Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. The role of the compensation committee can vary, from making recommendations to the board on executive salaries, bonuses (and option grants) to having authority to set executive salaries. What a great article. The accounting firm looked at CEO pay at more than 250 venture-backed companies. Some families live on that," says VC Sean Owen. A Crofton software startup that hopes to take some of the headaches out of tracking the costs of individual projects and payroll is raising a $1.5 million seed round. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. The increase in CEO pay for 2022 brings back the overall, up and to the right trend that weve observed in the average CEO (and founder) pay since 2018. I would like more of this start up articles as I just subscribed to your platform. Tell us what you think about our article on startup founder salary in the comments section. As a startup founder, you must understand that entrepreneurship is not a bed of roses. 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.. 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. Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. You can also fix an hourly wage rate if you want to. 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. A more mature space leading to a higher salary. Personally, you dont want to bring that kind of stress home to your partner. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. The following is a guest post by Chris Sheehan. David Rose agrees. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. In 2019, before COVID, startup CEO salaries averaged $142,000. However, during the COVID pandemic in 2020 the pay gap expanded again throughout corporate America, and our research on startup companies also reflects that trend. Did we miss something? It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. We have created one of the most complete databases in the startup world. Companies that raised over $5M and over $10M in funding saw their Chief Executive Officer pay go up by 7.5% and 13%, respectively, in 2022. See our full report for CEO pay bands. Below is our 2019 study, which we have left online for reference. This can lead to less time with your loved ones, which can lead to resentment. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. The amount of cash that flows into a business determines how much flows out of it. Founders of bootstrapped startups dont need to pay themselves. Case Study. 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. However, you cannot expect it to be at par with the market standards. 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. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. 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. Very few entrepreneurs have the courage to be that transparent. 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. When the company exited after three venture rounds, my salary was at $250k. Keep in mind that these rewards are essential to incentivise you and keep you focused. 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. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. How do you determine whats best? One of the easiest ways to do that is pay yourself the right amount. The more a CEO pays herself, the less runway available to hit milestones. Series A CEO Pay Again our 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. Remember that every dollar you receive could have been used for your companys growth. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. Feedough is the one-stop resource for everything related to startups. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? As already mentioned, founders are paid only when they work as employees, not because they started the company. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. But early employees will be attracted to your business in part because of the long-term payoff. 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. 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. The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. 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). And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. 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. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. Not paying yourself enough can turn you into a bad decision-maker. Your request has been submitted.We will contact you shortly. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. Because of this, startup founder salary is a highly debatable topic. Percent of CEOs who deceased salary during COVID who changed salary by year end. 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. This is an especially important question to answer when youre trying to hire your first employees. Resources and best practices to help investors manage and communicate with their portfolio companies. VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. Start your search now on this startup guide. You are probably eligible, Hiring veterans and felons? An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. 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. Seed, Series A, Series B, etc.) On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. For rounds of 150k or below, around half of founders secure a salary. In 2019, we analyzed 125 startups. In 2022, female CEOs made $20,000 less than males. The companies we used to determine this figure have raised collectively more than $2B in funding. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. 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. ), and their companys industry. Do account for salary baseline and tax here. 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%. 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. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. 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. 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. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. In 2020, approximately 36% of companies reduced their chief executive compensation during COVID. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. 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. Visit kruzeconsulting.comto learn more. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. 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 you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. At a 2,000,000 valuation, Seed Legals found that the average founders salary was 25,000, rising to 52,000 and 80,000 at 4,000,000 and 6,000,000 respectively. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. 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. CEO Salary by Total Funding Raised - 2022. Anyway, even when the business starts growing, it wont pay you much in the form of salary. the average startup CEO salary is $130,000. 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. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. The following data is from the, Kruze Consulting 2021 Startup CEO Salary Report. 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. David Rose agrees. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. 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. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. This has remained fairly consistent year to year as the space is more mature. You may hire an accountant for assistance. It can be difficult to place a number here as the value of the company is solely on paper. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. 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). 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. Say you raise $1,000,000 on a $5,000,000 pre-money valuation. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. Stress can create dissension in a relationship, adding pressure to your home life, affecting how you relate to those you love. 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. How do you Determine Proper Compensation for Startup CEOs and So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. Thankfully, that thinking has evolved. 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. Read our tips now. If it is set at a high level, you end up burning a whole lot more money. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. This means the earlier you join, the more diluted you'll become. 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.. Weve found that CEOs in some industries have higher average salaries than others. For 2021, the average startup CEO salary is now up to $146,000, an increase of $4,000 from 2019 (almost a 3% increase) or 5% up from the COVID crisis of 2020. Please quote the information above when referring to 2020 - 2021 data. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. 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! Several years ago, many eComm companies were just getting started when they were seed funded. Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. The process is usually difficult for first-time founders, especially because of the complexity of the deciding factors. The average startup founder salary in the seed round is $100,000. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. While the spread of compensation by stage of financing (i.e. As companies mature, its typical that a compensation committee is formed by non-management board members. Determining how to properly compensate employees at a startup is also a tricky task. 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. So, its better to invest $45K and let the additional $5K stay in your bank account. 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. Profit-generating startups are a rare sight. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. When should a startup make its first ops hire? 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. While there are quite a few factors that go into determining your salary we find the following to be most important. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Companies that raised between $2 million and $5 million saw almost an 8% increase in Chief Executive Officer salaries. 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 analysis comes from an anonymized dataset comprising more than 250 venture-funded companies and representing more than $2 BN in funding. Having the above questions answered will help. Still, when it comes to startup CEO pay, our data reveals some good news. According to Kruzes data, after completing their research, the average CEOs get roughly 146,000 dollars as a salary. Here is a breakdown by Series A, Series B, etc. Is it wise to pay yourself when your startup demands this many resources? 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