A Mumbai-based investor has criticised an entrepreneur for buying a new car and moving into a bigger apartment shortly after his startup received ₹5 crore funding. Mrunal Jhaveri, founding partner at Ice VC, said that he had to have a “very uncomfortable” talk with the unnamed founder after his extravagant purchase.
The topic of founders and funding came up thanks to an ongoing social media discussion about how much entrepreneurs should pay themselves.
An investor’s shock at founder’s spending
“A founder got ₹5 crore in seed funding last year. First thing he did was buy a new car and move to a bigger apartment,” Jhaveri said in his LinkedIn post yesterday. “I had to have a very uncomfortable conversation after that.”
Seed funding is the earliest stage of official venture funding. According to Jhaveri, founders at the seed stage typically raise between ₹4 to 12 crore, and should pay themselves a moderate salary. The figure, he said, should range between ₹60,000 to ₹1.2 lakh.
“The business is burning money and you haven't proved anything yet,” he said.
{{/usCountry}}“The business is burning money and you haven't proved anything yet,” he said.
{{/usCountry}}For the Mumbai-based investor, the founder’s car purchase was an unjustified expense, as was his decision to move into a bigger flat. He cautioned budding entrepreneurs against treating startup funding like a salary hike.
“Let me be clear first. I don't want my founders stressed about rent or school fees. That's bad for everyone. But there's a big difference between living comfortably and treating VC funding like a salary hike,” he wrote.
How much should founders pay themselves?
Jhaveri also shared what he believes is a reasonable salary for founders at different stages of a startup's growth.
According to him, founders who have raised a Series A round of ₹20 to 35 crore can pay themselves between ₹3 lakh and ₹5 lakh a month, as they have "proved something real". At the Series B stage, after raising ₹50 to 100 crore, he said founders could draw a base salary of ₹5 lakh to ₹7 lakh a month, with additional performance-linked pay tied to business milestones.
For startups that have reached Series C and beyond, Jhaveri said founders who meet their targets can earn ₹3 crore to ₹4 crore or more annually. At that stage, he also encourages founders to sell a small portion of their equity and "take some money off the table".
He ended his post by arguing that startup founders should focus on building long-term value instead of chasing a bigger salary.
"The equity upside is real. The exit payday is real. But only if the company actually wins first," he wrote, adding: "If a fat salary is what you need right now, corporate is the right place for that. Startups pay in equity and that's the deal from day one."