I recently had a difficult conversation with the founder of a startup looking for a small seed extension investment. I reviewed the company’s performance since their seed round and expressed concern with the unexpected increase in the monthly burn and the shorter-than-expected runway immediately after they closed on their seed round. I discovered that this individual and his co-founder had started taking combined annual salaries of almost $300k. This is a company with less than $400k in the bank and less than 6 months of runway. The company did not disclose the amounts of these salaries in the Use of Proceeds provided during the seed round fundraising process.

I tried to explain to this founder that he and his co-founder were going to blee...