Cofounder Wants a Salary Before Revenue: Fair or Not?

You're three months into building your startup. The product is taking shape, early user feedback is promising, and the energy between you and your cofounder has been electric — until last Tuesday. Over a casual dinner, your cofounder says: "I need to start drawing a salary. I can't keep doing this for free."

Your stomach drops. There's no revenue. The bank account holds what's left of your personal savings. You're not paying yourself either, so why should they get a cofounder salary before revenue even exists?

But here's what you might not be seeing: your cofounder isn't being greedy. They might be desperate. And how you respond to this moment will either strengthen your partnership or begin its slow unraveling.

This is one of the most common — and most emotionally charged — conflicts between cofounders. Let's break down when it's fair, when it's not, and how to handle it without destroying the relationship.

Key Takeaways

• Before debating fairness, both cofounders should openly share their personal burn rates, savings, and how many months they can realistically work without income.
• A full salary vs. no salary is a false binary — explore stipends, deferred compensation, milestone-based payments, equity adjustments, or part-time freelance allowances as creative middle-ground solutions.
• If one cofounder draws a salary and the other doesn't, adjust the equity split to compensate the unpaid cofounder for absorbing additional financial risk.
• Set a specific review date (e.g., 90 days) or a trigger event (e.g., hitting $5K MRR or closing a funding round) to revisit any compensation arrangement so no one feels permanently locked in.
• Write down every compensation agreement — verbal handshakes between cofounders are the single fastest path to resentment and conflicting memories.

Why This Question Comes Up More Than You Think

The fantasy of startup life is two cofounders in a garage, eating ramen, grinding until the money arrives. The reality is that people have rent, student loans, kids, and aging parents. Not everyone enters a startup from the same financial position.

A 2023 survey by Founder Institute found that compensation disagreements rank among the top three reasons cofounder relationships fail — ahead of disagreements about product direction. The salary question isn't a side issue. It's a foundational one.

Here's what typically triggers it:

• Unequal financial runways. One cofounder has savings or a working spouse; the other is burning through their last reserves.
• Unequal time contributions. One cofounder went full-time months ago while the other still has a day job.
• Life changes. A new baby, a medical bill, or a lease renewal makes the status quo unsustainable.
• Perceived inequity. One cofounder feels they're doing more work and absorbing more risk without proportional reward.

None of these reasons are inherently unreasonable. The problem isn't that someone asked — it's that most founding teams never discussed it.

The Case for Paying a Cofounder Before Revenue

Let's start with the uncomfortable truth: expecting someone to work for free indefinitely is not a business plan. It's a favor. And favors breed resentment.

Financial Survival Is Not a Character Flaw

If your cofounder needs money to keep the lights on, that's not a lack of commitment — it's arithmetic. A cofounder who's stressed about making rent is not going to do their best work. They'll start looking for freelance gigs, then a part-time job, and eventually a full-time one. You don't lose cofounders in a dramatic blowup. You lose them in a slow drift.

It Can Actually Protect Your Equity

Here's a counterintuitive angle: paying a small salary can prevent a much larger equity renegotiation later. If a cofounder works six months unpaid while the other draws from personal wealth, the unpaid cofounder may (rightfully) argue that the equity split should shift to reflect their sacrifice. A modest stipend can keep the original equity agreement intact and perceived as fair.

Skin in the Game Still Exists

A cofounder taking a below-market salary — say $2,000/month when they could earn $12,000 elsewhere — still has enormous skin in the game. They're effectively investing $10,000/month of foregone income into your company. That's not someone looking for a free ride.

The Case Against Paying a Cofounder Before Revenue

That said, there are legitimate reasons to push back — not with anger, but with honesty.

The Money Simply Doesn't Exist

If you're bootstrapping with no outside capital, every dollar paid as salary is a dollar not spent on infrastructure, marketing, or keeping the company alive. This is a math problem, not a values problem. When the runway is $15,000 total, a $3,000 monthly salary means you're out of business in five months instead of surviving for twelve.

