Should software engineer founders pay themselves market rates?

Sure if they need that pay to keep going, recent relevant discussion https://news.ycombinator.com/item?id=30514209 top comment at this time https://news.ycombinator.com/item?id=30514651 says "Pay yourself as much as you need to not be distracted by anything that would slow you down."

Yes they should pay themselves market rates (for their skillset, eg if they could get 200k as a dev). The founder's bargain is not a great one otherwise, you are getting a relatively small budget to pull off a miracle with a performance incentive that has a small chance of being very good. If you were doing something similar in an internal role, you would probably have more budget and safety net, and have to work less.

Not to imply it isn't worth it, but a lot of the time, especially with single digit millions funding rounds, it's a ton of work and personal responsibility for not that much money or budget (lots of managers would control way more). VCs are getting a good deal if they think you're going to work for anything materially below market.

In my opinion you only get market rates if you can produce market value, and this heavily depends on the ecosystem you have to build things on.

For example, one can created huge value working at Netflix and Netflix pays top dollar for this. However, the value the engineer produces depends on the number of subscribers Netflix has, the content that they are able to provide, and the infrastructure to stream high quality videos.

The same engineer cannot produce the same market value if this person works by themselves in a start up. At the early stages it makes sense therefore to pay the rate that keeps the engineer productive, because the value they produce at early times is zero.