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. Make sure that you dont ask for too much or little. Lets dive into why we think there are notable difference by industry. There is a strong positive correlation between the two. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. So what is the range of CEO salaries in the seed stage? 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. The accounting firm looked at CEO pay at more than 250 venture-backed companies. This year, we took it up a notch and analyzed data from more than 250 venture-funded companies. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. Therefore, the assessment of your companys present state is somewhat important when determining your salary. Determine the gap between their salary and total compensation. 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. Also, you may have to pay more when hiring more experienced people. *. 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.. So, if your only contribution is money and/or some assistance during the ideation phase, you dont get a salary. This makes it important to account for the duration that you work when calculating your 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. 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. 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. One of the easiest ways to do that is pay yourself the right amount. Seed, Series A, Series B, etc.) As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. A well-researched proposal that clearly assesses your companys current financials, demonstrates the expected impact fairly compensating an early employee or CEO will have and honors your commitment to delivering the return they expect on their investment will get you to reach mutually agreeable terms. That comes in the form of common stock. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. Some families live on that," says VC Sean Owen. 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. Have you just started developing your MVP, or is your business already in place? Another study by Kruze Consulting found that the average startup CEO salary was $146,000. No need to stifle reasonable human aspirations but also dont expect a lavish lifestyle when you own a growing company. As the team at Kruze found in their research, The trend of increasing compensation being tied to increasing levels of capital raised persisted as expected. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. The table below shows average and median salaries since 2018. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. Getting someone to join your dream before it is much of anything is an art not a science.. Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. Im seriously enlightened. David Rose agrees. Transparency and preparation are key. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. The best way is to tie your remuneration to achievable growth milestones and work accordingly. When the company exited after three venture rounds, my salary was at $250k. The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. 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. As companies mature, its typical that a compensation committee is formed by non-management board members. The term sheet Do account for tax. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. Chris is a seed stage VC and angel investor at CommonAngels. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. 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. 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. However, our research is meant to aid your own, and we are not acting as licensed professionals. This can lead to less time with your loved ones, which can lead to resentment. The distinction between the two may impact early employee decisions on how they personally value their stock. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. I asked Richard why? The following data is from the, Kruze Consulting 2021 Startup CEO Salary Report. 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. Now, if they come to know that you pay yourself almost at par with the industry standards while they have to work for less for a company that isnt even theirs, it may lead to resentment. Share your companys key data with our beautiful dashboards. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Filter by role, location, stage, startup size. What's the average salary for CEOs from funded startups? 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. 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. The companies we used to determine this figure have raised collectively more than $2B in funding. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. You may start taking a salary when your business raises enough capital. 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. What are Your VCs Return Expectations Depending on the Stage of Investment? ), and their companys industry. The median base pay for an entrepreneur who has successfully raised funding ranges from 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. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. Many slashed their compensation to zero. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. San Francisco/New Delhi: The average startup CEO salary increased by 2.7 per cent in 2022 to reach $150,000 per annum globally from last year, while the median increased to $140,000, according to a new report. Some families live on that," says VC Sean Owen. CEO Salary by Total Funding Raised - 2022. 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, Tim Jackson writes. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. Suppose you have just raised capital and are using it for the development of business. 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. In fact, the VCs will insist on this. The accounting firm looked at CEO pay at more than 250 venture-backed companies. You might feel the same way. CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. 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. Per month. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. 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. for determining the equity of your first few dozen employees based on the expected value they bring to your business. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. You are probably eligible, Hiring veterans and felons? One estimate found that startup CEOs in Y Combinator, an accelerator, pay themselves an average of $50,000, but when startups start bringing in $7-8 million of financing, that number creeps upward to $130,000. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage 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. Did we miss something? Wow your investors with data-driven updates that drive interaction. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. Your employees have options for where they work. You need to be on the businesss payroll for that. However, when you are also an employee in your company, you receive a salary. 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. In practice we have found that if you only ask one question, ask that. This continues a corporate trend that began in 2019. 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. It seems that companies pay 8-12% of their funding to their founders. ETtech. How Did the Covid Pandemic Affect CEO Salary? 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. Determining how to properly compensate employees at a startup is also a tricky task. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. List down all your sources of income and expenditure; dont forget to consider loans and 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. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Do account for salary baseline and tax here. As already mentioned, founders are paid only when they work as employees, not because they started the company. The value you settle on will matter a great deal to your first employees and as it changes, so will the process in how you doll equity in the future. Thankfully, that thinking has evolved. Start your search now on this startup guide. However, you cannot expect it to be at par with the market standards. This means the earlier you join, the more diluted you'll become. See if you are eligible for a salary or not. