Mrinal Jhaveri, a leading venture capitalist from Mumbai and founding partner of Ice VC, has openly criticized a young entrepreneur. Terming it inappropriate for the founder to spend lavishly on getting funding, he said that startup funding should not be taken like a salary hike.
As soon as the startup received ₹5 crore in seed funding, the founder bought a luxury car and shifted to a bigger apartment in an upscale area of the city. This news has created a stir in the investment circle of Mumbai. Ice VC’s founding partner Mrinal Jhaveri openly expressed his displeasure over this incident, saying that the funding money is for business growth and not for the personal luxury lifestyle of the founder. This statement of Jhaveri has created a storm on social media and a vigorous debate has started in the entire startup ecosystem regarding the salary, expenses and fund usage of founders.
What has Jhaveri written in his post?
Referring to this incident in his LinkedIn post, Jhaveri wrote that last year a founder received ₹5 crore in seed funding. First he bought a new luxury car and moved into a big, expensive apartment. After this I had to have a very awkward and uncomfortable conversation with her. He further said that such expenses are not only a waste of funds but also break the confidence of investors. Jhaveri’s post has sparked debate on social media, where founders, investors and people from the startup community are discussing the issue of how much salary founders should pay themselves.
Guidelines for Founders
In his post, Mrinal Jhaveri has also given clear guidelines on salary for founders as per different funding stages. He believes that founders should keep in mind the current status, traction and future needs of the startup while deciding the salary.
Seed stage (₹4 to ₹12 crore funding): In this initial stage, the founder should pay himself a salary of ₹60,000 to ₹1.2 lakh per month. Jhaveri clearly said that money is being wasted in business and you have not proved anything yet. In such a situation, luxury expenses are absolutely wrong. Series A (₹ 20 to 35 crore funding): At this stage the founders have shown some concrete results. So they can pay themselves a monthly salary of ₹3 lakh to ₹5 lakh. Series B (₹50 to ₹100 crore funding): Here, founders should get a base salary of ₹5 lakh to ₹7 lakh per month, with additional performance linked incentives based on business milestones. Series C and beyond: Successful founders who meet their targets can earn ₹3 crore to ₹4 crore or more annually. Can earn. Jhaveri also advises founders at this stage to ‘take some money out’ by selling some of their equity so that their personal financial pressure is reduced.
Jhaveri further wrote in his post that let me make it clear that I do not want my founders to be stressed about rent or school fees. This is bad for everyone. But there is a big difference between living comfortably and considering VC funding as a means of salary hike or luxury lifestyle. He warned new entrepreneurs that using the funding for personal expenses could stunt the company’s growth and break the confidence of investors.
Emphasis on long-term value
At the end of the post, Jhaveri’s main message to founders was that the equity gains are real. Exit payday is real, but only if the company actually wins first. If you want a big salary now then corporate job is the right place for it. Startups pay in equity and the deal is finalized from day one.
