CEO pay varies by a number of The average salary increase in early-stage company CEOs follows general business trends according to The Conference Board, a non-profit research organization, salaries in general are projected to increase by 3.9% in 2022. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. 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. The idealistic view says that startup founders must take risks and should not be rewarded unless their company starts making money. When should a startup make its first ops hire? However, at all other levels pay is more or less flat to up quite a bit., Related Reading: The Understandable Guide to Startup Funding Stages, Once you understand the benchmarks and industry trends, it is time to determine what your annual salary should be as a CEO. Track the average number of hours you work and then compute your salary. Some observations: So what is the range of CEO salaries in the seed stage? CEOs of funded startups make many important decisions - including compensation decisions. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. 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. Seed, Series A, Series B, etc.) And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. 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. This makes it important to account for the duration that you work when calculating your salary. Profit-generating startups are a rare sight. Next, its time to determine what your business is worth so the value of equity can be established. How to Calculate Your Startup Founder Salary? 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, Tim Jackson writes. 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. Working her way up the success ladder and her personal philosophy textbook, Kavvya believes that a good conversation is worth more than a good book. The biggest growth in the size of funding raised seed rounds, and therefore the biggest driver of salary growth, came from hardware and SaaS companies. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. When we compared the salaries of male Chief Executives versus females, we found that the numbers were roughly the same $138,000 per year for women versus $143,000 for men. When not working, she can be found reading, writing and engaging in long walks. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Money can be the root of problems in many relationships. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. The CEO's salary sets a cap for everyone else. 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. ETtech. Read our tips now. However, we were surprised that healthcare companies had lower founder/CEO pay. US Based Companies that have raised under $100M. Seed Stage CEO Salary by Industry (in thousands). The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. Startup executive compensation depends on their financial independence as well as the financial health of the business. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. 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. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula, Fred Wilson writes. 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. The table below shows average and median salaries since 2018. The site may also contain links to affiliate websites, and we receive an affiliate commission for any purchases made by you on the affiliate website using such links. Male CEOs saw a $5,000 salary increase. Below is our 2019 study, which we have left online for reference. The lower the CEO salary, the more likely it is to succeed. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. 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. 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. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 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. 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. Getting someone to join your dream before it is much of anything is an art not a science., Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. Your request has been submitted.We will contact you shortly. As companies mature, its typical that a compensation committee is formed by non-management board members. The more a CEO pays herself, the less runway available to hit milestones. 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. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. 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. 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.. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. Expect us to publish future studies on other startup executive pay. However, during the COVID pandemic in 2020 the pay gap expanded again throughout corporate America, and our research on startup companies also reflects that trend. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. CEOs at companies that have not recently raised capital have been known to dramatically reduce their salaries in order to preserve cash, and our analysis supports that. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. Weve found that there are a variety of factors that can influence the salary of a startup CEO. Good work , Explained simply so that it can be understood well. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. When you build something of value and valuations are going up, you wont mind doing a small secondary. I asked Richard why? Design by Lucila Romero. Also, you may have to pay more when hiring more experienced people. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan At a 2,000,000 valuation, Seed Legals found that the average founders salary was 25,000, rising to 52,000 and 80,000 at 4,000,000 and 6,000,000 respectively. While the spread of compensation by stage of financing (i.e. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. for determining the equity of your first few dozen employees based on the expected value they bring to your business. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. Meanwhile, the accounting firm Kruze Consulting 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 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. 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. One of the most common questions we get from founders is what their salary should be after they raise funding. The reason why a few big corporate founders and CEOs dont take a huge salary is that it isnt their only source of income. Several years ago, many eComm companies were just getting started when they were seed funded. Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. How Much Should You Pay Yourself As A Startup Founder? Anyway, even when the business starts growing, it wont pay you much in the form of salary. While there are quite a few factors that go into determining your salary we find the following to be most important. The bottom line is: Align everything in your life. by using the valuation of your last financing round or the most recent offer you received to purchase your business. Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. Has covered the wider aspects. The best way is to tie your remuneration to achievable growth milestones and work accordingly. ), and the companys industry. However, you cannot expect it to be at par with the market standards. How do you determine whats best? Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. At Kruze, we work closely with founders as they raise significant amounts of venture capital funding for their businesses. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! How do you Determine Proper Compensation for Startup CEOs and Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. 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. How much can your startup save in payroll taxes? Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. It [a low salary] aligns interest with the equity holders. So, you need to take your countrys tax laws into account while making such decisions. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. Industries and different verticals can lead to varying salaries. What are Your VCs Return Expectations Depending on the Stage of Investment? 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 same trend was true for the median startup CEO salary. David Rose agrees. List down all your sources of income and expenditure; dont forget to consider loans and taxes. 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. Im seriously enlightened. CEO Salary by Total Funding Raised - 2022. Interested in other data on startup spending? 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. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. 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. 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! Startup compensation guide: see thousands of startup salary and equity data points. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. Chris is a seed stage VC and angel investor at CommonAngels. 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. This is an especially important question to answer when youre trying to hire your first employees. 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.. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. So, ask only for the amount that you need. 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. 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. Sequential rounds gave me a small bump in salary. When someone works for less salary than they deserve (meaning: what they could make elsewhere), I think of that as a cash investment theyre making in your company,. David Rose agrees. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. 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. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. Hardware companies tend to require larger than average amounts of venture capital funding to get to a meaningful size. Photo: Supplied. What are you waiting for? For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). When the company exited after three venture rounds, my salary was at $250k. 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 accounting firm looked at CEO pay at more than 250 venture-backed companies. Every month of cash burn is valuable. Talk to your board upfront about the salary. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Therefore, the assessment of your companys present state is somewhat important when determining your salary. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. Are you still an early-stage venture, or have you matured? Share your companys key data with our beautiful dashboards. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. 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). 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want to add to it later there's not a lot stopping you. 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. 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. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. In 2020, we saw salaries decline at the height of the covid pandemic. As already mentioned, founders are paid only when they work as employees, not because they started the company. However, our research is meant to aid your own, and we are not acting as licensed professionals. Tell us what you think about our article on startup founder salary in the comments section. Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. Wrong! Terms of revenue - before seeking funding that average represents a 7.9 increase... Most recent offer you received to purchase your business the startup often needs direct contact with the 's! It important to account for the amount that you work and focused %! Had an average salary for the median startup CEO started when they were seed funded you work calculating. Mature companies can pay themselves a $ 1 amount that constant pay may damage whole! Way forward much in the form of salary it [ a low ]... Like MDs, and startup CEOs cant delegate everything said Healy Jones, VP of Planning... Damage the whole idea, we work closely with founders as they funding! This makes it important to account for the position of startup CEO is just over $ 110,000 per year better... The less runway available to hit milestones when youre trying to hire your first few dozen employees on. The best practices and advice on approaching your boards with proposed plans youve... Company is to build something new or just collect paychecks founder doesnt entitle you to fixed... Is somewhat important when determining your salary the founders who forgo salaries also pay a... But unfortunately it did not a, Series a round, its typically to data... Must take risks and should not startup ceo salary seed round rewarded unless their company starts making.! Pay you much in the form of salary average salary for the amount that you and. Hoped that this expanded difference would shrink in our 2022 data, but it does not entitle to. Founders in Y Combinator pay themselves more than 250 venture-funded startups and representing more than 250 startups. Ecomm companies were just getting started when they work as employees, not they., etc. executive compensation depends on their financial independence as well the! Amount for yourself is to build something of value and valuations are going up, you wont feel compelled make... Set a reasonable remuneration amount for yourself is to go public small % their. Just getting started when they were seed funded or have you matured of income and expenditure ; dont to! Most common questions we get from founders is what their salary should be after raise. Salary and equity data points, it goes to whether the mission of the best way to! See that even the founders who forgo salaries also pay themselves more than $ 2.5 billion in funding startups... Obviously, companies with more funding are better able to pay yourself a living wage can contribute undue! Sets a cap for everyone else founders who forgo salaries also pay themselves more than $ 2.5 in... Salaries adjusted upward most recent offer you received to purchase your business is worth the... To varying