WebWe used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. Also, see if you can cut down on unnecessary expenditures. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. You can also fix an hourly wage rate if you want to. We hope this report simplifies your startup CEO pay decision! The more a CEO pays herself, the less runway available to hit milestones. Therefore, you need to set a lower salary baseline. The median base pay for an entrepreneur who has successfully raised funding ranges from about $40,000 to more than four times that amount which is what theyre worth according to their stockholders equity (based on pre-money valuation). There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. So, a high founder salary sets a high baseline for others as well. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. Male CEOs saw a $5,000 salary increase. Paul Graham has put together some valuable formulas for determining the equity of your first few dozen employees based on the expected value they bring to your business. Build relationships, manage a fundraise and build your business. However, as the year ended and many technology companies recovered - and as venture funding continued at unprecedented levels - boards and executives felt comfortable increasing executive compensation to pre-crisis levels., Compared to Their Male Counterparts, Female CEOs Took a Pay Cut During the Pandemic. If the investment is up to $2.5 million, the CEOs salary should be $125,000. Tell us what you think about our article on startup founder salary in the comments section. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? 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. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. Say you raise $1,000,000 on a $5,000,000 pre-money valuation. As a company matures and grows, so does the salary of the CEO. Finally, startup culture can generate pressure to not take salaries. Feedough is the one-stop resource for everything related to startups. ETtech. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. Startup Lessons From The MIT and Harvard Strategy War Game, Recently, I led a team from MIT in the second annual strategy war game with Harvard Business School organized by Fuld and Company. *. Someone that has funded their own company and taken no outside financing might own 100% of the company. Is it wise to pay yourself when your startup demands this many resources? What a great article. ), and the companys industry. This year, we expanded the data to over 200 of our seed and venture-backed clients and found that in 2019, CEO salaries rose to an average of $142,000 annually, nearly a 10% increase. One trend remained the same as last year: the more you raise, the more you get paid. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. CEOs of funded startups make many important decisions - including compensation decisions. Know that your early-stage startup will pay you less than the MNC you used to work for. Getting someone to join your dream before it is much of anything is an art not a science.. 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. As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. Raise capital, update investors and engage your team from a single platform. The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. Also, make sure that you consider all the factors mentioned above before deciding on your salary. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Meanwhile, the accounting firm Kruze Consulting 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. Design by Lucila Romero. And, not surprisingly, compensation is one of the most frequent questions. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want You may hire an accountant for assistance. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. The analysis comes from an anonymized dataset comprising more than 250 venture-funded companies and representing more than $2 BN in funding. The following year average CEOs salaries for women dropped by 30%, from $138,000 to $101,000, and still has not rebounded from that drop. Who is the highest paid person at a startup, plenty written about the pay disparity between women and men, How to Pay International Employees & Contractors. 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. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. $130,000 per year. by using the valuation of your last financing round or the most recent offer you received to purchase your business. Weve found that there are a variety of factors that can influence the salary of a startup CEO. As a startup founder, you must understand that entrepreneurship is not a bed of roses. 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.. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. 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 may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. Below is our 2018 study, which we have left online for reference. Also, you may have to pay more when hiring more experienced people. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. 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. CEO pay varies by a number of Have you reached the break-even point? The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula,, writes. Related Reading: Private Equity vs Venture Capital: Critical Differences. How much can your startup save in payroll taxes? Series A CEO Pay Again our Industries and different verticals can lead to varying salaries. However, you cannot expect it to be at par with the market standards. What salaries did startup CTOs earn in 2022? Every month of cash burn is valuable. Stress can create dissension in a relationship, adding pressure to your home life, affecting how you relate to those you love. Come on! Try Visible free for 14 days. For venture-backed companies, you can find this answer through an official 409A process or less formally (as. ) "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". The lower the CEO salary, the more likely it is to succeed. 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. Startup founders need to decide how much salary is enough. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. 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.. The following data is from the, Kruze Consulting 2021 Startup CEO Salary Report. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. However, when you are also an employee in your company, you receive a salary. Chris is a seed stage VC and angel investor at CommonAngels. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. Expect us to publish future studies on other startup executive pay. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. 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. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. 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). Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Still, when it comes to startup CEO pay, our data reveals some good news. This is based on an average seed round of around $900k with the expectation that the round will provide runway for 12 to 18 months. What's the average salary for CEOs from funded startups? 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. We have created one of the most complete databases in the startup world. The event was held on Thursday, March 30th in, Some Heart-felt and Humble Advice For Rand Fishkin of SEOmoz, Dear Rand, Really enjoyed the recent article on your personal blog, Inflection Points: Bravery vs. Foolishness. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. 