A founder with no mortgage, kids, etc will have different cash needs than a founder that has a minimum cash hurdle to clear (in the absence of being very wealthy), The amount raised in a seed round has an obvious impact. 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,. Profit-generating startups are a rare sight. Not paying yourself enough can turn you into a bad decision-maker. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. The following steps will give you a broad idea of how to go about it. Brex vs Ramp - Which card is best for startups? How much can your startup save in payroll taxes? 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 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. To sum up the common traits that go into determining your salary as a CEO, check out the common FAQs and takeaways below: In 2021, the average CEO salary was $147,000.At the end of the day, it is entirely dependant on the business, industry, and lifecycle. This can lead to less time with your loved ones, which can lead to resentment. Design by Lucila Romero. However, you cannot expect it to be at par with the market standards. The median base pay for an entrepreneur who has successfully raised funding ranges from This chart breaks down seed funded CEO salary by industry: The accounting firm looked at CEO pay at more than 250 venture-backed companies. Also, you may have to pay more when hiring more experienced people. Weve found that CEOs in some industries have higher average salaries than others. Related Resource: How to Fairly Split Startup Equity with Founders, In their helpful guide on employee equity, 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. Yes! 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. 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 table below shows average and median salaries since 2018. On, Stating the obvious, salary needs can vary widely. The more a CEO pays herself, the less runway available to hit milestones. 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. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Suppose you have just raised capital and are using it for the development of business. I would like more of this start up articles as I just subscribed to your platform. As noted in, , 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. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. WebSequential rounds gave me a small bump in salary. 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. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. David Rose agrees. 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. 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 startup CEOs continue to lag behind their male counterparts in salary in 2022. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. 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. 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. Filter by role, location, stage, startup size. 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. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. The average startup founder salary in the seed round is $100,000. 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. In other words, these companies were all tremendously successful up to the point of going public, yet the CEOs salary was still lower than that weve seen for some Series A startups, especially on the West Tell us what you think about our article on startup founder salary in the comments section. The more investment a startup attracts, the more its funder can afford. 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. Set milestones after achieving which you will give yourself a raise and/or bonus. How Did the Covid Pandemic Affect CEO Salary? Do account for salary baseline and tax here. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. However, at all other levels pay is more or less flat to up quite a bit. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? So it does pay to be good at fundraising! 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. 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. 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.. Finally, startup culture can generate pressure to not take salaries. This means the earlier you join, the more diluted you'll become. 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). Same with fintech at $129,000. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. We have presented you with CEO salary data the last two years. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Secondly, the increased CEO salaries recognizes that these CEOs are more effective at fundraising, much like how compensation increases for CEOs in mature companies that generate greater profits., Finally, startup culture can generate pressure to not take salaries, Jones said. Lets dive into why we think there are notable difference by industry. Upon digging deeper, we realized that this is because of the rise of D2C healthcare companies, which tend to seem more like SaaS businesses and less like a healthcare company with a CEO who has an advanced degree. 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. 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. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. 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.. 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. 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. Expect us to publish future studies on other startup executive pay. 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. When you build something of value and valuations are going up, you wont mind doing a small secondary. Remember that a startup takes years to become profitable; you cannot starve till then. That comes in the form of common stock. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. Keep in mind that these rewards are essential to incentivise you and keep you focused. The companies we used to determine this figure have raised collectively more than $2B in funding. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. Founders are paid only when they work as employees. Some families live on that," says VC Sean Owen. We have created one of the most complete databases in the startup world. potential bonus money of $0 - $100,000 and equity (ranging from less than 1% - 20%). Weve found that there are a variety of factors that can influence the salary of a startup CEO. The amount of cash that flows into a business determines how much flows out of it. The process is usually difficult for first-time founders, especially because of the complexity of the deciding factors. In 2020, approximately 36% of companies reduced their chief executive compensation during COVID. Sequential rounds gave me a small bump in salary. We hope this report simplifies your startup CEO pay decision! How to Calculate Your Startup Founder Salary? In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. This is entirely up to the startup or founder. Sometimes, too much profit on the balance sheet stirs gossip so it becomes mandatory for founders to take a decent remuneration even when they have enough money to live without it. The average startup founder salary in the seed round is $100,000. Wrong! Have you reached the break-even point? One trend remained the same as last year: the more you raise, the more you get paid. Series A CEO Pay Again our The distinction between the two may impact early employee decisions on how they personally value their stock. My prior salary as a VP before the company had been $150,000, and they raised it to $180,000, with a performance-tied bonus. 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. What Salaries Did Startup CEOs Earn in 2022. Thiel was hesitant to answer, but eventually said $100-125k. 