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. Below is our 2018 study, which we have left online for reference. 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. 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. Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. Industries and different verticals can lead to varying salaries. How Much Should You Pay Yourself As A Startup Founder? Next, its time to determine what your business is worth so the value of equity can be established. One of the most common questions we get from founders is what their salary should be after they raise funding. 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). 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. 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: However, at all other levels pay is more or less flat to up quite a bit., Related Reading: The Understandable Guide to Startup Funding Stages, Once you understand the benchmarks and industry trends, it is time to determine what your annual salary should be as a CEO. Has covered the wider aspects. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. $276k Is the Median Startup CEO Salary for a Very Successful Company. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. 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. Getting someone to join your dream before it is much of anything is an art not a science., Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. WebSequential rounds gave me a small bump in salary. 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. 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. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Oftentimes a startup cant offer the salary an established Fortune 500 company may be able to offer but they can offer equity and intangibles that an employee cant find elsewhere. But early employees will be attracted to your business in part because of the long-term payoff. 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. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. Wrong! Working her way up the success ladder and her personal philosophy textbook, Kavvya believes that a good conversation is worth more than a good book. 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. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. This chart breaks down seed funded CEO salary by industry: The amount of cash that flows into a business determines how much flows out of it. The distinction between the two may impact early employee decisions on how they personally value their stock. 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. As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. Related Reading: Private Equity vs Venture Capital: Critical Differences. said Vanessa Kruze, CEO of Kruze Consulting. Get typical startup equity %. See our full report for CEO pay bands. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. 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. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. 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. Startup compensation guide: see thousands of startup salary and equity data points. the average startup CEO salary is $130,000. At any moment, executives or team members may own public or private stock in any of the third party companies we mention. An interesting perspective. 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. Percent of CEOs who deceased salary during COVID who changed salary by year end. For venture-backed companies, you can find this answer through an official 409A process or less formally (as. ) Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. 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! Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". Your salary also depends on the amount you have raised. Raise capital, update investors and engage your team from a single platform. 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. 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. That comes in the form of common stock. 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. Seed, Series A, Series B, etc. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Youll want to pay yourself a fair wage, but it can be a tricky conversation with the people who need to sign off on your salary before you give yourself a bump. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. Still, when it comes to startup CEO pay, our data reveals some good news. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. We have presented you with CEO salary data the last two years. If you can raise a Series A round with your company at a Youve got a package in mind that includes a salary you can afford and an equity stake that makes the offer competitive if your company grows as expected. , 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 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. So, ask only for the amount that you need. 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. The salary amount, frequency, and the way you withdraw that money affect your tax amount. Come on! Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. 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. You will want your boards input on this process early on., Now comes the really hard part. This benchmarking will help you figure out your opportunity cost, that is, the amount of salary money you have forgone to start your own company. 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. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. For venture-backed companies, you can find this answer through an official 409A process or less formally (as Fred Wilson proposed in 2010) by using the valuation of your last financing round or the most recent offer you received to purchase your business. The same trend was true for the median startup CEO salary. 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. Keep in mind that these rewards are essential to incentivise you and keep you focused. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. Therefore, paying founders doesnt seem sensible. Do unprofitable companies need to file tax returns? So, a high founder salary sets a high baseline for others as well. When the company exited after three They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Several years ago, many eComm companies were just getting started when they were seed funded. Startup founders need to decide how much salary is enough. On, Stating the obvious, salary needs can vary widely. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. If the investment is up to $2.5 million, the CEOs salary should be $125,000. 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. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. 28 2 Jason M. Lemkin SaaStr Fund. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Same with fintech at $129,000. As a startup founder, you must understand that entrepreneurship is not a bed of roses. We hope this report simplifies your startup CEO pay decision! Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. 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. 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. However, at all other levels pay is more or less flat to up quite a bit. Read our tips now. 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. Our analysis backs this up, but its important to mention that there is no single factor that influences this decision. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. I would like more of this start up articles as I just subscribed to your platform. Yes! Finally, startup culture can generate pressure to not take salaries. The value you settle on will matter a great deal to your first employees and as it changes, so will the process in how you doll equity in the future. 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,. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. However, there are also various other factors into play. Founders of bootstrapped startups dont need to pay themselves. 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