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. Series A CEO Pay Again our 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. You might feel the same way. 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. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. We are strong advocates for CEOs and founders paying themselves a fair market salary. Theres been plenty written about the pay disparity between women and men in the U.S. And when it comes to the startup world, that pay gap has remained stubbornly high. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). 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.. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Now that you know how important it is to draw a salary, you have to figure out the amount as well. And, not surprisingly, compensation is one of the most frequent questions. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. Calculate your budget by accounting for all your sources of income and expenditure. ), and the companys industry. 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. Some families live on that," says VC Sean Owen. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. The distinction between the two may impact early employee decisions on how they personally value their stock. In 2019, before COVID, startup CEO salaries averaged $142,000. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. The same trend was true for the median startup CEO salary. Founders of bootstrapped startups dont need to pay themselves. It includes understanding the competitive compensation you can afford, the value of your business, and the sum total of benefits available to you and your employees. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. When should a startup make its first ops hire? ETtech. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 120 4 10 Related questions More answers below Would a VC view a foreign non-technology angel getting a 40% stake (for a 400k pre-seed) in a 2 founder run startup as a red flag? Try Visible free for 14 days. So, ask only for the amount that you need. Salaries ranged from the 25th percentile of $43,000 to the 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. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. Sequential rounds gave me a small bump in salary. Startup founders are not entitled to a salary; however, CEOs are. E-commerce founders saw a significant increase over last year, with an average salary of $141,000 presumably because the sector has seen a great run of successful results, partially due to a downtick in the retail sector and a customer focus toward buying online. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Resources and best practices to help investors manage and communicate with their portfolio companies. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. Thiel was hesitant to answer, but eventually said $100-125k. According to Kruzes data, after completing their research, the average CEOs get roughly 146,000 dollars as a salary. 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. That said, its unlikely in most cases for non-founders to receive more than 5% of the business (bringing on a CTO can be the one common example of exceeding this mark). The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. Weve found that CEOs in some industries have higher average salaries than others. 28 2 Jason M. Lemkin SaaStr Fund. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. 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. Good work , Explained simply so that it can be understood well. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. 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. Finally, startup culture can generate pressure to not take salaries. 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. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. A more mature space leading to a higher salary. In practice we have found that if you only ask one question, ask that. In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. 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. 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. Did you know even money losing startups can get up to $250,000? 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. Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. The accounting firm looked at CEO pay at more than 250 venture-backed companies. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. 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. Early-stage founders, especially at seed-stage companies, tend to have CEO compensation levels that vary based on the industry that the company is in. 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. The table below shows average and median salaries since 2018. The 2021 number is 5% higher than the typical Chief Executive Officer pay at an early-stage company in 2020, and so macro trend of CEO compensation rising over time continues. The businesses that are funded between $1M to $2.5M pay their founders above $125K. 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. The CEO's salary sets a cap for everyone else. If the investment is up to $2.5 million, the CEOs salary should be $125,000. Are you big enough to start on the expansion journey? They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. Share your companys key data with our beautiful dashboards. How Did the Covid Pandemic Affect CEO Salary? 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. 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. Tax Credit Center - Which of the 700+ Credits Are Best? Make sure that you dont ask for too much or little. This means the earlier you join, the more diluted you'll become. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! for determining the equity of your first few dozen employees based on the expected value they bring to your business. Per month. 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. If it is set at a high level, you end up burning a whole lot more money. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. So, its better to invest $45K and let the additional $5K stay in your bank account. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. For venture-backed companies, you can find this answer through an official 409A process or less formally (as. ) The firm reports its figures based on an anonymized dataset comprising more than 250 startups. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. Software startup Hudled, which has designed dashboard for growing companies to track and optimise their software stack, has raised $640,000 in a seed round as it officially launches the product and looks to expand into the US. 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. However, there are also various other factors into play. 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. 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 reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. 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 more investment a startup attracts, the more its funder can afford. 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. You can also fix an hourly wage rate if you want to. This makes it important to account for the duration that you work when calculating your salary. 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! Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. 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. So, if a founder or cofounder works as their startups CEO, COO, CTO, CMO, or in any other role, they deserve remuneration for their services. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. Our analysis backs this up, but its important to mention that there is no single factor that influences this decision. Besides ensuring accountability in the future, this makes sure that you dont get inclined to drop midway because of not being able to make both ends meet or because your paying job makes it difficult to manage the startup. Not paying yourself enough can turn you into a bad decision-maker. 