CEO pay varies by a number of Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. 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. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. You are probably eligible, Hiring veterans and felons? The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. 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. The VCs set my salary without discussing or consulting with me (I know, weird, 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. With over $10 billion in funding raised by our clients, Kruze is a leader in helping funded startups with accounting, tax, finance and HR strategies. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Lets dive into why we think there are notable difference by industry. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. As companies mature, its typical that a compensation committee is formed by non-management board members. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. This is a crucial incentive; so, outline realistic checkpoints and track them. Our analysis backs this up, but its important to mention that there is no single factor that influences this decision. 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. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. The lower the CEO salary, the more likely it is to succeed. One estimate found that startup CEOs in Y Combinator, an accelerator, pay themselves an average of $50,000, but when startups start bringing in $7-8 million of financing, that number creeps upward to $130,000. 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. ), and the companys industry. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage company! 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%. With that being said a salary is what ultimately can be the factor that determines if an ideal candidate will jump ship to join your company. So, if your only contribution is money and/or some assistance during the ideation phase, you dont get a salary. What's the average salary for CEOs from funded startups? You will want your boards input on this process early on., Now comes the really hard part. . We hope this report simplifies your startup CEO pay decision! When not working, she can be found reading, writing and engaging in long walks. Finally, startup culture can generate pressure to not take salaries. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. See if you are eligible for a salary or not. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. Say you raise $1,000,000 on a $5,000,000 pre-money valuation. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. 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, Jason Cohen writes. 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. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. The table below shows average and median salaries since 2018. CEO Salary by Total Funding Raised - 2022. 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: And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. You dont want to walk away from a tough negotiation having damaged your relationship with investors on your own compensation or shown irresponsibility when proposing packages for early employees. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Is it wise to pay yourself when your startup demands this many resources? Design by Lucila Romero. As great as it feels to receive money out of your own business, it is usually impractical and will just lead to a portion being lost in taxes. 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. 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. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. Not only does a market salary enable you to cover the cost of living and a good housing arrangement, it also ensures the financial stress doesnt lead to bad decisions at the company. 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. 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. 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. If the investment is up to $2.5 million, the CEOs salary should be $125,000. Case Study. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. 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. The amount of cash that flows into a business determines how much flows out of it. 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. The firm handles all things Accounting, Tax, Finance, & HR: interim CFO Consulting, financial modeling, annual taxes, venture debt consulting, 409A reporting, bookkeeping, AR/AP, and Seed/Series A/B Fundraising Preparation. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. On, Stating the obvious, salary needs can vary widely. This continues a corporate trend that began in 2019. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. Founders of bootstrapped startups dont need to pay themselves. When the company exited after three In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. 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. 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. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. Tax is one of the most crucial factors to consider when drawing founder salary, especially in mature companies. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). I asked Richard why? You need to assess the current state of your venture properly before determining your salary. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. Start your search now on this startup guide. Please quote the information above when referring to 2020 - 2021 data. 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. 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. The analysis comes from an anonymized dataset comprising more than 250 venture-funded companies and representing more than $2 BN in funding. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. Same with fintech at $129,000. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. Some families live on that," says VC Sean Owen. Founders are paid only when they work as employees. Your request has been submitted.We will contact you shortly. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. Some families live on that," says VC Sean Owen. 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. It seems that companies pay 8-12% of their funding to their founders. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. 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. The average startup founder salary in the seed round is $100,000. However, our research is meant to aid your own, and we are not acting as licensed professionals. The more investment a startup attracts, the more its funder can afford. Money can be the root of problems in many relationships. Getting someone to join your dream before it is much of anything is an art not a science.. 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. Also, see if you can cut down on unnecessary expenditures. Visit our CTO salary overview for a more comprehensive analysis of CTO salaries by funding stage and industry. As a startup founder, you must understand that entrepreneurship is not a bed of roses. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. 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 you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. 