Of course, you still want to be aligned with the VCs, but selling 1% of your stock or doing a secondary sale definitely relieves some additional pressure. Yes! Meanwhile, the accounting firm Kruze Consulting The reason why a few big corporate founders and CEOs dont take a huge salary is that it isnt their only source of income. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. This calculator will show you an estimated range of compensation for a startup CEO based on the amount of funding that the company has raised, the stage of the company (i.e. Startup CEO salary breakdown by funding stage, How to determine startup employees salary, The Understandable Guide to Startup Funding Stages, How to Fairly Split Startup Equity with Founders, Employee Stock Options Guide for Startups, Private Equity vs Venture Capital: Critical Differences, Developing a Successful SaaS Sales Strategy, This Week in Hiring & Talent May 19th, 2022, This Week in Hiring & Talent May 5th, 2022, Creating Momentum in Your Fundraise with Brett Brohl, The Supply & Demand of VC with Kenn So of Shasta Ventures, The State of Revenue Retention with Patrick Campbell, CEO of ProfitWell, How To Manage Remote Teams: 16 Tips From a Remote Startup. Now, if they come to know that you pay yourself almost at par with the industry standards while they have to work for less for a company that isnt even theirs, it may lead to resentment. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. When comparing male and female CEOs, female leaders took a 30% reduction in salary at the peak of the pandemic ($101,000 compared to $138,000 in 2019) while their male counterparts saw an increase ($146,000 compared to $143,000 in 2019). In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. Early-stage companies, as well as all other companies, should evaluate their policies to determine how the gender pay gap increased in the last three years, and see what steps they can take to better support female leaders.. Has covered the wider aspects. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. According to Kruzes data, after completing their research, the average CEOs get roughly 146,000 dollars as a salary. Remember that every dollar you receive could have been used for your companys growth. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. My team and I handle payroll, taxes and the accounting for seed and venture-funded startups, and we analyzed CEO pay at over 125 startups; most of them in Silicon Valley. For venture-backed companies, you can find this answer through an official 409A process or less formally (as. ) The largest growth appeared among companies who raised between $5-10 million among this group, average CEO salaries jumped 12% from $145,000 in 2018 to $162,000 in 2019. Series B CEOs are paid, on average, about $250,000 to $260,000 - but once again, there is a tremendous range of compensation based on the industry, amount of funding raised, etc. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. Some families live on that," says VC Sean Owen. In fact, the VCs will insist on this. ), and their companys industry. The median base pay for an entrepreneur who has successfully raised funding ranges from 41% of the CEOs who had their salaries reduced later increased them by the end of the year, while 47% kept their salaries flat - and 13% decreased their compensation further. The following steps will give you a broad idea of how to go about it. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Not paying yourself enough can turn you into a bad decision-maker. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. Note that our dataset is only for funded companies, with the average company in this analysis having raised between $7 and $8 million in venture and seed financing. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. At the seed stage you should have a reasonable salary based on your location. The average startup founder salary in the seed round is $100,000. Profit-generating startups are a rare sight. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. the average startup CEO salary is $130,000. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. When not working, she can be found reading, writing and engaging in long walks. One of the most common questions we get from founders is what their salary should be after they raise funding. Earlier this year, this issue presented itself when a client was the lead investor in a Series A round of about $2MM at a $4MM pre-money. Having the above questions answered will help. Of course, read our answers to the two logical follow up questions: When can a startup CEO take a raise - well tell you what the data says! Based on what I see in the market, I'd say the range for founder CEO salaries after a seed round is between $60k and $150k, with the average/median in the range of $90k - $110k. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. They earn through their investments and other personal revenue-generating activities. Do account for salary baseline and tax here. Have you just started developing your MVP, or is your business already in place? For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. That said, its unlikely in most cases for non-founders to receive more than 5% of the business (bringing on a CTO can be the one common example of exceeding this mark). This has long been an acceptable salary range depending on the cost of living adjustments and the value of the business, and as long as the fledgling business isnt truly desperate for cash. One trend remained the same as last year: the more you raise, the more you get paid. Search by stage, location, sector and more. The role of the compensation committee can vary, from making recommendations to the board on executive salaries, bonuses (and option grants) to having authority to set executive salaries. In practice we have found that if you only ask one question, ask that. Seed stage salaries for companies that have raised less than $2 million in total funding seem to be still recovering from the COVID crisis, and the overall pay there is down from $120,000 in 2019. How Much Should You Pay Yourself As A Startup Founder? Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. In 2022, chief executives at early-stage companies that have raised over $10 million in financing were paid just under two hundred thousand dollars a year, $199,000. The companies we used to determine this figure have raised collectively more than $2B in funding. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. $276k Is the Median Startup CEO Salary for a Very Successful Company. So, its better to invest $45K and let the additional $5K stay in your bank account. See our full report for CEO pay bands. Startup Chief Executives with the highest annual salaries tend to be running companies that have either recently raised capital, or are performing very well and have not raised money for an extended period of time. Staying within a competitive range is needed to appease your current board and attract new investors (for example Peter Thiel has publicly stated he passes on any startup saying its CEO more than $150,000). As a CEO, you also want to examine your own motivations in a negotiation, especially if you are attempting to increase your salary or equity stake. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. That comes in the form of common stock. Looking by year, for every dollar in salary men earned, female CEOs earned: The setback in salaries for female startup CEOs is troubling, especially considering that the market was much closer to parity in 2019, prior to the COVID crisis, said Vanessa Kruze, CEO of Kruze Consulting. Set milestones after achieving which you will give yourself a raise and/or bonus. Did we miss something? Below is our 2019 study, which we have left online for reference. As already mentioned, founders are paid only when they work as employees, not because they started the company. Male CEOs saw a $5,000 salary increase. This compensation varies a lot by industry and by amount of funding raised, so use our calculator to estimate what is a reasonable compensation spread for your particular situation. David Rose agrees. So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. The table below shows average and median salaries since 2018. Your salary also depends on the amount you have raised. We have created one of the most complete databases in the startup world. Get typical startup equity %. Have you reached the break-even point? For the most lightly-funded tech companies, the concept of ramen profitability encourages founders to take no salary to keep expenses minimal and make the company more attractive to investors. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. hot space in VC leading to more companies being funded with more money., , as above you can see that the capital raised greatly impacts a startup CEOs salary., Companies that have yet to prove product-market fit so likely as a lesser salary, Similar to $0-$2M this range has yet to give investors and board members the full confidence of a large exit, On the path to a larger exit and team warranting a larger salary., Next, its time to determine what your business is worth so the value of equity can be established. Breaking the numbers down by industry, on average: Hardware company CEOs are near the bottom of the pack, with an average salary of $112,000 per year. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. Ecommerce companies can be started and built with individuals and smaller teams leading to a smaller salary, A hot space in VC leading to more companies being funded with more money.. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. Resources and best practices to help investors manage and communicate with their portfolio companies. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. It is typically seen that founders who have alternate sources of income are not paid as much as the others. Money can be the root of problems in many relationships. You may start taking a salary when your business raises enough capital. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. We may monetize some of our links through affiliate advertising. Every month of cash burn is valuable. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. On one hand, you need to hire the best talent, retain them, and incentivize their performance to have the right team in place to grow. Interested in other data on startup spending? Another influencing factor is how long the company has bootstrapped prior to the seed round and how much were the founders getting paid during this time. So, you need to take your countrys tax laws into account while making such decisions. Read on to see the average CEO salary, detail on how CEO pay differs as companies raise increasing amounts of capital, salary data by company industry - and more! Design by Lucila Romero. that a founder CEO will be in the 5-20% range, a founder CTO in the 2-10% range, other co-founders between 3-7% and non-founder early employees between 0.5-5%. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. For co-founder COOs, these figures were roughly 71,000 ($96,000 USD) for seed-stage companies, and 125,000 ($169,000 USD) for Series B companies. Thiel was hesitant to answer, but eventually said $100-125k. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. Startup executive compensation depends on their financial independence as well as the financial health of the business. Remember that a startup takes years to become profitable; you cannot starve till then. 28 2 Jason M. Lemkin SaaStr Fund. By the way, to see some survey data on what other people think the founder/CEO salary should be, check out the OnStartups poll on founder salary. As such, their founders and CEOs, at least at the most early stages, often draw lower than average salaries in 2022, $112,000 per year. And, of course, you have well-known founders like Jeff Bezos and Mark Zuckerberg who took little or no pay and focused on company equity for their compensation.. Whenever founders raise a round of finance, the question becomes what the hell should I be paying myself. Its one of those rare things you cant really go to your board or advisors with. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. Non-co-founder COOs at seed-stage startups earn an average salary of 94,500 ($128,000 USD as of writing). How does CEO pay vary by the amount of venture capital raised? Try Visible free for 14 days. *. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. US Based Companies that have raised under $100M. As noted in Business Insider here, Seth Levines observation on CEO salary in 2012 still holds true compared to the 2019 Kruze salary report data above: early on companies that have raised $500,000 or less cap out at $75,000, companies that have raised $1 million or less pay between $75,000-$125,000, companies that have raised between $1-$2.5 million pay closer to $125,000. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. The firm handles all things Accounting, Tax, Finance, & HR: interim CFO Consulting, financial modeling, annual taxes, venture debt consulting, 409A reporting, bookkeeping, AR/AP, and Seed/Series A/B Fundraising Preparation. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? The term sheet Because of this, startup founder salary is a highly debatable topic. When two sides in a negotiation cant come to a deal, its often because the two sides dont have a clear enough view of what each others alternatives are if they cant agree,. If the CEO is also a founder, it will be much easier to manage their annual salary because the value of their compensation package will likely lean much heavier toward equity than cash. VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. Richard had just raised his first round of funding. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. David Rose agrees. Expect us to publish future studies on other startup executive pay. According to the Foundry Group Venture Capitalist, Seth Levine, the companies that have raised $500K usually cannot pay their founders more than $75K while the ones raising $1M pay them between $75K and $125K. Every year we analyze CEO pay at hundreds of early-stage companies to try to help our clients set reasonable salaries and compensation for themselves. The distinction between the two may impact early employee decisions on how they personally value their stock. Previously. Founders of funded startups may start to pay themselves provided that they are on the payroll. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. I'm not sure that it's a leading predictor of success, but it certainly is a very important aspect at the seed stage because cash is so precious. So, a high founder salary sets a high baseline for others as well. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. It seems that companies pay 8-12% of their funding to their founders. Visit kruzeconsulting.comto learn more. Finally, startup culture can generate pressure to not take salaries. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. Getting someone to join your dream before it is much of anything is an art not a science.. Many CEOs scrambled during COVID to try to stretch their companys runway by slashing costs, including their own pay, said Scott Orn, COO of FP&A at Kruze Consulting. While the spread of compensation by stage of financing (i.e. Therefore, the assessment of your companys present state is somewhat important when determining your salary. So, if your only contribution is money and/or some assistance during the ideation phase, you dont get a salary. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. Wow your investors with data-driven updates that drive interaction. The later the stage a company is, the higher their salary is. Earlier this year, this issue presented itself when a client was the lead investor in a Series A round of about $2MM at a $4MM pre-money. An interesting perspective. We hope this report simplifies your startup CEO pay decision! Most early-stage, non-CEO founders are often paid about the same amount as the CEOs, so founders can use this to estimate compensation as well. If it is set at a high level, you end up burning a whole lot more money. Female startup CEOs continue to lag behind their male counterparts in salary, and their average paycheck is still 3.7% below the peak in 2019. Kruzes clients have raised over $500 million in venture capital in the past 12 months, and are market leading Saas, software, eCommerce, eHealth and FinTech startups. It [a low salary] aligns interest with the equity holders. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. Please quote the information above when referring to 2020 - 2021 data. The firm, which runs payroll, accounting, tax, finance, and HR for funded startups, was able to get this figure after performing a series of analyses on CEO salary at approximately 250 seed and venture-funded startups. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. A portion of that money goes to the government. Per month. You dont want to walk away from a tough negotiation having damaged your relationship with investors on your own compensation or shown irresponsibility when proposing packages for early employees. The value you settle on will matter a great deal to your first employees and as it changes, so will the process in how you doll equity in the future. Salaries ranged from the 25th percentile of $43,000 to the The CEO's salary sets a cap for everyone else. This continues a corporate trend that began in 2019. The more investment a startup attracts, the more its funder can afford. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. Previously Brad Feld has argued that a founder CEO will be in the 5-20% range, a founder CTO in the 2-10% range, other co-founders between 3-7% and non-founder early employees between 0.5-5%. This can lead to less time with your loved ones, which can lead to resentment. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. The distinction between the two may impact early employee decisions on how they personally value their stock. You will want your boards input on this process early on., Now comes the really hard part. As noted in, , Seth Levines observation on CEO salary in 2012 still holds true compared to the 2019 Kruze salary report data above: early on companies that have raised $500,000 or less cap out at $75,000, companies that have raised $1 million or less pay between $75,000-$125,000, companies that have raised between $1-$2.5 million pay closer to $125,000. Some observations: So what is the range of CEO salaries in the seed stage? On, Stating the obvious, salary needs can vary widely. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. In my experience in New York, for seed round startups, founder salaries tend to be in the range of $75,000 $125,000, with the occasional outlier in both directions. Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. Wrong! Startup Founder Salary Guide: How Much To Pay Yourself? $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. Also, see if you can cut down on unnecessary expenditures. In other words, these companies were all tremendously successful up to the point of going public, yet the CEOs salary was still lower than that weve seen for some Series A startups, especially on the West Track the average number of hours you work and then compute your salary. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. Read on to see the older Startup CEO Salary Reports that weve published over the years, plus some more of our commentary on how founders should approach their compensation. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. Thankfully, that thinking has evolved. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. The VCs set my salary without discussing or consulting with me (I know, weird, And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. Founders in those industries tend to come with academic credentials, and previous experience, that founders in other industries dont always have (M.D., PHD), and thus warrant a higher annual salary. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Many slashed their compensation to zero. And if you are interested in how COVID impacted compensation in 2020, skip to How Did the Covid Pandemic Affect CEO Salary? ), and the companys industry. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. While there are quite a few factors that go into determining your salary we find the following to be most important. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. And since there is a persistent deficit in the number of female-founded startups that successfully raise venture capital, narrowing the pay gap for early-stage CEOs is a nice first step but not nearly enough. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. The Columbus, Ohio-based startup also recently closed an oversubscribed $4M series seed round led by Tamarind Hill, a venture capital firm investing in tech-driven While the overall average emerging company CEO salary moved up, there is a bifurcation in salary trends based on how much capital the companies raised. Seed, Series A, Series B, etc. This has remained fairly consistent year to year as the space is more mature. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. Some families live on that," says VC Sean Owen. The increase in CEO pay for 2022 brings back the overall, up and to the right trend that weve observed in the average CEO (and founder) pay since 2018. We hope this data will help other early-stage businesses prepare their budgets! Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. You are not in the position to fully compensate your employees so you give them sweat equity and motivate them by assuring that will be duly paid once the business starts generating returns. Know that your early-stage startup will pay you less than the MNC you used to work for. Startup compensation guide: see thousands of startup salary and equity data points. And, while we did see many of startups with male leaders also reduce their pay, we arent quite sure why females were more likely to take a pay cut during the pandemic.. Industries and different verticals can lead to varying salaries. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. Very few entrepreneurs have the courage to be that transparent. In 2019, we analyzed 125 startups. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. Providing direction to the company, and Jack Dorsey taking a salary in 2020 guidance on what is market salaries... Contribution is money and/or some assistance during the Pandemic Biotech and Healthcare industries to. Does to its executive team members left with fewer resources to function on sign the term sheet and on. Startup executive compensation depends on the other hand, Mukesh Ambani paid himself INR 4.36 crores in seed! 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