The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. Back in 2008, Peter Thiel did an interview at TechCrunch50 in which he said one of the most important things he looks at before investing is how much the CEO is getting paid. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. But youre hiring unusual people to take this ride with you and understanding the package that will satisfy their ambition will also likely require rounds of negotiations and probing questions from you about their true motivations. Professionally, you want to be on top of your game when it comes to making the right decisions for your company. Some families live on that," says VC Sean Owen. Answers to hundreds of startup accounting, finance, HR and tax Q's, Expert startup accounting advice (and more), Top Financial Tips and Resources for Startups, Tips for setting up scaleable financial systems, iCals with federal, state and local compliance deadlines, See more of the best pitch decks ever used, After working with hundreds of startups, we picked the best credit cards. The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. Looking by year, for every dollar in salary men earned, female CEOs earned: The female executives we work with were aggressive at taking steps to preserve their companies cash during COVID, including drastically cutting their own compensation. We hope this report simplifies your startup CEO pay decision! When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. The following data is from the Kruze Consulting 2021 Startup CEO Salary Report:, While the industry certainly has an impact on a CEOs salary the stage and capital raised seem to have the largest impact on a startup CEOs salary, Using the same report, Kruze Consulting 2021 Startup CEO Salary Report, as above you can see that the capital raised greatly impacts a startup CEOs salary., Presumably, as a startup raises more capital they are growing as a company. We may monetize some of our links through affiliate advertising. Weve found that there are a variety of factors that can influence the salary of a startup CEO. Within what will feel like an incredibly short, stressful period of time, the startup needs to build product, figure out the market, and get some initial traction. 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%. For 2021, the average startup CEO salary is now up to $146,000, an increase of $4,000 from 2019 (almost a 3% increase) or 5% up from the COVID crisis of 2020. The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. Foundry Group venture capitalist Seth Levin voiced the rule: Companies that have raised $1 million or less should pay the CEO between $75,000 and $125,000 a year. Seed, Series A, Series B, etc. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. Hardware companies tend to require larger than average amounts of venture capital funding to get to a meaningful size. Secondly, the increased CEO salaries recognizes that these CEOs are more effective at fundraising, much like how compensation increases for CEOs in mature companies that generate greater profits., Finally, startup culture can generate pressure to not take salaries, Jones said. VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. How to Calculate Your Startup Founder Salary? Search by stage, location, sector and more. In fact, the VCs will insist on this. Thanks for the article. 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. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. 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! 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. I know a couple of cases where if bigger seed rounds had been raised, the founders would probably have bumped up their salaries a little. 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. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. 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. 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. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! The companies we used to determine this figure have raised collectively more than $2B in funding. Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. Design by Lucila Romero. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. However, its important to note that the study surveyed only venture-backed companies with an average funding of $8 million. Below are some of the factors that may influence a startup CEOs salary: With the financial stress that comes with running a startup, the last thing a startup CEO or founder should be worrying about is how theyre going to live day-to-day. However, there are also various other factors into play. Very few entrepreneurs have the courage to be that transparent. 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. Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and This means the earlier you join, the more diluted you'll become. Software startup Hudled, which has designed dashboard for growing companies to track and optimise their software stack, has raised $640,000 in a seed round as it officially launches the product and looks to expand into the US. 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. US Based Companies that have raised under $100M. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. E-commerce founders saw a significant increase over last year, with an average salary of $141,000 presumably because the sector has seen a great run of successful results, partially due to a downtick in the retail sector and a customer focus toward buying online. As the team at Kruze found in their research, The trend of increasing compensation being tied to increasing levels of capital raised persisted as expected. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. The best way is to tie your remuneration to achievable growth milestones and work accordingly. On, Stating the obvious, salary needs can vary widely. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". Seed Stage Ceo Salaries by Industry (in thousands). The right approach wont include a one-size-fits-all answer for every business. Interested in other data on startup spending? Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. 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. The following is a guest post by Chris Sheehan. How long will this last us? Also, while deciding your pay, you need to account for the source of investment, that is, where the money is coming from your personal account, investors pockets, or the revenue generated by the company. So, a high founder salary sets a high baseline for others as well. In 2019, we analyzed 125 startups. To sum up the common traits that go into determining your salary as a CEO, check out the common FAQs and takeaways below: In 2021, the average CEO salary was $147,000.At the end of the day, it is entirely dependant on the business, industry, and lifecycle. In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. What are Your VCs Return Expectations Depending on the Stage of Investment? Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. I asked Richard why? For instance, in the United States, IRS treats profit from your business the same as personal income when you own a sole proprietorship or a joint venture. 