Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. The more investment a startup attracts, the more its funder can afford. 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! A more mature space leading to a higher salary. 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 Youve got a package in mind that includes a salary you can afford and an equity stake that makes the offer competitive if your company grows as expected. The median base pay for an entrepreneur who has successfully raised funding ranges from Industries and different verticals can lead to varying salaries. 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. 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. For venture-backed companies, you can find this answer through an official 409A process or less formally (as Fred Wilson proposed in 2010) by using the valuation of your last financing round or the most recent offer you received to purchase your business. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. 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. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). 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. So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. Money can be the root of problems in many relationships. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. Breaking the numbers down by industry, on average: Hardware company CEOs are near the bottom of the pack, with an average salary of $112,000 per year. Startup CEOs pay varies by industry and the amount of venture capital funding the company has raised, with companies that are more highly funded earning a higher salary. As a company matures and grows, so does the salary of the CEO. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. Personally, you dont want to bring that kind of stress home to your partner. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Has covered the wider aspects. As you would have figured out by now, entrepreneurs dont always earn big bucks. 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. If you can raise a Series A round with your company at a 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. potential bonus money of $0 - $100,000 and equity (ranging from less than 1% - 20%). The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. Track the average number of hours you work and then compute your salary. The salary amount, frequency, and the way you withdraw that money affect your tax amount. 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. Paul Graham has put together some valuable formulas for determining the equity of your first few dozen employees based on the expected value they bring to your business. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. Are you big enough to start on the expansion journey? There are a variety factors that drive the difference in founder/CEO pay by industry. My team and I handle payroll, taxes and the accounting for seed and venture-funded startups, and we analyzed CEO pay at over 125 startups; most of them in Silicon Valley. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see 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. Determining how to properly compensate employees at a startup is also a tricky task. VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. Finally, startup culture can generate pressure to not take salaries. Tax Credit Center - Which of the 700+ Credits Are Best? However, you cannot expect it to be at par with the market standards. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. 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. As we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. This is a crucial incentive; so, outline realistic checkpoints and track them. 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 analysis comes from an anonymized dataset comprising more than 250 venture-funded companies and representing more than $2 BN in funding. The companies we used to determine this figure have raised collectively more than $2B in funding. 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. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". 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. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. Weve kept these previous salary analyses below. 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. 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. Your employees have options for where they work. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. Startup compensation guide: see thousands of startup salary and equity data points. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. 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. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. $130,000 per year. Your salary also depends on the amount you have raised. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. 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. Female CEOs took a 30% reduction in salary at the peak of the pandemic ($101,000 compared to $138,000 in 2019), while the salaries for male CEOs increased ($146,000 compared to $143,000 in 2019). Thankfully, that thinking has evolved. Make sure that you dont ask for too much or little. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. What Salaries Did Startup CEOs Earn in 2022. However, at all other levels pay is more or less flat to up quite a bit. 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.. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. Non-co-founder COOs at seed-stage startups earn an average salary of 94,500 ($128,000 USD as of writing). 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. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. Remember that a startup takes years to become profitable; you cannot starve till then. So, if your only contribution is money and/or some assistance during the ideation phase, you dont get a salary. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. Expect us to publish future studies on other startup executive pay. 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. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. We are strong advocates for CEOs and founders paying themselves a fair market salary. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. Startup Chief Executives with the highest annual salaries tend to be running companies that have either recently raised capital, or are performing very well and have not raised money for an extended period of time. At the seed stage you should have a reasonable salary based on your location. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. 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. 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. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. The later the stage a company is, the higher their salary is. 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. David Rose agrees. And in 2021, the average salary popped back - but thats not the full story, as youll see as we dig into the numbers. 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. 3) Excessive hiring and spending. 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. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. A well-researched proposal that clearly assesses your companys current financials, demonstrates the expected impact fairly compensating an early employee or CEO will have and honors your commitment to delivering the return they expect on their investment will get you to reach mutually agreeable terms. They earn through their investments and other personal revenue-generating activities. 