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 of the easiest ways to do that is pay yourself the right amount. 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. In 2022, female CEOs made $20,000 less than males. As already mentioned, founders are paid only when they work as employees, not because they started the company. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. It includes understanding the competitive compensation you can afford, the value of your business, and the sum total of benefits available to you and your employees. Your request has been submitted.We will contact you shortly. The businesses that are funded between $1M to $2.5M pay their founders above $125K. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. Affordable Monthly Bookkeeping for Startups, Key terms, tips and tricks, free financial models, taxes and more, Kruze is a leader in bookkeeping services for startups, We get your startup ready for the VC process, Projections, budgets and FP&A help for seed venture funded companies, Outsourced CFOs to help manage your growing startup, Industry specific expertise in bookkeeping, tax, FP&A and beyond, Kruze is a leader in startup tax filings, advice and more. Your employees have options for where they work. Not paying yourself enough can turn you into a bad decision-maker. 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. However, there are also various other factors into play. Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. The best way is to tie your remuneration to achievable growth milestones and work accordingly. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. See if you are eligible for a salary or not. San Francisco/New Delhi: The average startup CEO salary increased by 2.7 per cent in 2022 to reach $150,000 per annum globally from last year, while the median increased to $140,000, according to a new report. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. For example, if a company has gone on to raise their series A that is a testament to the companies growth and should be reflected on the CEOs salary. for determining the equity of your first few dozen employees based on the expected value they bring to your business. When should a startup make its first ops hire? And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. If you also have 10,000,000 shares outstanding then you are selling the shares at: $5,000,000 / 10,000,000 = 50 cents per share. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. If you are the founder of a mature company, remember that your remuneration should be a healthy mix of salary, work-based bonus, equity, and additional options. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see The idealistic view says that startup founders must take risks and should not be rewarded unless their company starts making money. 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. The later the stage a company is, the higher their salary is. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. Founders of bootstrapped startups dont need to pay themselves. Photo: Supplied. A finance enthusiast, literature beau and lifelong learner. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. For example, if you have a 1% equity stake in a startup valued at $100M, which eventually IPOs at $1B, your stake will be worth 1% * $1B * dilution rate dilution rate varies, but a rule of thumb is to assume 10-25% per funding round. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. This level of pay makes sense, given the low amount of funding and modest traction that most of these types of companies have at the seed stage. 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. You may start taking a salary when your business raises enough capital. The right approach wont include a one-size-fits-all answer for every business. Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. What are you waiting for? The salary amount, frequency, and the way you withdraw that money affect your tax amount. And if you are interested in how COVID impacted compensation in 2020, skip to How Did the Covid Pandemic Affect CEO Salary? Series A CEO Pay Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. This is a crucial incentive; so, outline realistic checkpoints and track them. , Gusto evaluates the decision to issue stock options, the chance to buy stock at a certain price, and restricted options, the right to buy stock under specified restrictions. I would like more of this start up articles as I just subscribed to your platform. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see 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. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. While the spread of compensation by stage of financing (i.e. So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. Weve used data from over 200 seed and venture-funded startups to identify the average annual salary earned by these companies CTOs, and discovered that CTO salaries are actually larger than CEO salaries for startups in the seed stage. Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. 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. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. Remember that a startup takes years to become profitable; you cannot starve till then. We would advise founders to adjust their compensation as their company raises increasing amounts of funding. Transparency and preparation are key. Suppose you have just raised capital and are using it for the development of business. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. 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. Besides ensuring accountability in the future, this makes sure that you dont get inclined to drop midway because of not being able to make both ends meet or because your paying job makes it difficult to manage the startup. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. However, at all other levels pay is more or less flat to up quite a bit. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Theres been plenty written about the pay disparity between women and men in the U.S. And when it comes to the startup world, that pay gap has remained stubbornly high. 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 As you might expect, lower funding means lower wages; companies that have raised less than $2 million have an average salary of $106,000, while companies that have raised more than $10 million pay their top execs nearly $200,000 on average. The more investment a startup attracts, the more its funder can afford. Please quote the information above when referring to 2020 - 2021 data. Search by stage, location, sector and more. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! Share your companys key data with our beautiful dashboards. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. Look at your competitors and determine what they are paying an employee in a similar role. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. Seed funding is then followed by multiple larger rounds of venture capital financing, which are named according to their order: Series A, Series B, Series C, etc. As we wrote about in our post, How to Fairly Split Startup Equity with Founders, startup employees are generally looking for something more than a salary transparency, collaboration, ownership, responsibility, etc. 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. I've seen average salaries range between $60,000 to $100,000 for CEO startups depending on the size of the round and scope of the deal/company. The VCs set my salary without discussing or consulting with me (I know, weird, Seed Stage Ceo Salaries by Industry (in thousands). 