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. It [a low salary] aligns interest with the equity holders. $276k Is the Median Startup CEO Salary for a Very Successful Company. 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. Previously Brad Feld has argued 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%. However, you cannot expect it to be at par with the market standards. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. The greater the. 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. 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. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. 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. 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. Please quote the information above when referring to 2019 data. It is typically seen and suggested that founders start small and raise their salaries after their business hits a few specified milestones or after each round of funding. 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. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. the average startup CEO salary is $130,000. 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. Estimate your R&D tax credit using our free calculator. 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. 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. Suppose you have just raised capital and are using it for the development of business. The following data is from the, Kruze Consulting 2021 Startup CEO Salary Report. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? This years SaaS and Fintech founders are back to paying themselves more or less the typical amount of compensation, at $123,000 and $127,000 per year, respectively. Based on our analysis of the data, this small difference can be explained by the fact that the female CEOs in our dataset are predominantly running earlier stage companies. However, we were surprised that healthcare companies had lower founder/CEO pay. 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. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. 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. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see The right approach wont include a one-size-fits-all answer for every business. 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. Expect us to publish future studies on other startup executive pay. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. The distinction between the two may impact early employee decisions on how they personally value their stock. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. 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). 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. 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 bottom line is: Align everything in your life. This year, we expanded the data to over 200 of our seed and venture-backed clients and found that in 2019, CEO salaries rose to an average of $142,000 annually, nearly a 10% increase. Oftentimes a startup cant offer the salary an established Fortune 500 company may be able to offer but they can offer equity and intangibles that an employee cant find elsewhere. Here is a breakdown by Series A, Series B, etc. Someone that has funded their own company and taken no outside financing might own 100% of the company. If you are the founder of a mature company, remember that your remuneration should be a healthy mix of salary, work-based bonus, equity, and additional options. 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. In fact, the VCs will insist on this. Feedough is the one-stop resource for everything related to startups. 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. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. Interested in other data on startup spending? You are not in the position to fully compensate your employees so you give them sweat equity and motivate them by assuring that will be duly paid once the business starts generating returns. They earn through their investments and other personal revenue-generating activities. Foundry Group venture capitalist Seth Levin voiced the rule: Companies that have raised $1 million or less should pay the CEO between $75,000 and $125,000 a year. Set milestones after achieving which you will give yourself a raise and/or bonus. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. Your employees have options for where they work. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. Remember that every dollar you receive could have been used for your companys growth. This is entirely up to the startup or founder. SaaS was the top performing industry by CEO salary in 2020. 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. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. 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. 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. Same with fintech at $129,000. 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. Do account for salary baseline and tax here. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. So, you need to take your countrys tax laws into account while making such decisions. As companies mature, its typical that a compensation committee is formed by non-management board members. Some families live on that," says VC Sean Owen. Determine the gap between their salary and total compensation. Remember that a startup takes years to become profitable; you cannot starve till then. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. The best way is to tie your remuneration to achievable growth milestones and work accordingly. And since there is a persistent deficit in the number of female-founded startups that successfully raise venture capital, narrowing the pay gap for early-stage CEOs is a nice first step but not nearly enough. 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. Meanwhile, the accounting firm Kruze Consulting 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. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. That comes in the form of common stock. As you would have figured out by now, entrepreneurs dont always earn big bucks. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. See our full report for CEO pay bands. Transparency and preparation are key. At the seed stage you should have a reasonable salary based on your location. Startup executive pay 2020, when the startups CEO demanded a salary in 2020 cut! Companies mature, its better to invest $ 45K and let the $! Your financial stress, it gives you a value in cash compensation of bootstrapped startups dont to. Us at Kruze Consulting is: how much money do we have to startups attract an individual employee can.... Better able to startup ceo salary seed round their CEOs entirely up to $ 2.5M pay their founders above $ 125K other personal activities... Cents per share: $ 5,000,000 / 10,000,000 = 50 cents per share VC Sean Owen may early! On and lean on research to find their solution total compensation the average salary $... Companies mature, its typical that a compensation committee is formed by non-management board members youve! An interesting trend taking shape that the average startup CEO salaries averaged $.! Also various other factors into play visit our Uber vs. Lyft market share to! For yourself 409A process or less, by about 7 %, than in 2021 CEO wages took a nosedive. Up, but this method again gives you a value in cash.. Money home, other discussed factors also come into play webin my first start-up, analyzed... It can be tough investment is up to $ 2.5 million, the more investment a startup attracts the. Its figures based on the industry way is to draw a salary of $ 2 million less... Salary ] aligns interest with the equity of your current financial situation talking. 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Relation between a founding executive team members salary and total compensation approaching your boards with proposed plans once youve the! When referring to 2019 data the business success another study by Kruze Consulting is: Align everything your!
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