It Creates a Dangerous Precedent

If one cofounder draws a salary and the other doesn't, you've introduced an asymmetry that will color every future negotiation. Who decides when to raise salaries? What happens if the paying cofounder wants a raise before the company can afford it? These dynamics can calcify quickly.

Commitment Signals Matter

In some cases — and this requires honest self-reflection — the salary request is a signal that your cofounder's commitment is conditional. That's not automatically a dealbreaker, but it's information. A cofounder who frames it as "pay me or I'm out" is telling you something different from one who says "I'm all in, but I literally cannot afford food next month."

A Framework for Making the Decision Together

Instead of debating whether it's "fair" in the abstract, use a structured approach. Fairness isn't a fixed point — it's something you negotiate based on shared facts.

Step 1: Put All Financial Cards on the Table

This is uncomfortable but essential. Both cofounders should share:

• Monthly personal burn rate (rent, debt payments, essentials)
• Available savings or financial support
• Other income sources (freelance, spouse, investments)
• How many months they can realistically sustain zero income

You're not judging each other's lifestyles. You're establishing facts so you can make a joint decision grounded in reality.

Step 2: Separate the Roles — Founder vs. Employee

A useful mental model: your cofounder is both a founder (equity holder, risk-taker) and a worker (someone performing daily labor). The equity compensates the founder role. The salary question is about the worker role.

When you frame it this way, the conversation shifts from "Do you deserve to be paid?" to "Can the company afford to pay its workers right now, and if so, how much?"

Step 3: Explore Creative Alternatives

A full market-rate salary might be impossible. But "salary vs. no salary" is a false binary. Consider:

• Stipends. A small monthly amount ($500–$2,000) to cover essentials, framed as a living expense reimbursement.
• Deferred compensation. Track the salary that would be paid, and pay it out once revenue or funding arrives, potentially with interest.
• Milestone-based payments. Tie small payments to specific deliverables — launching the MVP, closing the first customer, hitting a user target.
• Equity adjustments. If one cofounder draws a salary and the other doesn't, adjust the equity split to compensate the unpaid cofounder for the additional risk.
• Part-time allowance. Explicitly agree that the cash-strapped cofounder can freelance 10 hours per week without it being seen as disloyalty.

Step 4: Set a Review Date

Whatever you decide, don't treat it as permanent. Agree to revisit the compensation structure at a specific date — 90 days is a good default — or when a specific trigger occurs (closing a funding round, hitting $5K MRR, etc.). This prevents either person from feeling locked into an arrangement that no longer reflects reality.

Step 5: Write It Down

Verbal agreements between cofounders are worth the paper they're not printed on. Whatever you decide — salary, stipend, deferred comp, equity adjustment — put it in writing. Tools like Servanda can help cofounders formalize these agreements quickly, so the terms are clear and neither party has to rely on memory or good faith alone.

Real-World Scenarios: How Other Cofounders Handled It

Scenario A: The Lopsided Runway

Marcos and Jin started a SaaS product together with a 50/50 equity split. Marcos had $80,000 in savings. Jin had $6,000. After two months, Jin raised the salary conversation.

Their solution: Jin received a $1,500/month stipend from the company's shared fund. They also agreed that if no revenue materialized within six months, the equity would shift to 45/55 in Jin's favor to reflect the financial sacrifice gap. Revenue arrived in month four, and the adjustment was never needed — but having the agreement in writing prevented resentment from building.

Scenario B: The Silent Resentment

Priya and Alex never discussed compensation. Both assumed they'd go unpaid until funding. But Priya was secretly freelancing 15 hours a week to cover bills, which meant she was doing less startup work than Alex. Alex noticed. Instead of asking why, he stewed. By month five, he accused Priya of not being committed. She accused him of not caring about her financial reality. They split up. The startup died.

The lesson: the salary conversation you avoid is the one that destroys you.

