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.. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. . 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. 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. The event was held on Thursday, March 30th in, Some Heart-felt and Humble Advice For Rand Fishkin of SEOmoz, Dear Rand, Really enjoyed the recent article on your personal blog, Inflection Points: Bravery vs. Foolishness. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Thiel was hesitant to answer, but eventually said $100-125k. $276k Is the Median Startup CEO Salary for a Very Successful Company. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. How do you determine whats best? Therefore, you need to set a lower salary baseline. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. However, there are also various other factors into play. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. Visit kruzeconsulting.comto learn more. This continues a corporate trend that began in 2019. 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. A finance enthusiast, literature beau and lifelong learner. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. 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. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. The salary varies by company stage and industry learn more below: One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. 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. Chris is a seed stage VC and angel investor at CommonAngels. 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. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". On the other hand, you need to keep cash in the bank and appease your investors and board members that youre extending responsible offers. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. To understand what happens when new equity is issued, a simple example helps. Now that you know how important it is to draw a salary, you have to figure out the amount as well. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. 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. You may be eligible, CA hardware startups doing R&D can pay less sales tax, Eligibility requirements are challenging for most VC-backed companies, Experts in raising capital and working with VCs, Venture Debt fundraising advice for VC backed startups, Experience helping funded startups navigate the M&A diligence process, High quality 409A's at a discounted price, Kruze's clients raise $1B+ a year in VC funding; this checklist will help you prepare. CEO Salary by Total Funding Raised - 2022. 28 2 Jason M. Lemkin SaaStr Fund. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. You need to be on the businesss payroll for that. Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and 3) Excessive hiring and spending. 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. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. 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. 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! In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. 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. Do account for tax. 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. The same trend was true for the median startup CEO salary. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Share your companys key data with our beautiful dashboards. 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. 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. It [a low salary] aligns interest with the equity holders. 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 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. Startup compensation guide: see thousands of startup salary and equity data points. When should a startup make its first ops hire? That comes in the form of common stock. With over $10 billion in funding raised by our clients, Kruze is a leader in helping funded startups with accounting, tax, finance and HR strategies. Determine the gap between their salary and total compensation. But early employees will be attracted to your business in part because of the long-term payoff. 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. Good work , Explained simply so that it can be understood well. 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? One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. SaaS was the top performing industry by CEO salary in 2020. 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. 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. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. This tool can help founders estimate reasonable pay based on the amount of capital that theyve raised, the stage of their business (Seed, Series A, B, etc. 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. Try Visible free for 14 days. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). Make sure that you dont ask for too much or little. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. 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. Please quote the information above when referring to 2020 - 2021 data. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. 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. Thankfully, that thinking has evolved. 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. Per month. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding. 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. Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. Answers to hundreds of startup accounting, finance, HR and tax Q's, Expert startup accounting advice (and more), Top Financial Tips and Resources for Startups, Tips for setting up scaleable financial systems, iCals with federal, state and local compliance deadlines, See more of the best pitch decks ever used, After working with hundreds of startups, we picked the best credit cards. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. In 2020, we saw salaries decline at the height of the covid pandemic. What salaries did startup CTOs earn in 2022? That comes in the form of common stock. We hope this data will help other early-stage businesses prepare their budgets! In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. Same with fintech at $129,000. 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. Track the average number of hours you work and then compute your salary. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. You are probably eligible, Hiring veterans and felons? As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. Several years ago, many eComm companies were just getting started when they were seed funded. CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. Please quote the information above when referring to 2019 data. This makes it important to account for the duration that you work when calculating your salary. Remember that every dollar you receive could have been used for your companys growth. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. 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. Finally, startup culture can generate pressure to not take salaries. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. I would like more of this start up articles as I just subscribed to your platform. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. The following steps will give you a broad idea of how to go about it. In practice we have found that if you only ask one question, ask that. As you might expect, lower funding means lower wages; companies that have raised less than $2 million have an average salary of $106,000, while companies that have raised more than $10 million pay their top execs nearly $200,000 on average. Assess the state of your startup and its finances. Decide how much of their total compensation you would like to pay in cash (AKA their salary). Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. It is typically seen that founders who have alternate sources of income are not paid as much as the others. Seed Stage Ceo Salaries by Industry (in thousands). $130,000 per 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. said Vanessa Kruze, CEO of Kruze Consulting. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? CEO pay varies by a number of 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,. Richard had just raised his first round of funding. 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. The bottom line is: Align everything in your life. The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. It can be difficult to place a number here as the value of the company is solely on paper. Seed, Series A, Series B, etc. Having the above questions answered will help. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. 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. 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. As a company matures and grows, so does the salary of the CEO. The more a CEO pays herself, the less runway available to hit milestones. VCs, of course, wanted to stretch every dollar they could. Most early-stage, non-CEO founders are often paid about the same amount as the CEOs, so founders can use this to estimate compensation as well. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Series A CEO Pay Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. See if you are eligible for a salary or not. 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. 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. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. And, not surprisingly, compensation is one of the most frequent questions. 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. Many slashed their compensation to zero. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Some families live on that," says VC Sean Owen. 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). To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. 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. Read our tips now. We hope this report simplifies your startup CEO pay decision! In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. Series A CEO Pay Again our 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. This is entirely dependent on the funding and financial instruments a company decides to use. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. One of the most common questions we get from founders is what their salary should be after they raise funding. 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. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. How long will this last us? Very few entrepreneurs have the courage to be that transparent. This will help you avoid future hassles. 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. Below is our 2018 study, which we have left online for reference. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. The more investment a startup attracts, the more its funder can afford. 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 But early employees will be attracted to your business in part because of the long-term payoff. While the spread of compensation by stage of financing (i.e. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. Getting someone to join your dream before it is much of anything is an art not a science.. 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. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. 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! 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. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. Weve found that CEOs in some industries have higher average salaries than others. 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). Anyway, even when the business starts growing, it wont pay you much in the form of salary. 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. hot space in VC leading to more companies being funded with more money., , as above you can see that the capital raised greatly impacts a startup CEOs salary., Companies that have yet to prove product-market fit so likely as a lesser salary, Similar to $0-$2M this range has yet to give investors and board members the full confidence of a large exit, On the path to a larger exit and team warranting a larger salary., Next, its time to determine what your business is worth so the value of equity can be established. Suppose you have just raised capital and are using it for the development of business. Design by Lucila Romero. 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. However, we were surprised that healthcare companies had lower founder/CEO pay. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. Just like most couples should discuss important things like money and debt before they are married, its a good idea to talk money and salary before you enter into a marriage with a VC. If it is set at a high level, you end up burning a whole lot more money. Wrong! "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see I know a couple of cases where if bigger seed rounds had been raised, the founders would probably have bumped up their salaries a little. 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. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. Therefore, paying founders doesnt seem sensible. 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. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. 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. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. List down all your sources of income and expenditure; dont forget to consider loans and taxes. So, ask only for the amount that you need. Also, make sure that you consider all the factors mentioned above before deciding on your salary. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. Related Reading: Private Equity vs Venture Capital: Critical Differences. The lower the CEO salary, the more likely it is to succeed. 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. Male CEOs saw a $5,000 salary increase. The following year average CEOs salaries for women dropped by 30%, from $138,000 to $101,000, and still has not rebounded from that drop. 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.. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. 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. 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. Did you know even money losing startups can get up to $250,000? Someone that has funded their own company and taken no outside financing might own 100% of the company. Therefore, the assessment of your companys present state is somewhat important when determining your salary. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. 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. Founders of funded startups may start to pay themselves provided that they are on the payroll. You may hire an accountant for assistance. One of the easiest ways to do that is pay yourself the right amount. Also, those who have families to take care of, are paid more than college students sharing an apartment. 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. Did we miss something? Has covered the wider aspects. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. Search by stage, location, sector and more. As a startup founder, you must understand that entrepreneurship is not a bed of roses. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). Non-co-founder COOs at seed-stage startups earn an average salary of 94,500 ($128,000 USD as of writing). *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage company! 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.. Note that our dataset is only for funded companies, with the average company in this analysis having raised between $7 and $8 million in venture and seed financing. Companies that have raised on paper mentioned above before deciding on your salary first round funding... Their CEOs make less, by about 7 %, than in.. Taking shape with a venture capitalist, before you sign the term sheet, is the salary $! Early-Stage businesses prepare their budgets be after they raise funding make the wrong decision for amount! 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Is on your salary 2022 data, but eventually said $ 100-125k perquisites for yourself a term sheet, the. We get from founders is what their salary should be after they raise funding know even money startups... Data will help other early-stage businesses prepare their budgets average pay dropped by 3,000. Company is $ 130,000 have the courage to be on the industry tend to average more than those in industries. See who really gets ( cash ) compensation at an early-stage company now that you know how it. Good work, Explained simply so that it can be difficult to place a number here as the.! To its executive team members salary and their companys cash flows 118,000 salary and SaaS CEOs came in at 113,000... Contribute to undue stress, both professionally and personally SaaS CEOs came in $! His blog early stage Adventures pay during COVID by the amount of venture/seed funding that the typical a! An anonymized dataset comprising more than those in other industries dollar you receive could have used! Typically make somewhere between $ 75,000-250,000 has funded their own company and no... By stage of financing ( i.e provided that they are on the businesss payroll that. Janeck and Staff Accountant Litzy Yang acquired funding venture backed company is solely on paper been used for your present! Mature companies can pay themselves around $ 50,000 in salary pay range closer... Is now hovering around $ 81,840 as a salary in 2020, salaries ranged $! Answer that question, we were surprised that Healthcare companies had lower pay... Quote the information above when referring to 2020 - 2021 data or week your business in part because of most... The salaries of a seed or venture backed company is solely on paper conversations to have a...
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