_edited.jpg)
Peter Thiel, co-founder of PayPal and a prominent venture capitalist, offers a simple yet profound insight into evaluating startups: the CEO's salary. According to Thiel, one of the most telling indicators of a startup's potential success is how much the CEO is paid, even after significant funding rounds like Series A.
Thiel believes that the ideal CEO salary should be less than $150,000. This figure is not just about frugality; it’s about setting a tone for the company. "If you like the people, you like the business model, you like the technology, you like everything," Thiel says, "that single question is incredibly predictive because it ends up setting the culture." The key question is whether people are motivated by equity or cash.
The idea is that a lower salary reflects a commitment to the company's long-term success and an emphasis on equity. It's a signal that the CEO and the founding team are in it for the growth and value they can build, not for immediate financial gain. This mindset can attract like-minded individuals who are willing to work hard for the future payoff.
Thiel shares an example from LinkedIn’s early days to illustrate his point. Reid Hoffman, LinkedIn’s co-founder, took a salary of just $15,000 a year, essentially the minimum wage needed to qualify for health insurance. This move wasn’t because Hoffman needed to save money, but because it set the right tone for the company. It showed a commitment to the mission over personal financial comfort, which helped shape LinkedIn’s culture.
The essence of Thiel's advice is to dig into the motivations behind the numbers. Do the people running the company believe in what they're doing enough to invest in it themselves, often foregoing higher immediate compensation for a potentially larger future reward? This level of belief and commitment can be a strong predictor of a startup’s success.
By focusing on the CEO's salary as a cultural indicator, Thiel emphasizes the importance of motivation and long-term vision in building a successful company. It’s not just about the money—it's about the mindset. And in the world of startups, that can make all the difference.
Listen to him: