Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. Design by Lucila Romero. Money can be the root of problems in many relationships. Visit kruzeconsulting.comto learn more. This continues a corporate trend that began in 2019. ), and the companys industry. As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. The VCs set my salary without discussing or consulting with me (I know, weird, SaaS was the top performing industry by CEO salary in 2020. 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 table below shows average and median salaries since 2018. 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. Weve found that CEOs in some industries have higher average salaries than others. 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. What are you waiting for? Salaries ranged from the 25th percentile of $43,000 to the Some families live on that," says VC Sean Owen. You will want your boards input on this process early on., Now comes the really hard part. Meanwhile, the accounting firm Kruze Consulting Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Keep in mind that these rewards are essential to incentivise you and keep you focused. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. In practice we have found that if you only ask one question, ask that. . Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. There are a variety factors that drive the difference in founder/CEO pay by industry. Still, when it comes to startup CEO pay, our data reveals some good news. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. And in 2021, the average salary popped back - but thats not the full story, as youll see as we dig into the numbers. While there are quite a few factors that go into determining your salary we find the following to be most important. The bottom line is: Align everything in your life. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. 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. 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). Know that your early-stage startup will pay you less than the MNC you used to work for. CEOs of funded startups make many important decisions - including compensation decisions. One of the most common questions we get from founders is what their salary should be after they raise funding. 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. The analysis comes from an anonymized dataset comprising more than 250 venture-funded companies and representing more than $2 BN in funding. The same trend was true for the median startup CEO salary. Your request has been submitted.We will contact you shortly. Do account for salary baseline and tax here. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. The distinction between the two may impact early employee decisions on how they personally value their stock. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. VCs, of course, wanted to stretch every dollar they could. Seed, Series A, Series B, etc.) numbers are from there, the more likely the CEO pay range climbs closer to $250,000. 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. $130,000 per year. Also, try our Startup CEO Salary Estimator tool on the right. 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. 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). 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. 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. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. 3) Excessive hiring and spending. 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. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. 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.. the average startup CEO salary is $130,000. Weve kept these previous salary analyses below. Filter by role, location, stage, startup size. Case Study. 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. This chart breaks down seed funded CEO salary by industry: said Vanessa Kruze, CEO of Kruze Consulting. However, our research is meant to aid your own, and we are not acting as licensed professionals. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. 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. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. 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. When should a startup make its first ops hire? The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Some families live on that," says VC Sean Owen. Remember that a startup takes years to become profitable; you cannot starve till then. 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. Your employees have options for where they work. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. As already mentioned, founders are paid only when they work as employees, not because they started the company. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. 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. That comes in the form of common stock. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. 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. The greater the. 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! In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. 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. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. We have presented you with CEO salary data the last two years. Do account for tax. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. 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. 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. And, not surprisingly, compensation is one of the most frequent questions. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. 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. Some observations: So what is the range of CEO salaries in the seed stage? 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. They might lose faith in you and your company. Per month. 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. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". Wow! So it does pay to be good at fundraising! Personally, you dont want to bring that kind of stress home to your partner. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. 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. 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. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. You are probably eligible, Hiring veterans and felons? 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. How long will this last us? Startup founders need to decide how much salary is enough. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. 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. Industries and different verticals can lead to varying salaries. US Based Companies that have raised under $100M. 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 Look at your competitors and determine what they are paying an employee in a similar role. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want to add to it later there's not a lot stopping you. What's the average salary for CEOs from funded startups? ), and their companys industry. Search by stage, location, sector and more. 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, Jason Cohen writes. Thiel was hesitant to answer, but eventually said $100-125k. Lets dive into why we think there are notable difference by industry. 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. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. 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. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. 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,. 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. The companies we used to determine this figure have raised collectively more than $2B in funding. We hope this data will help other early-stage businesses prepare their budgets! 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. 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. Startup compensation guide: see thousands of startup salary and equity data points. It can be difficult to place a number here as the value of the company is solely on paper. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. No need to stifle reasonable human aspirations but also dont expect a lavish lifestyle when you own a growing company. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. Because of this, startup founder salary is a highly debatable topic. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. It discovered the salaries are up 2.7% compared to 2021 well below the Male CEOs saw a $5,000 salary increase. When the company exited after three venture rounds, my salary was at $250k. As companies mature, its typical that a compensation committee is formed by non-management board members. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. 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. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. 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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. Weve been creating this startup CEO salary report for the past several years. How do you Determine Proper Compensation for Startup CEOs and Build relationships, manage a fundraise and build your business. 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. 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 As you would have figured out by now, entrepreneurs dont always earn big bucks. Your salary also depends on the amount you have raised. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. 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. 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. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. that a founder CEO will be in the 5-20% range, a founder CTO in the 2-10% range, other co-founders between 3-7% and non-founder early employees between 0.5-5%. A more mature space leading to a higher salary. Startup executive compensation depends on their financial independence as well as the financial health of the business. Startup Founder Salary Guide: How Much To Pay Yourself? 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. 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 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. Related Reading: Private Equity vs Venture Capital: Critical Differences. Raise capital, update investors and engage your team from a single platform. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. We are strong advocates for CEOs and founders paying themselves a fair market salary. However, we were surprised that healthcare companies had lower founder/CEO pay. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. 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. Sequential rounds gave me a small bump in salary. You may hire an accountant for assistance. The later the stage a company is, the higher their salary is. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. The Columbus, Ohio-based startup also recently closed an oversubscribed $4M series seed round led by Tamarind Hill, a venture capital firm investing in tech-driven 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. See our full report for CEO pay bands. Several years ago, many eComm companies were just getting started when they were seed funded. For example, if a company has gone on to raise their series A that is a testament to the companies growth and should be reflected on the CEOs salary. 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 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). Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is This is a crucial incentive; so, outline realistic checkpoints and track them. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. The amount of cash that flows into a business determines how much flows out of it. Also, those who have families to take care of, are paid more than college students sharing an apartment. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. 41% of the CEOs who had their salaries reduced later increased them by the end of the year, while 47% kept their salaries flat - and 13% decreased their compensation further. 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. Below is our 2018 study, which we have left online for reference. Estimate your R&D tax credit using our free calculator. 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,. 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. One trend remained the same as last year: the more you raise, the more you get paid. 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. 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. 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. Resources and best practices to help investors manage and communicate with their portfolio companies. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. 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. 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. One of the easiest ways to do that is pay yourself the right amount. This is somewhat true as well. How Much Should A Startup Founder/CEO Pay Herself? Another influencing factor is how long the company has bootstrapped prior to the seed round and how much were the founders getting paid during this time. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation.

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