Title: How Should We Handle an Advance Salary Request from Our CTO in a Pre-Revenue Startup?
We’re a one-year-old company that recently closed a $1M round and is currently pre-revenue. Most of our funds are safely in the bank, but we’re facing a personal situation with our CTO that’s causing tough financial and strategic questions for the business.
The CTO is dealing with personal issues and has asked to receive a full year’s salary upfront. Here’s the context:
– He is building a house and took out a loan last year. Construction has been delayed and damaged by weather, and the contractor has been slow to respond.
– He is already maxed out on his loan and needs additional funds to repair and expedite the project. He plans to move into the house next year.
– If we grant a year’s salary upfront, it could impact our financial runway, and it could be seen as unfair to other co-founders, employees, and current or future investors.
– There are concerns about potential motivation shifts or forced retention, and whether we should disclose this to investors.
– Since we’re pre-revenue, this decision would constrain our ability to pivot and adjust salaries to extend runway. He is the top earner on the team.
– On the other hand, I have complete trust in him. I don’t doubt his commitment or that he would repay the loan, and I believe supporting key leadership in genuine need can be reasonable.
What would be the best approach in this situation? How should we balance personal hardship, leadership support, fairness to stakeholders, and the company’s long-term goals? I’m feeling overwhelmed and could use guidance.
