OnStartups

Why we picked it Dharmesh Shah (HubSpot co-founder) makes the exact separation your question needs: salary pays for work, equity is ownership, and the two are separate matters. He says plainly that whether a founder puts in cash or takes less pay should not change their salary, and that if you cannot pay full salary now you should book the gap as a deferred expense item the company owes, not convert it into extra shares. That is the cleanest argument that a modestly-paid co-founder can still hold equal equity.

Startup Founder Compensation: The Good, The Bad and The Irrelevant

From OnStartups by Dharmesh Shah 10 min read

• Salary compensates the role you play today; equity reflects company creation and long-term contribution, so there should be no mechanical link between the two.
• Deferred pay belongs on the books as a company liability (a deferred expense item), where it can be settled at the next financing, not swapped for cap-table shares.
• Whether a co-founder invests cash or draws a smaller salary is a separate question from how much equity is fair, judge equity on contribution.