at any income: it takes up thinking you need for the decision in front of you.

Calculate your personal runway

Write down what your household needs to survive each month, like rent or mortgage, food, insurance, childcare, and debt payments.

Divide your liquid savings by that number. The result is your personal runway in months.

Now compare it with the company's numbers. If your next funding round or breakeven is 12 months away, your savings need to cover more than 12 months, because milestones often get delayed.

A personal runway under 12 months creates a company problem, because it will impact your business decisions.

Won't a higher salary look bad to investors?

Yehia's advice to founders after the sale was to make money and pay yourself. Ed Sim, who runs Boldstart Ventures and has topped Business Insider's ranking of seed investors, gives the same advice as an investor.

His argument: an investor gains nothing from a founder who is distracted by unpaid bills, so he'd rather see a salary that covers the founder's life, especially when there's a family or a mortgage behind it.

Compare the two costs. A $2,000 monthly raise costs the company $24,000 a year. Founder desperation cost Sqoot a seven-figure deal.

A raise isn't the only fix. Some founders extend their runway by cutting their own living costs, and some rely on a partner's salary while the company is young.

Try this tonight

Calculate both runways. How many months of cash the company has, and how many months of savings you have.

If your number is smaller than the company's, put your salary on the agenda for your next board or co-founder conversation.

Go deeper

👉 500 Global: Sell Your Company, Not Your Soul — read Yehia's full list of lessons before your own exit conversation; the pricing and relationships ones sting the most.

👉 Kruze Consulting: Startup CEO Salary Report — use this to check your own pay against payroll data from 450+ venture-backed startups before your next comp conversation.

👉 Harvard Magazine: The Science of Scarcity — read this to understand why money worry narrows attention, in plain language and without the academic paper.

👉 FutureSight Ventures: 7 Ways Founders Fund Their Personal Runway — pick your funding model from seven named archetypes, from the frugal founder to the couple where one partner keeps the salary.

Coming up tomorrow

In tomorrow's issue, you'll learn three simple checks to decide whether to stay in a shrinking market or move on before your options narrow further.