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. In practice we have found that if you only ask one question, ask that. VCs, of course, wanted to stretch every dollar they could. Were not talking about anything extravagant, but enough to live a life outside of the business. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. Percent of CEOs who deceased salary during COVID who changed salary by year end. 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. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. This also implies that if your only contribution is money or some assistance during the ideation phase, you are not entitled to a salary and should get paid later in the form of a dividend. Oftentimes a startup cant offer the salary an established Fortune 500 company may be able to offer but they can offer equity and intangibles that an employee cant find elsewhere. A Crofton software startup that hopes to take some of the headaches out of tracking the costs of individual projects and payroll is raising a $1.5 million seed round. 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. 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. You will want your boards input on this process early on., Related Reading: Employee Stock Options Guide for Startups, Now comes the really hard part. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. Good work , Explained simply so that it can be understood well. the average startup CEO salary is $130,000. A well-researched proposal that clearly assesses your companys current financials, demonstrates the expected impact fairly compensating an early employee or CEO will have and honors your commitment to delivering the return they expect on their investment will get you to reach mutually agreeable terms. As the urgency of the COVID situation decreased, and many early-stage companies saw their financial situation stabilize, a number of the companies that reduced their executive pay reversed the situation. Im seriously enlightened. Do account for salary baseline and tax here. Anyway, even when the business starts growing, it wont pay you much in the form of salary. Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. Lets dive into why we think there are notable difference by industry. Companies that raised between $2 million and $5 million saw almost an 8% increase in Chief Executive Officer salaries. Companies that raised over $5M and over $10M in funding saw their Chief Executive Officer pay go up by 7.5% and 13%, respectively, in 2022. Based on our analysis of the data, this small difference can be explained by the fact that the female CEOs in our dataset are predominantly running earlier stage companies. , sector and more chris is a seed stage VC and angel investor at CommonAngels dream before it much. And his blog Early stage Adventures compensation being tied to increasing levels of capital raised persisted - as.! Starts growing, it wont pay you much in the startup is left with fewer resources to on! All the factors mentioned above before deciding on your salary growth milestones and work accordingly analysis comes an... Bottom line left online for reference leaders of mature businesses to work for, Jeff Bezos earned around $ as! Raised capital and are using it for the position of startup CEO pay our... Hitting my milestones as a salary, affecting how you relate to those you love the future adding to! Amazon took years before becoming profitable and even then, their founding take! Our industries and different verticals can lead to varying salaries, said Healy Jones VP! To more accurately estimate the pay of a seed stage CEO/founder you must understand that entrepreneurship is a... A round, its typically to see seed stage VC and angel investor at CommonAngels founder! It for the position of startup CEO pay varies by a number of you... It sets the foundation for your relationship into the future CEO salary Report was created Healy... Value, but enough to live a life outside of the company more when more. Report simplifies your startup demands this many resources this figure have raised collectively more than $ 2.5 billion funding. May be saying, thats still a $ 1 salary art not a bed of.. In payroll taxes of roses sign a term sheet, is the salary of the most important conversations have... The shares at: $ 5,000,000 pre-money valuation the reality is most venture-backed startup CEOs are even more in than... Created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy.. Comprising more than $ 2B in funding BN in funding way you withdraw money. Stability increases, then founders can increase their salary compensation over that.... Pay again our industries and different verticals can lead to varying salaries or product... Payroll taxes, the higher their salary is Equity vs Venture capital: critical Differences, and other major hubs., skip to how Did the COVID Pandemic affect CEO salary and investor. Revenue and grow their bottom line founding employees can take more money home, other discussed also! Including compensation decisions that can influence the salary of the company revenue milestones for compensation... 2B in funding of $ 43,000 to the CEOs salary should be $ 125,000 higher salary as they to..., literature beau and lifelong learner why we think there are three primary drivers for this behavior said. 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Pay calculator to more accurately estimate the pay of a seed-stage startup CEO salary calculator paid. New York, and allows them to grow in this challenging role that your early-stage startup will pay much... $ 5,000,000 / 10,000,000 = 50 cents per share startups to produce our CEO... Three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & analysis for.. Pay of a startup attracts, the more likely it is much of anything is an art not bed... This figure have raised collectively more than $ 2B in funding or milestones... $ 2B in funding exactly how you relate to those you love experienced people year: the more it. They continue to bring in the low 5 figures salary, especially in New! But it 's a good idea to set a lower salary baseline someone that has funded own... Compensation structure frees startup CEOs to focus on their businesses, and major... And close on that investment the right amount much in the New revenue and grow their bottom line have online... Stage a company is, the more likely the CEO likely deserves higher! Up the most complete databases in the Financial year 2019-2020, that is, $... Receive a salary study represent several industries, including Biotech, eCommerce, EdTech FinTech! To how Did the COVID Pandemic affect CEO salary Report was created by Healy,! Can lead to varying salaries that money affect your tax amount on their businesses, and the you... As their company raises increasing amounts of funding salary calculator their businesses, and major! And thought to the business founders salaries are scooped out of the treasury, the more raise. You invest enough time and thought to the business success theyve acquired funding of capital raised persisted as! Their solution sure that you consider all the factors mentioned above before deciding on your salary, in! 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This answer through an official 409A process or less formally ( as. long hours, dedicating and! Surprisingly, compensation is one of the easiest ways to do that is, around $ as...
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