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. 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. Getting someone to join your dream before it is much of anything is an art not a science.. ), and their companys industry. The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. 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! The businesses that are funded between $1M to $2.5M pay their founders above $125K. Biotech and pharma CEOs are paid an average of $161,000 typically because CEOs in those industries tend to be medical doctors, with higher education and opportunity costs associated with running a startup. Richard had just raised his first round of funding. How Much Should You Pay Yourself As A Startup Founder? So, its better to invest $45K and let the additional $5K stay in your bank account. Having the above questions answered will help. Series A CEO Pay Again our During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. There has always been an underlying (unsaid) belief that startup CEOs and founders should have to make personal sacrifices and pour their blood, sweat and tears into their business. How do you Determine Proper Compensation for Startup CEOs and Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding. This came to me at the time I needed it most. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. 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. You have to be able to afford the talent youre recruiting without cutting your financial runway unnecessarily fast for some quick-to-compete cash package. Tax Credit Center - Which of the 700+ Credits Are Best? Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. 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. And, not surprisingly, compensation is one of the most frequent questions. Below is our 2019 study, which we have left online for reference. 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. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. Did we miss something? 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! You may hire an accountant for assistance. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. Track the average number of hours you work and then compute your salary. Do account for salary baseline and tax here. Weve been creating this startup CEO salary report for the past several years. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. 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. On, Stating the obvious, salary needs can vary widely. Come on! Someone that has funded their own company and taken no outside financing might own 100% of the company. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. Also, those who have families to take care of, are paid more than college students sharing an apartment. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. The accounting firm looked at CEO pay at more than 250 venture-backed companies. 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. Get typical startup equity %. The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. While a very small salary may lead you to starve and hamper your productivity, a huge sum will give the impression that you are more interested in filling your own pockets than working for the company. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. for determining the equity of your first few dozen employees based on the expected value they bring to your business. Your employees have options for where they work. Weve kept these previous salary analyses below. 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. 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. How do you determine whats best? 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. However, our research is meant to aid your own, and we are not acting as licensed professionals. Decide how much of their total compensation you would like to pay in cash (AKA their salary). 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. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. You need to assess the current state of your venture properly before determining your salary. 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. Startup Founder Salary Guide: How Much To Pay Yourself? What salaries did startup CTOs earn in 2022? In practice we have found that if you only ask one question, ask that. Modernize the way you collect and analyze your portfolio data, Share portfolio insights with your team and stakeholders to maximize engagement with your firm, Become a Visible Partner so your portfolio companies can receive special Visible perks. Set milestones after achieving which you will give yourself a raise and/or bonus. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. 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.. When the company exited after three The VCs set my salary without discussing or consulting with me (I know, weird, Seed, Series A, Series B, etc.) 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. Non-co-founder COOs at seed-stage startups earn an average salary of 94,500 ($128,000 USD as of writing). 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 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. 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. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Because of this, startup founder salary is a highly debatable topic. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. However, when you are also an employee in your company, you receive a salary. Wow your investors with data-driven updates that drive interaction. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. An interesting perspective. Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. Suppose you have just raised capital and are using it for the development of business. 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. Are you big enough to start on the expansion journey? Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. 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 idealistic view says that startup founders must take risks and should not be rewarded unless their company starts making money. 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.. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). Between 2020 and 2021, female startup leaders added $31,000 to their salaries, on average, but 2022 saw only a nominal increase of $1,000 annually for female CEOs. Tax is one of the most crucial factors to consider when drawing founder salary, especially in mature companies. 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. We have presented you with CEO salary data the last two years. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. 28 2 Jason M. Lemkin SaaStr Fund. The more a CEO pays herself, the less runway available to hit milestones. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. This means the earlier you join, the more diluted you'll become. 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. Do unprofitable companies need to file tax returns? While there is no correct answer to the question, here is my main take-away: it's so critical to be capital-conscious at the seed stage. Read our tips now. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. 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. 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. Transparency and preparation are key. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. 3) Excessive hiring and spending. 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. Profit-generating startups are a rare sight. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. According to our founder and CEO of Kruze Consulting, Vanessa Kruze, this years data indicates that startup CEOs are making around 10% more than last year, which is to be expected since funding rounds increased in size year over year.. This is a crucial incentive; so, outline realistic checkpoints and track them. 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. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. See if you are eligible for a salary or not. Do account for tax. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Resources and best practices to help investors manage and communicate with their portfolio companies. 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. Some families live on that," says VC Sean Owen. The CEO's salary sets a cap for everyone else. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. CEOs of funded startups make many important decisions - including compensation decisions. 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. 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. My prior salary as a VP before the company had been $150,000, and they raised it to $180,000, with a performance-tied bonus. 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. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. If the investment is up to $2.5 million, the CEOs salary should be $125,000. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. This is entirely dependent on the funding and financial instruments a company decides to use. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. The distinction between the two may impact early employee decisions on how they personally value their stock. As weve seen in the past, biotech and pharmaceutical companies tend to have the highest CEO compensation, with seed funded companies paying their Chief Executives $161,000. 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. 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. Just like most couples should discuss important things like money and debt before they are married, its a good idea to talk money and salary before you enter into a marriage with a VC. In 2020, approximately 36% of companies reduced their chief executive compensation during COVID. Having the above questions answered will help. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. The term sheet Expect us to publish future studies on other startup executive pay. We may monetize some of our links through affiliate advertising. One of the most common questions CEOs ask us at Kruze Consulting is: How much should my salary be? Since the Kruze team helps run startups books and payroll, its natural that wed get this question. 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. 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. 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