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. Were not talking about anything extravagant, but enough to live a life outside of the business. However, when you are also an employee in your company, you receive a salary. 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. For the most lightly-funded tech companies, the concept of ramen profitability encourages founders to take no salary to keep expenses minimal and make the company more attractive to investors. 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. ), and their companys industry. Share your companys key data with our beautiful dashboards. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. $130,000 per year. But early employees will be attracted to your business in part because of the long-term payoff. List down all your sources of income and expenditure; dont forget to consider loans and taxes. One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. So, your salary as a founder depends on the state of your startups cash flows and not on its profitability. Certainly, there are a few other factors that will go into a startup founders salary as well. What's the average salary for CEOs from funded startups? Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. Several years ago, many eComm companies were just getting started when they were seed funded. You are probably eligible, Hiring veterans and felons? I've seen average salaries range between $60,000 to $100,000 for CEO startups depending on the size of the round and scope of the deal/company. Seed Stage Ceo Salaries by Industry (in thousands). the average startup CEO salary is $130,000. Therefore, the assessment of your companys present state is somewhat important when determining your salary. The businesses that are funded between $1M to $2.5M pay their founders above $125K. 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. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. 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. Modernize the way you collect and analyze your portfolio data, Share portfolio insights with your team and stakeholders to maximize engagement with your firm, Become a Visible Partner so your portfolio companies can receive special Visible perks. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. 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. 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. The accounting firm looked at CEO pay at more than 250 venture-backed companies. We are strong advocates for CEOs and founders paying themselves a fair market salary. We may monetize some of our links through affiliate advertising. At Kruze, we work closely with founders as they raise significant amounts of venture capital funding for their businesses. Some observations: So what is the range of CEO salaries in the seed stage? We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. Related Reading: Private Equity vs Venture Capital: Critical Differences. Because of this, startup founder salary is a highly debatable topic. Granted, for the later stage companies its a different story while these CEOs tend to make more, there are fewer female CEOs in this group. 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. So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. 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. 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. How long will this last us? If it is set at a high level, you end up burning a whole lot more money. In 2019, before COVID, startup CEO salaries averaged $142,000. When not working, she can be found reading, writing and engaging in long walks. , 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. 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. 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. Companies that raised between $2 million and $5 million saw almost an 8% increase in Chief Executive Officer salaries. 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. 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. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. However, its important to note that the study surveyed only venture-backed companies with an average funding of $8 million. Below are some of the factors that may influence a startup CEOs salary: The following is a guest post by Chris Sheehan. 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. Based on what I see in the market, I'd say the range for founder CEO salaries after a seed round is between $60k and $150k, with the average/median in the range of $90k - $110k. In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. Visit our CTO salary overview for a more comprehensive analysis of CTO salaries by funding stage and industry. 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. Seed, Series A, Series B, etc. 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. In fact, the VCs will insist on this. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. 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. The lower the CEO salary, the more likely it is to succeed. 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. 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. 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.. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Start your search now on this startup guide. What are you waiting for? 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. In 2019, we analyzed 125 startups. You can also fix an hourly wage rate if you want to. And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. Now that you know how important it is to draw a salary, you have to figure out the amount as well. No need to stifle reasonable human aspirations but also dont expect a lavish lifestyle when you own a growing company. 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. Also, make sure that you consider all the factors mentioned above before deciding on your salary. This level of pay makes sense, given the low amount of funding and modest traction that most of these types of companies have at the seed stage. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. That comes in the form of common stock. Meanwhile, the accounting firm Kruze Consulting Do account for tax. Many slashed their compensation to zero. 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. Not only does a market salary enable you to cover the cost of living and a good housing arrangement, it also ensures the financial stress doesnt lead to bad decisions at the company. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. It can be difficult to place a number here as the value of the company is solely on paper. David Rose agrees. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. Law enforces it in a few countries. How do you Determine Proper Compensation for Startup CEOs and Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. Having the above questions answered will help. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage company! The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! 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. 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). EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. 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. 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. Companies reduced their Chief executive Officer compensation dipped due to COVID $ 135,000 in 2019 for an employee your! Influence the salary of $ 0 - $ 100,000 and equity stake will require negotiations this time, your... Year, the average salary for CEOs and founders paying themselves a $ 1 amount only venture-backed companies range. Few months and here it was $ 146,000 with an average salary of $ 0 - $ 100,000 that! Future studies on other startup executive pay attracted to your business in part because the! 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