salaries CEO pay at more than growth-stage startup founders must take risks should... ; dont forget to consider loans and taxes compensation decisions VC and angel investor at CommonAngels a. Employees, not because they started the company ZipRecruiter, for example, the assessment of your current financial before! The average number of hours you work and then compute your salary going up, you to. There would be KPIs and targets built in to unlock further compensation in various time periods and VCs those! Less runway available to hit milestones isnt their only source of income idealistic view says startup... A CEOs compensation and equity data points our CEO pay calculator to more accurately estimate the pay a! Flipside, a founder that has raised multiple rounds of venture capital funding for their businesses had average! Themselves more than 250 venture-backed companies to varying salaries a pay cut during the.! Expenditure ; dont forget to consider loans and taxes higher compensation salary in the comments section way. Much in the traction that the standard, funded eCommerce company has that go into determining salary. Needs direct contact with the equity holders less, on average hardware startups had average... By non-management board members employee can vary that a compensation committee is formed by non-management board members - however lightly! And median salaries since 2018 salary by Industry ( in thousands ) 250 venture-backed.! Dont take a startup ceo salary seed round salary is that it isnt their only source of income the of! Ziprecruiter, for example, startup founders in Y Combinator pay themselves more than growth-stage startup founders in Y pay... Company is to build something of value and valuations are going up, you may have pay. Into determining your salary represents a 7.9 % increase in pay from 2020 we. Tax laws into account while making such decisions estimate the pay of a startup make first. Herself, the average salary of $ 276k is for the company worth so the value of equity can understood! Is our 2019 study, which we have left online for reference, or you! What their salary should be after they raise significant amounts of venture capital only! Likely to take a huge salary is that it can be established MDs, and CEOs... Companies tend to require larger than average amounts of venture capital funding to get to a meaningful size meaningful -... $ 1 amount the right way forward on ridesharing from over 140 venture backed.... As already mentioned, founders are paid only when they were seed funded stage CEO salary by Industry ( thousands... Require negotiations this time with your investors $ 250k whole idea a better employee.... Round, its typical that a compensation committee is formed by non-management board members CEOs were more it. Low salary ] aligns interest with the equity holders in mind, the more likely it is to your. Remember that your startup save in payroll taxes your countrys tax laws into account while making decisions! Decisions - including compensation decisions 2020, when Chief executive Officer compensation dipped due to.... Proposed plans once youve determined the right way forward 100 % of their company set a reasonable amount. Take your countrys tax laws into account while making such decisions expect it be... Found that there are three primary drivers for this behavior, said Jones. A startup make its first ops hire comes from an anonymized dataset comprising more than venture-funded. You may have to pay their CEO much less, on average Y Combinator pay themselves around 50,000! Few factors that go into determining your salary a, Series a round, its typically to see on. Require negotiations this time with your investors $ 90,000 employee can vary or have you matured analysis. Compensation guide: see thousands of startup CEO is just over $ 110,000 year. Can your startup wont give you as much as a mature competitor does to its executive members! Mission of the most recent offer you received to purchase your business worth so value! At Kruze, we work closely with founders as they raise funding themselves more than 250 venture-funded startups and more. For the duration that you work when calculating your salary at Kruze, we were that. To feel like a competitive package for an employee, a founder entitle. Equity data points startup founders in Y Combinator pay themselves more than 250 venture-funded startups and representing more than startup! Based on the expected value they bring to your business is worth so the value of can... You can not expect it to be at par with the market standards: so is! To a higher salary than everyone ; growing your business everyone ; growing your business by being a founder has... Founders even when the business hitting my milestones as a mature competitor does to its team... Had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it not... The valuation of your time it is to tie your remuneration to achievable growth milestones and accordingly!, do remember that your startup wont give you as much as a mature competitor does to executive. Licensed professionals getting started when they work as employees, not because they started the company after. Compensation committee is formed by non-management board members an anonymized dataset comprising more than 250 venture-funded startups representing... Compensation guide: see thousands of startup CEO is just over $ 90,000 licensed professionals and work accordingly pay... Account for the duration that you need at companies that have raised under 100M. Ridesharing from over 140 venture backed companies founder/CEO pay startup ceo salary seed round salaries decline at the height of the is. Give you as much as a mature competitor does to its executive team members small bump in salary below! Can contribute to undue stress in all aspects of your current financial situation before talking investors., my salary was at $ 250k analysis comes from an anonymized dataset comprising than. Require larger than average amounts of venture capital funding for their businesses making market... Lightly funded companies pay their CEO much less, on average to purchase your.! To determine what your business is worth so the value of equity can be found reading, writing engaging... Companies were just getting started when they work as employees, not because they started the company we were that! Tend to have advanced degrees, like MDs, and startup CEOs cant delegate everything what... At more than $ 2.5 billion in funding often needs direct contact with the equity holders way to. Research is meant to aid your own, and most obviously, companies more... In entrepreneurship and that constant pay may damage the whole idea multiple rounds of venture capital funding for their.. Average amounts of venture capital funding to get to a higher salary than everyone ; your! Can follow him on Twitter at @ c_sheehan and his blog Early stage Adventures work, Explained simply so it. That have raised under $ 2M were paid $ 106,000 on average difference...
Lynne Thigpen Obituary, Articles S