Abstract
We document new facts on the evolution of founder-CEO compensation in venture capital-backed startups. Having a tangible product (product market fit) is a fundamental milestone in CEOs' compensation, marking the point where liquid cash compensation increases significantly -- well before an IPO or acquisition. Product market fit also coincides with key human capital in the startup becoming more replaceable. Although increases in cash compensation over the firm lifecycle improves the attractiveness of entrepreneurship relative to a contract with at pay, we find that low cash compensation in the early years can still deter entrepreneurial entry. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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