CEO pay varies by a number of 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. 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. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. Below is our 2019 study, which we have left online for reference. Remember that a startup takes years to become profitable; you cannot starve till then. 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. Still, when it comes to startup CEO pay, our data reveals some good news. We are strong advocates for CEOs and founders paying themselves a fair market salary. Some families live on that," says VC Sean Owen. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). As companies mature, its typical that a compensation committee is formed by non-management board members. Start your search now on this startup guide. Someone that has funded their own company and taken no outside financing might own 100% of the company. It is typically seen that founders who have alternate sources of income are not paid as much as the others. We hope this report simplifies your startup CEO pay decision! 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. Early-stage companies, as well as all other companies, should evaluate their policies to determine how the gender pay gap increased in the last three years, and see what steps they can take to better support female leaders.. In 2020, approximately 36% of companies reduced their chief executive compensation during COVID. When should a startup make its first ops hire? It is typically seen and suggested that founders start small and raise their salaries after their business hits a few specified milestones or after each round of funding. Startup Founder Salary Guide: How Much To Pay Yourself? Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. 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. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Your employees have options for where they work. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. . The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. Stress can create dissension in a relationship, adding pressure to your home life, affecting how you relate to those you love. The biggest growth in the size of funding raised seed rounds, and therefore the biggest driver of salary growth, came from hardware and SaaS companies. 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. 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. 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. This continues a corporate trend that began in 2019. And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. The lower the CEO salary, the more likely it is to succeed. Having the above questions answered will help. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. Transparency and preparation are key. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. Photo: Supplied. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. Are you still an early-stage venture, or have you matured? 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). On the other hand, you need to keep cash in the bank and appease your investors and board members that youre extending responsible offers. ), and their companys industry. What salaries did startup CTOs earn in 2022? Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. Come on! How long will this last us? At any moment, executives or team members may own public or private stock in any of the third party companies we mention. 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. 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. 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. 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. Anyway, even when the business starts growing, it wont pay you much in the form of salary. Please quote the information above when referring to 2020 - 2021 data. Thanks for the article. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. What Salaries Did Startup CEOs Earn in 2022. At the seed stage you should have a reasonable salary based on your location. Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want It seems that companies pay 8-12% of their funding to their founders. This came to me at the time I needed it most. As weve seen in the past, biotech and pharmaceutical companies tend to have the highest CEO compensation, with seed funded companies paying their Chief Executives $161,000. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. Getting someone to join your dream before it is much of anything is an art not a science.. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. 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. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. 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. If the CEO is also a founder, it will be much easier to manage their annual salary because the value of their compensation package will likely lean much heavier toward equity than cash. Weve found that CEOs in some industries have higher average salaries than others. 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. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. This calculator will show you an estimated range of compensation for a startup CEO based on the amount of funding that the company has raised, the stage of the company (i.e. You may hire an accountant for assistance. 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.. 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. Brex vs Ramp - Which card is best for startups? Many slashed their compensation to zero. 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. That comes in the form of common stock. Say you raise $1,000,000 on a $5,000,000 pre-money valuation. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. 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). In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. Search by stage, location, sector and more. 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. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. If you can raise a Series A round with your company at a Did we miss something? The firm, which runs payroll, accounting, tax, finance, and HR for funded startups, was able to get this figure after performing a series of analyses on CEO salary at approximately 250 seed and venture-funded startups. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. The median base pay for an entrepreneur who has successfully raised funding ranges from I know of a couple of companies I am invested in where the founders didn't pay themselves anything for quite a while as they were building the foundations of their product. For rounds of 150k or below, around half of founders secure a salary. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". 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. 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 The VCs set my salary without discussing or consulting with me (I know, weird, The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. Are you big enough to start on the expansion journey? 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. 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. 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.. 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. 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. 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. *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage company! Do unprofitable companies need to file tax returns? A portion of that money goes to the government. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. 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? The businesses that are funded between $1M to $2.5M pay their founders above $125K. 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. Seed Stage Ceo Salaries by Industry (in thousands). Typically there would be KPIs and targets built in to unlock further compensation in various time periods. And, not surprisingly, compensation is one of the most frequent questions. said Vanessa Kruze, CEO of Kruze Consulting. 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. Tax Credit Center - Which of the 700+ Credits Are Best? The distinction between the two may impact early employee decisions on how they personally value their stock. Having the above questions answered will help. 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. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. What are you waiting for? In 2019, we analyzed 125 startups. Some families live on that," says VC Sean Owen. Thiel was hesitant to answer, but eventually said $100-125k. Some observations: So what is the range of CEO salaries in the seed stage? The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. The analysis comes from an anonymized dataset comprising more than 250 venture-funded companies and representing more than $2 BN in funding. How do you determine whats best? Interested in other data on startup spending? We have created one of the most complete databases in the startup world. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. 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,. 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.. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. Previously. 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. Now that you know how important it is to draw a salary, you have to figure out the amount as well. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. 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. 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. There is a strong positive correlation between the two. Founders are paid only when they work as employees. CEO pay varies by a number of factors, including the executives previous experience, the amount the company has raised, the startups traction and the industry the startup is in. Good work , Explained simply so that it can be understood well. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. 28 2 Jason M. Lemkin SaaStr Fund. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. Seed, Series A, Series B, etc.) Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. 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. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. Do account for salary baseline and tax here. We have presented you with CEO salary data the last two years. Assess the state of your startup and its finances. 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. While the spread of compensation by stage of financing (i.e. Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. SaaS was the top performing industry by CEO salary in 2020. It [a low salary] aligns interest with the equity holders. As a company matures and grows, so does the salary of the CEO. Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. 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. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Weve kept these previous salary analyses below. You have to be able to afford the talent youre recruiting without cutting your financial runway unnecessarily fast for some quick-to-compete cash package. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. 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. Talk to your board upfront about the salary. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. Saw was for eCommerce companies, who saw their salaries dip nearly %. 1M, with three quarters successfully negotiating a salary the Kruze team helps run startups and. 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