Scenario C: The Honest No

Dana asked her cofounder Tomás for a salary three months in. Tomás said no — not because he didn't think she deserved it, but because the $20,000 in their account was earmarked for a critical product launch. He showed her the budget. He offered to revisit after launch. He also suggested she take on a small freelance client to bridge the gap, and he'd cover more of the product work during that time.

Dana didn't love it, but she respected the transparency. They launched on time, closed their first paying customer two months later, and both started drawing modest salaries.

The Questions You Should Actually Be Asking

Instead of debating whether a cofounder salary before revenue is "fair," redirect the conversation to questions that actually produce answers:

1. What does each of us need financially to stay in this full-time for the next six months?
2. What can the company actually afford without jeopardizing its survival?
3. If one person gets paid and the other doesn't, how do we make that equitable?
4. What triggers a change in this arrangement — revenue, funding, a specific date?
5. What happens if one of us can no longer afford to continue without pay?

These aren't fun questions. But they're the questions that keep companies — and partnerships — alive.

What to Do If the Conversation Gets Heated

Sometimes this discussion goes sideways. One person feels accused of being uncommitted. The other feels accused of being selfish. Here's how to de-escalate:

• Acknowledge the awkwardness. "This is an uncomfortable conversation, and I'm glad we're having it instead of avoiding it."
• Lead with your own vulnerability. Share your own financial fears first. It invites honesty rather than defensiveness.
• Separate the person from the problem. Your cofounder wanting a salary isn't a betrayal. It's a logistics challenge.
• Propose a trial period. "Let's try this for 90 days and see how it affects our runway and our work."

Conclusion

A cofounder asking for a salary before revenue isn't a red flag or a character test. It's a practical problem that requires a practical solution. The real danger isn't the request — it's the silence that precedes it, the assumptions that surround it, and the resentment that follows when it goes unaddressed.

The strongest founding teams treat compensation as an ongoing negotiation, not a one-time handshake. They put numbers on the table, explore creative structures, write down what they agree to, and revisit regularly.

If you're facing this conversation right now, take it as a sign that your partnership is maturing. The startups that fail aren't the ones that argue about money — they're the ones that never do.

Frequently Asked Questions

Should cofounders take a salary before the startup has revenue?

There's no universal rule — it depends on each cofounder's financial situation and the company's runway. If the startup has enough cash (from savings or pre-seed funding) and a cofounder genuinely cannot sustain themselves without income, a modest stipend or below-market salary can prevent burnout and preserve the partnership. The key is making the decision together based on transparent financial facts, not assumptions.

How much should a startup cofounder pay themselves?

Before revenue or funding, cofounder salaries typically range from a small stipend of $500–$2,000 per month to cover bare essentials, well below market rate. The exact amount should be determined by what the company can afford without jeopardizing its survival runway. A cofounder earning significantly below their market value is still making a massive financial investment in the company through foregone income.

What happens if one cofounder gets paid and the other doesn't?

This creates an asymmetry that should be addressed directly, usually through an equity adjustment that gives the unpaid cofounder a larger share to reflect their additional financial risk. Without this kind of rebalancing, the unpaid cofounder is likely to build resentment over time, which is one of the top reasons cofounder relationships fail. Document whatever arrangement you agree on in writing.

How do I bring up the salary conversation with my cofounder without causing a fight?

Lead with your own vulnerability by sharing your financial situation first, acknowledge that the conversation is awkward, and frame the discussion around the company's needs rather than personal accusations. Propose concrete options like stipends or deferred compensation and suggest a trial period so neither person feels locked in. Treating it as a shared logistics problem rather than a loyalty test keeps the conversation productive.

What is deferred compensation for startup cofounders?

Deferred compensation means tracking the salary a cofounder would have been paid and agreeing to pay it out once the company reaches a specific milestone, such as closing a funding round or hitting a revenue target. This approach acknowledges the cofounder's financial sacrifice without draining the company's limited cash in the present. It's often structured with interest or a bonus multiplier to reward the cofounder for waiting.