How Much Of Your Own Money Should You Put Into Your Startup?

It depends on how much.

One way or another, every founder is going to invest a bunch of her or his own money, at least a tiny bit, to get a startup off the ground. As well as a ton of soft costs and lost income.

Where I get worried as an investor is if it’s too much as a percent of her savings. If a founder has made, say, $500,000 from being early at Salesforce or Uber or wherever, and puts all of it into the startup … I worry they may make the wrong decisions because they are too worried about losing all their savings.

It may be OK. I’ve done it before — I signed a $750,000 full-recourse promissory note in my first start-up, which far exceeded my savings at the time.

Some “skin in the game” is important. It aligns interests.

But usually, when I invest, part of the reason is to de-stress the money side of things. I want the founders to start taking a salary, at least a modest one, if they haven’t. I want the founders to make that extra hire. I want to put them in a position where they can grow faster.

I don’t want them worrying that their entire life savings could go up in smoke. That doesn’t help you grow faster.

That adds risk to my investment. I don’t like it.