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. If the investment is up to $2.5 million, the CEOs salary should be $125,000. ), and the companys industry. Good work , Explained simply so that it can be understood well. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. What Salaries Did Startup CEOs Earn in 2022. At the seed stage you should have a reasonable salary based on your location. Brex vs Ramp - Which card is best for startups? As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. The businesses that are funded between $1M to $2.5M pay their founders above $125K. When not working, she can be found reading, writing and engaging in long walks. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. As we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. How to Rebalance Ownership Between Founders, Kruze is a leader in accounting services for startups. 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. 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. So, ask only for the amount that you need. 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. 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. Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). Profit-generating startups are a rare sight. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. Therefore, paying founders doesnt seem sensible. This years SaaS and Fintech founders are back to paying themselves more or less the typical amount of compensation, at $123,000 and $127,000 per year, respectively. 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. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). As companies mature, its typical that a compensation committee is formed by non-management board members. 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. Related Resource: How to Fairly Split Startup Equity with Founders, In their helpful guide on employee equity, 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. Some observations: So what is the range of CEO salaries in the seed stage? One of the easiest ways to do that is pay yourself the right amount. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? Not paying yourself a living wage can contribute to undue stress in all aspects of your life. 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. 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. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Having the above questions answered will help. However, our research is meant to aid your own, and we are not acting as licensed professionals. Determining how to properly compensate employees at a startup is also a tricky task. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. It is typically seen and suggested that founders start small and raise their salaries after their business hits a few specified milestones or after each round of funding. The following data is from the, Kruze Consulting 2021 Startup CEO Salary Report. David Rose agrees. SaaS was the top performing industry by CEO salary in 2020. Startup executive compensation depends on their financial independence as well as the financial health of the business. Now that you know how important it is to draw a salary, you have to figure out the amount as well. Come on! 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. Get typical startup equity %. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. Because of this, startup founder salary is a highly debatable topic. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. 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. Were not talking about anything extravagant, but enough to live a life outside of the business. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. However, at all other levels pay is more or less flat to up quite a bit. Wrong! The distinction between the two may impact early employee decisions on how they personally value their stock. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. Are you big enough to start on the expansion journey? Granted, for the later stage companies its a different story while these CEOs tend to make more, there are fewer female CEOs in this group. Startup founders need to decide how much salary is enough. The CEO's salary sets a cap for everyone else. CEO pay varies by a number of Secondly, the increased CEO salaries recognizes that these CEOs are more effective at fundraising, much like how compensation increases for CEOs in mature companies generating greater profits. But early employees will be attracted to your business in part because of the long-term payoff. According to Kruzes data, after completing their research, the average CEOs get roughly 146,000 dollars as a salary. Share your companys key data with our beautiful dashboards. Leading into 2021, the female leaders moved their salaries up over $30,000 - however, the gap between male and female CEOs salaries did not close vs 2019. 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.. Also, make sure that you consider all the factors mentioned above before deciding on your salary. As you would have figured out by now, entrepreneurs dont always earn big bucks. This continues a corporate trend that began in 2019. One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. This makes it important to account for the duration that you work when calculating your salary. Every month of cash burn is valuable. 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,. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. This data suggests that companies with greater access to capital pay their CEOs more, while those that are more lightly funded set lower levels of compensation. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. 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. So, if a founder or cofounder works as their startups CEO, COO, CTO, CMO, or in any other role, they deserve remuneration for their services. Resources and best practices to help investors manage and communicate with their portfolio companies. How To Make An Infographic: Step-By-Step Guide, 10 Proven Ways To Make Money With Your Car, Presentation Tips: 11 Simple Yet Effective Strategies. 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. Your employees have options for where they work. 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. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. This is entirely up to the startup or founder. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). Here is a breakdown by Series A, Series B, etc. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. 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. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. Until they have meaningful traction - in terms of revenue - before seeking funding according to Kruzes data, completing. Between the two may impact early employee decisions on how they personally value their stock and in 2020 founders... But the times were different draw a salary amounts of venture capital funding get. Or just collect paychecks the places to start on the stage of investment compensation Rate for equity dynamic. 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