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. CEOs of funded startups make many important decisions - including compensation decisions. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. On, Stating the obvious, salary needs can vary widely. CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. As such, their founders and CEOs, at least at the most early stages, often draw lower than average salaries in 2022, $112,000 per year. The largest growth appeared among companies who raised between $5-10 million among this group, average CEO salaries jumped 12% from $145,000 in 2018 to $162,000 in 2019. This can lead to less time with your loved ones, which can lead to resentment. Startup founders need to decide how much salary is enough. 28 2 Jason M. Lemkin SaaStr Fund. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. In 2019, before COVID, startup CEO salaries averaged $142,000. 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. This also implies that if your only contribution is money or some assistance during the ideation phase, you are not entitled to a salary and should get paid later in the form of a dividend. CEO pay varies by a number of You will want your boards input on this process early on., Now comes the really hard part. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. If it is set at a high level, you end up burning a whole lot more money. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. For example, if a company has gone on to raise their series A that is a testament to the companies growth and should be reflected on the CEOs salary. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. 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. This year, we took it up a notch and analyzed data from more than 250 venture-funded companies. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. 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. Below is our 2018 study, which we have left online for reference. This could be because there is more capital, or because VCs have witnessed exactly what happens when a founder is under enormous stress and pressure in their personal and professional life: they make bad decisions and things fall apart. 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. Same with fintech at $129,000. Case Study. 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%. Lets dive into why we think there are notable difference by industry. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Your employees have options for where they work. Filter by role, location, stage, startup size. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! 8 If you own .7% of the company at this time, then your shares are worth around $37,000. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. Thanks for the article. However, we were surprised that healthcare companies had lower founder/CEO pay. When you build something of value and valuations are going up, you wont mind doing a small secondary. The following is a guest post by Chris Sheehan. 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. In 2022, female CEOs made $20,000 less than males. What salaries did startup CTOs earn in 2022? How does CEO pay vary by the amount of venture capital raised? This is somewhat true as well. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? 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. 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 following steps will give you a broad idea of how to go about it. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. Also, make sure that you consider all the factors mentioned above before deciding on your salary. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. 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. Related Reading: Private Equity vs Venture Capital: Critical Differences. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? We used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. In fact, the VCs will insist on this. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Hardware companies tend to require larger than average amounts of venture capital funding to get to a meaningful size. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. Next, its time to determine what your business is worth so the value of equity can be established. The term sheet Still, when it comes to startup CEO pay, our data reveals some good news. 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. 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. 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. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. 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. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. 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. The greater the. Case Study. 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. 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. As already mentioned, founders are paid only when they work as employees, not because they started the company. When the company exited after three Every year we analyze CEO pay at hundreds of early-stage companies to try to help our clients set reasonable salaries and compensation for themselves. Affordable Monthly Bookkeeping for Startups, Key terms, tips and tricks, free financial models, taxes and more, Kruze is a leader in bookkeeping services for startups, We get your startup ready for the VC process, Projections, budgets and FP&A help for seed venture funded companies, Outsourced CFOs to help manage your growing startup, Industry specific expertise in bookkeeping, tax, FP&A and beyond, Kruze is a leader in startup tax filings, advice and more. Male CEOs saw a $5,000 salary increase. Many slashed their compensation to zero. If the investment is up to $2.5 million, the CEOs salary should be $125,000. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. 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 average startup founder salary in the seed round is $100,000. Weve found that CEOs in some industries have higher average salaries than others. 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. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. 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. Have you reached the break-even point? This is entirely up to the startup or founder. Know that your early-stage startup will pay you less than the MNC you used to work for. Female startup CEOs continue to lag behind their male counterparts in salary, and their average paycheck is still 3.7% below the peak in 2019. Have you just started developing your MVP, or is your business already in place? Startup founders are not entitled to a salary; however, CEOs are. Design by Lucila Romero. Assess the state of your startup and its finances. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! 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,. A finance enthusiast, literature beau and lifelong learner. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. Here is a breakdown by Series A, Series B, etc. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. The percent equity owned by the CEO post the seed financing varies as a function of not just the size and terms of the seed round, but quite significantly, by the number of founders and how equity is divided up between them. Wow! Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. 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. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. Chris is a seed stage VC and angel investor at CommonAngels. 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