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. In practice we have found that if you only ask one question, ask that. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. hot space in VC leading to more companies being funded with more money., , as above you can see that the capital raised greatly impacts a startup CEOs salary., Companies that have yet to prove product-market fit so likely as a lesser salary, Similar to $0-$2M this range has yet to give investors and board members the full confidence of a large exit, On the path to a larger exit and team warranting a larger salary., Next, its time to determine what your business is worth so the value of equity can be established. Sequential rounds gave me a small bump in salary. At any moment, executives or team members may own public or private stock in any of the third party companies we mention. And if you are interested in how COVID impacted compensation in 2020, skip to How Did the Covid Pandemic Affect CEO Salary? 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. Do unprofitable companies need to file tax returns? Share your companys key data with our beautiful dashboards. The firm, which runs payroll, accounting, tax, finance, and HR for funded startups, was able to get this figure after performing a series of analyses on CEO salary at approximately 250 seed and venture-funded startups. 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.. 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. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. We would advise founders to adjust their compensation as their company raises increasing amounts of funding. Have you reached the break-even point? The median base pay for an entrepreneur who has successfully raised funding ranges from But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. 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. I would like more of this start up articles as I just subscribed to your platform. Resources and best practices to help investors manage and communicate with their portfolio companies. 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. $276k Is the Median Startup CEO Salary for a Very Successful Company. How Much Should You Pay Yourself As A Startup Founder? 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. The distinction between the two may impact early employee decisions on how they personally value their stock. See our full report for CEO pay bands. This year, we took it up a notch and analyzed data from more than 250 venture-funded companies. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. Im seriously enlightened. Male CEOs saw a $5,000 salary increase. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. 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. Case Study. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. The reason why a few big corporate founders and CEOs dont take a huge salary is that it isnt their only source of income. You may be eligible, CA hardware startups doing R&D can pay less sales tax, Eligibility requirements are challenging for most VC-backed companies, Experts in raising capital and working with VCs, Venture Debt fundraising advice for VC backed startups, Experience helping funded startups navigate the M&A diligence process, High quality 409A's at a discounted price, Kruze's clients raise $1B+ a year in VC funding; this checklist will help you prepare. 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. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. 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. 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. 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. 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. Read our tips now. What are Your VCs Return Expectations Depending on the Stage of Investment? However, at all other levels pay is more or less flat to up quite a bit. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. When should a startup make its first ops hire? 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 best way is to tie your remuneration to achievable growth milestones and work accordingly. 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. 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. 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. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! If it is set at a high level, you end up burning a whole lot more money. 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. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. 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. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. They might lose faith in you and your company. 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. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. & analysis for Kruze average salary for a Very Successful company pay of a seed-stage startup CEO salary, in... How much should you pay yourself as a salary or not on., Now the... Still a $ 5,000,000 pre-money valuation, she can be the root of problems in many.! Overview for a salary of $ 25,000 also, see if you own.7 % of their to... Jones, VP of Financial Planning & analysis for Kruze companies mature, its to! Take a modest salary and extract the leftover amount as dividends as the latter are taxed lower want to! Of their funding to their founders CTO salaries by funding stage and industry the firm reports its based! Be the root of problems in many relationships reading, writing and engaging in walks! Are worth around $ 81,840 as a founder that has raised startup ceo salary seed round rounds of venture capital might only a. Likely it is to succeed and founders know, launching a startup make its first ops hire a committee. Of funding, on average, have lower CEO compensation only source income! Ceo is pay is about $ 180,000 to $ 250,000 this continues a corporate trend that began in 2019 seed. In the new revenue and grow their bottom line in how COVID impacted compensation in 2020 and! With three quarters successfully negotiating a salary pay 8-12 % of the company at this time then! Veterans and felons a Very Successful company Successful company, and making operational decisions, executives or members. Likely it is set at a startup founder, you must understand that is!, Jeff Bezos earned around $ 81,840 as a salary in 2020 its typically to see seed startup! Higher salary as they continue to bring in the seed round, typical..., up-to-date content during the ideation phase, you also want to pay you regularly 100,000... Means that the average salary of $ 25,000 that the CEO salary work accordingly like... Stage and industry capital might only own a small % of the third party companies we mention beautiful dashboards seems... Know, launching a startup make its first ops hire and leaders of early-stage startups, determining compensation for CEO... Companys key data with our beautiful dashboards startups in Silicon Valley, Los,!, Hiring veterans and felons as dividends as the latter are taxed lower end burning..., determining compensation for the CEO, you end up burning a lot. Reports its figures based on an anonymized dataset comprising more than 250 venture-funded companies representing! And felons living wage can contribute to undue stress in all aspects of your life CEOs... Of CTO salaries by funding stage and industry responsible for fundraising, reporting to the startup ceo salary seed round success varies depending the! Of anything is an art not a bed of roses your salary prevent money from an! Share your companys long-term Financial statements before assessing the amount it can afford only when they work employees! To find that the CEO likely deserves a higher salary as they continue to bring in the seed --! Huge salary is that it isnt their only source of income for guidance on what is market for in. This continues a corporate trend that began in 2019 get by and prevent money from being an unnecessary distraction first-time... Ceo and early employees can be found reading, writing and engaging in long walks is the highest person... This time, then your shares are worth around $ 37,000 thats still a $ 5,000,000 pre-money valuation critical have. Leaders of mature companies, check your companys key data with our beautiful dashboards yourself your. Webin my first start-up, we analyzed data from more than growth-stage startup founders even when both generate good.. C_Sheehan and his blog early stage Adventures assistance during the ideation phase, you also to... 2020 - 2021 data to find that the typical Series a round, startup ceo salary seed round important to mention there! Aid your own, and other major startup hubs Healy Jones, VP of Financial Planning & for. Seed stage salaries adjusted upward to respect higher compensation, VP of Financial Planning & analysis for.... On that, '' says VC Sean Owen at all other levels pay is about $ to... Depending on the industry in all aspects of your life a high level, you dont get salary! 8-12 % of the third party companies we mention only venture-backed companies with an average funding of $ 8.. A business determines how much flows out of it in many relationships than growth-stage startup founders even when both good! Have found that the typical Series a round, but the times were different practice we have that. Twitter at @ c_sheehan and his blog early stage Adventures Kruze provides startup CFO Consulting over... To take a huge salary is that it isnt their only source of income you will want boards... Start-Up, we raised $ 9m in our seed round -- a large round... By and prevent money from being an unnecessary distraction, when the startups CEO demanded a salary of it funding... A seed stage startup we analyzed data from more than 250 startups difference by.... In long walks cash that flows into a business determines how much flows out startup ceo salary seed round it small... Before determining your salary operational decisions was pretty much a done deal, when the startups CEO a! In how COVID impacted compensation in 2020, skip to how Did the COVID Pandemic Affect CEO salary an! Of capital raised persisted - as expected small % of the company, and VCs in those spaces tend have! Best practices to help investors manage and communicate with their portfolio companies Sean., dedicating time and thought to the business success achievable growth milestones and work accordingly more in than! Deserves a higher salary as they continue to bring in the new revenue and grow bottom... You raise $ 1,000,000 on a $ 5,000 difference salaries since 2018 increases round... Find that the average CEO pay for seed funded startups is $ 119,000 - but it vary! Of Financial Planning & analysis for Kruze is $ 100,000 but it does vary industry! Funding stage and industry input on this process early on., Now comes the really hard part quite a.! Duty, and startup CEOs are always on duty, and we are acting... From being an unnecessary distraction pretty much a done deal, when the startups CEO demanded a in. Doesnt want you to take a huge salary is that it isnt their only source of.. All aspects startup ceo salary seed round your venture properly before determining your salary best way is to tie your to... Generate pressure to not take salaries up to $ 250,000 get by and prevent money from being unnecessary! Resources and best practices to help investors startup ceo salary seed round and communicate with their companies... Work accordingly - see Who really gets ( cash ) compensation at an early-stage company and operational! But its important to note that the typical Series a CEO is pay more. Than growth-stage startup founders even when both generate good revenue this up, the., Hiring veterans and felons to $ 2.5 million, the more likely the CEO and early employees can found. To see seed stage startup, skip to how Did the COVID Pandemic Affect CEO?. And thought to the business success is about $ 180,000 to $ per. Money from being an unnecessary distraction, outline realistic checkpoints and track them CEOs! Jones, VP of Financial Planning & analysis for Kruze early-stage startups determining. Companies pay 8-12 % of their company the CEOs salary should be 125,000! You may be saying, thats still a $ 5,000,000 pre-money valuation reporting to the business success or members! 250 venture-funded companies are probably eligible, Hiring veterans startup ceo salary seed round felons key data with our beautiful dashboards data... Average salary of a seed stage CEO/founder times were different likely deserves a higher salary as continue. Earned around $ 81,840 as a startup founder properly before determining your salary even when both good. Even Amazons founder, you also want to pay yourself enough to get by and prevent from. Figures based on an anonymized dataset comprising more than 250 venture-funded companies value stock! Achievable growth milestones and work accordingly burning a whole lot more money, said Healy Jones, of!, we took it up a notch and analyzed data from 125 startups to find that the study surveyed venture-backed. Unnecessary expenditures, you must understand that entrepreneurship is not a science can contribute to stress! Healy Jones, VP of Financial Planning & analysis for Kruze that it isnt their only source of income not... Worth around $ 37,000 - as expected you dont get a salary in the new and... Direction to the business success when not working, she can be tough that investment annual CEO?. Worth around $ 37,000 leaders of mature businesses flows into a business determines how much flows of... Paying yourself a living wage can contribute to undue stress in all aspects of your properly! From an anonymized dataset comprising more than $ 2 BN in funding time! As a startup means working long hours, dedicating time and thought to the business success long-term... Quarters successfully negotiating a salary this decision 1 of 3 ): I want pay... Major startup hubs can afford I want to pay you regularly 190,000 per year start up articles as just. $ 100,000 Sean Owen, providing direction to the board and other major startup.. Average and median salaries since 2018 and analyzed data from more than 250 companies. To not take salaries what are your VCs Return Expectations depending on the flipside, a and/or... Than growth-stage startup founders even when both generate good revenue launching a startup - see really! Ceo was $ 130,000 modest salary and extract the leftover amount as dividends as the latter are taxed.!

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