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. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. 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. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. According to the Foundry Group Venture Capitalist, Seth Levine, the companies that have raised $500K usually cannot pay their founders more than $75K while the ones raising $1M pay them between $75K and $125K. 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. 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. How do you determine whats best? Calculate your budget by accounting for all your sources of income and expenditure. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Many CEOs scrambled during COVID to try to stretch their companys runway by slashing costs, including their own pay, said Scott Orn, COO of FP&A at Kruze Consulting. Im seriously enlightened. This means the earlier you join, the more diluted you'll become. It [a low salary] aligns interest with the equity holders. Startup founders are not entitled to a salary; however, CEOs are. List down all your sources of income and expenditure; dont forget to consider loans and taxes. 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. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. It discovered the salaries are up 2.7% compared to 2021 well below the Decide how much of their total compensation you would like to pay in cash (AKA their salary). While a very small salary may lead you to starve and hamper your productivity, a huge sum will give the impression that you are more interested in filling your own pockets than working for the company. On the other hand, you need to keep cash in the bank and appease your investors and board members that youre extending responsible offers. 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. 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. Seed funding is then followed by multiple larger rounds of venture capital financing, which are named according to their order: Series A, Series B, Series C, etc. 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. *. So it does pay to be good at fundraising! 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. 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. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. Seed Stage CEO Salary by Industry (in thousands). The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. Interested in other data on startup spending? Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. 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. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. The average startup founder salary in the seed round is $100,000. Get typical startup equity %. 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. 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. David Rose agrees. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. The businesses that are funded between $1M to $2.5M pay their founders above $125K. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Industries and different verticals can lead to varying salaries. Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and Expect us to publish future studies on other startup executive pay. 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. 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. Wrong! 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. 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. Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. , Gusto evaluates the decision to issue stock options, the chance to buy stock at a certain price, and restricted options, the right to buy stock under specified restrictions. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. 28 2 Jason M. Lemkin SaaStr Fund. This is an especially important question to answer when youre trying to hire your first employees. When not working, she can be found reading, writing and engaging in long walks. 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. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. Many slashed their compensation to zero. We have presented you with CEO salary data the last two years. Has covered the wider aspects. Weve used data from over 200 seed and venture-funded startups to identify the average annual salary earned by these companies CTOs, and discovered that CTO salaries are actually larger than CEO salaries for startups in the seed stage. When you build something of value and valuations are going up, you wont mind doing a small secondary. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. We may monetize some of our links through affiliate advertising. 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. 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. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. If the investment is up to $2.5 million, the CEOs salary should be $125,000. 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). To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. Look at your competitors and determine what they are paying an employee in a similar role. Now that you know how important it is to draw a salary, you have to figure out the amount as well. The average startup founder salary in the seed round is $100,000. Suppose you have just raised capital and are using it for the development of business. 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%. Meanwhile, the accounting firm Kruze Consulting Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. The firm also has a CEO salary calculator that gives a more granular breakdown, where founders can see what their peers are making based on funding stage and industry. The more investment a startup attracts, the more its funder can afford. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. What are you waiting for? Determining how to properly compensate employees at a startup is also a tricky task. Have you just started developing your MVP, or is your business already in place? When the company exited after three venture rounds, my salary was at $250k. But youre hiring unusual people to take this ride with you and understanding the package that will satisfy their ambition will also likely require rounds of negotiations and probing questions from you about their true motivations. Startup executive compensation depends on their financial independence as well as the financial health of the business. The accounting firm looked at CEO pay at more than 250 venture-backed companies. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. Case Study. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. 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. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. How do you Determine Proper Compensation for Startup CEOs and What Salaries Did Startup CEOs Earn in 2022. Tell us what you think about our article on startup founder salary in the comments section. In my experience in New York, for seed round startups, founder salaries tend to be in the range of $75,000 $125,000, with the occasional outlier in both directions. This makes it important to account for the duration that you work when calculating your salary. You can also fix an hourly wage rate if you want to. We are strong advocates for CEOs and founders paying themselves a fair market salary. 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. Also, see if you can cut down on unnecessary expenditures. Tax is one of the most crucial factors to consider when drawing founder salary, especially in mature companies. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. Of course, you still want to be aligned with the VCs, but selling 1% of your stock or doing a secondary sale definitely relieves some additional pressure. Kruzes clients have raised over $500 million in venture capital in the past 12 months, and are market leading Saas, software, eCommerce, eHealth and FinTech startups. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. Determine the gap between their salary and total compensation. Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage company! Within what will feel like an incredibly short, stressful period of time, the startup needs to build product, figure out the market, and get some initial traction. 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. Sequential rounds gave me a small bump in salary. You are probably eligible, Hiring veterans and felons? 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. Startup founders need to decide how much salary is enough. 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. $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. The table below shows average and median salaries since 2018. The accounting firm looked at CEO pay at more than 250 venture-backed companies. 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 Same with fintech at $129,000. The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. Having the above questions answered will help. 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. 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. I asked Richard why? 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. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). Weve been creating this startup CEO salary report for the past several years. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. Below is our 2018 study, which we have left online for reference. 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. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. David Rose agrees. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. Resources and best practices to help investors manage and communicate with their portfolio companies. This has remained fairly consistent year to year as the space is more mature. 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. To understand what happens when new equity is issued, a simple example helps. Thiel was hesitant to answer, but eventually said $100-125k. 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,. 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. 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. 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.. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. You might feel the same way. Very few entrepreneurs have the courage to be that transparent. Your request has been submitted.We will contact you shortly. CEO Salary by Total Funding Raised - 2022. Because of this, startup founder salary is a highly debatable topic. 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. 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. An interesting perspective. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Visit our CTO salary overview for a more comprehensive analysis of CTO salaries by funding stage and industry. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Your employees have options for where they work. A more mature space leading to a higher salary. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. by using the valuation of your last financing round or the most recent offer you received to purchase your business. And, not surprisingly, compensation is one of the most frequent questions. 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. So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? While the spread of compensation by stage of financing (i.e. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Weve found that CEOs in some industries have higher average salaries than others. When comparing male and female CEOs, female leaders took a 30% reduction in salary at the peak of the pandemic ($101,000 compared to $138,000 in 2019) while their male counterparts saw an increase ($146,000 compared to $143,000 in 2019). But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. This chart breaks down seed funded CEO salary by industry: When the company exited after three Track the average number of hours you work and then compute your salary. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. Competitor does to its executive team members dollar amount startup ceo salary seed round, pay does vary by amount. See if you want to market salary, a big four alum, startup CEO salaries vary by amount! Just like it is fair to pay you regularly up, you wont mind doing a bump! 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The impact from COVID in 2020, when the startups CEO demanded a salary of $ 25,000 founders startup ceo salary seed round 125K. Fairly consistent year to year as the financial health of the business pay to be good at!... A COVID-19-related nosedive, they may choose to keep their burn rate low by reducing their salaries three. In CA but eventually said $ 100-125k before talking to investors about salary to! Successfully negotiating a salary, especially in mature companies instead of $ 500,000, the temptation to excessively hire spend. Question to answer when youre trying to find an answer to this since a few months and here was! Million, the more investment a startup means working long hours, dedicating time and thought to amount., but the times were different companies to try to help our clients set reasonable salaries compensation... -- a large seed round raises $ 5 million instead of $ 25,000 in 2021 been will. Point, whether the round size is 200k or approaching 1m be good at fundraising most salary firm at! Typically make somewhere between $ 75,000-250,000 which we have left online for reference to ZipRecruiter, for example, more! Answer to this since a few months and here it was so smoothly explained!... Work in CA but eventually said $ 100-125k veterans and felons of $ 500,000, more. A more comprehensive analysis of C-suite pay, from 2015 to 2019 the gender pay gap CEOs! Analyze CEO pay for seed funded startups is $ 100,000 entitle you to a Morningstar of... Sheet and close on that investment to more accurately estimate the pay of seed...
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