I am employee #1 in a startup with some substantial equity in it.
Our startup was funded by angel money and I have worked from the beginning for a salary way below market rate. Now, venture round A is coming. I talked with a founder regarding my salary and he said that while my salary will go up, it will continue to be below market rate.
I understand that everything is negotiable and there are no two identical cases.
However, I would be interested to know whether it's a common deal or not (to continue working with a below-market rate after round A funding).
One more thing. I understand the rationale for reduced pay in early-stage startups. (It reduces cash burn rate and makes the startup's runway longer). I am not sure that I understand the rationale for venture-backed startups, though. The burn rate becomes way higher and reduced pay for founders/first couple of employees won't make a dent in the length of runway.
I think it is bad business to not provide at least market rate for a key employee - esp. as it relates to flight risk. The possibility of recouping the lost wages via stock options is uncertain while your fiscal burden is.
Perhaps there is a gap between what your both perceive is market rate. Seek a neutral source for validation, share the information with your manager and have an honest conversation.
Yes, it is common. But, in return, you should expect more in stock/stock options -- remember that you're trading less money now for potentially more money later. If that potential doesn't exist, then why receive less money now?