In today’s episode of The Startup Chat, Steli and Hiten talk about personal finances for founders.
One of the biggest mistakes founders make without realizing it, is neglecting to manage their own personal finances while they focus on starting, building and scaling their startups. This can be disastrous if it goes wrong as not paying attention to your own finances, ultimately slow down the development of your startup
In this episode, Steli and Hiten talk about common monetary situations founders find themselves in, recommendations on when to take a salary, the importance of having savings and much more.
Time Stamped Show Notes:
00:00 About today’s topic.
00:50 Why this topic was chosen.
02:35 Common monetary situations founders find themselves in.
02:19 Hiten’s recommendations on if a founder should take a salary.
04:02 Why survival is your game if you haven’t raised money.
05:03 Steli’s advice on how to manage your finances.
06:37 When you can expect to see ROI.
06:58 The importance of having savings.
07:52 Why you should live one level below your income level.
08:55 Hiten’s experience with founders who struggle financially.
09:31 How Hiten started his business initially.
3 Key Points:
As a founder, if you weren’t doing your work, you’d have to work for your money.
If you raise money, you should definitely take a salary.
If you haven’t raised money, survival is your game.
Steli Efti: All right. Hey, this is Steli Efti.
Hiten Shah: And this is Hiten Shah.
Steli Efti: And today we're gonna talk about Hiten Shah's favorite topic, money. Right?
Hiten Shah: It was a joke.
Steli Efti: Particularly.
Hiten Shah: It's the topic I never talk about, so it's great.
Steli Efti: Yes, yes. Personal finances for founders, we wanted to chat about that.
Hiten Shah: Let's do it.
Steli Efti: So here's the reason why I wanted to chat about this with you, Hiten Shah. I had a little bit of a back and forth email chain with a founder that basically, I'll summarize his situation. There's a lot more going on, but I'll summarize it to successful quote unquote founder, raised a good amount of money, had a strong salary, so was thinking about himself as wealthy? Started to immediately do a lot of angel investments. Started to live a pretty great lifestyle. And startup is has been going through troubles, cannot raise more money. Had to let a lot of people go. Had to decrease salary and now has started to be having growing personal financial issues. Credit card is piling up, bills are piling up. Personal debt has to, had to lend money from a few people. Is now worrying what to do about all of this. And basically there's a whole other component that we could do an episode on on like him, I feel like there was a big, big part of his trouble is him mourning how rich he thought he was and then how poor he thinks he is right now. I think a lot of that is bullshit, but I thought that this prompted to me particularly the idea of like talking a little bit about how to, maybe some basic advice that we have to give to founders on how to manage their personal finances as they are starting a startup. What's your immediate reaction to this?
Hiten Shah: There's been a few blog posts about how much founders should get paid and things like that, early on or later on and things like that. I think the number one thing I learned if you're a founder is you're in one of two situations, basically. You're in a situation where, if you weren't doing your startup, you would have to work for money. There's another situation which is regardless of you doing your startup, you wouldn't have to work for money.