Meanwhile, the accounting firm Kruze Consulting According to the Foundry Group Venture Capitalist, Seth Levine, the companies that have raised $500K usually cannot pay their founders more than $75K while the ones raising $1M pay them between $75K and $125K. Expect us to publish future studies on other startup executive pay. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. 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. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. , 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. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. Tax is one of the most crucial factors to consider when drawing founder salary, especially in mature companies. So, ask only for the amount that you need. As a company matures and grows, so does the salary of the CEO. But early employees will be attracted to your business in part because of the long-term payoff. What Salaries Did Startup CEOs Earn in 2022. Non-co-founder COOs at seed-stage startups earn an average salary of 94,500 ($128,000 USD as of writing). The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. How much can your startup save in payroll taxes? In 2020, we saw salaries decline at the height of the covid pandemic. Did we miss something? What a great article. 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. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. 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. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. So, if a founder or cofounder works as their startups CEO, COO, CTO, CMO, or in any other role, they deserve remuneration for their services. 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. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Startup founders are not entitled to a salary; however, CEOs are. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. 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! Is it wise to pay yourself when your startup demands this many resources? One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. Your employees have options for where they work. While there are quite a few factors that go into determining your salary we find the following to be most important. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. Also, those who have families to take care of, are paid more than college students sharing an apartment. 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,. When the company exited after three venture rounds, my salary was at $250k. Case Study. The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. Determining how to properly compensate employees at a startup is also a tricky task. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. Also, see if you can cut down on unnecessary expenditures. 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. This is a crucial incentive; so, outline realistic checkpoints and track them. How to Calculate Your Startup Founder Salary? 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. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula,, writes. They might lose faith in you and your company. 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. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Wrong! And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. by using the valuation of your last financing round or the most recent offer you received to purchase your business. 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. This year, we expanded the data to over 200 of our seed and venture-backed clients and found that in 2019, CEO salaries rose to an average of $142,000 annually, nearly a 10% increase. 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. Come on! Im seriously enlightened. Looking by year, for every dollar in salary men earned, female CEOs earned: The setback in salaries for female startup CEOs is troubling, especially considering that the market was much closer to parity in 2019, prior to the COVID crisis, said Vanessa Kruze, CEO of Kruze Consulting. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. What salaries did startup CTOs earn in 2022? 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. 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. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. 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. Thiel was hesitant to answer, but eventually said $100-125k. 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. As we wrote about in our post, How to Fairly Split Startup Equity with Founders, startup employees are generally looking for something more than a salary transparency, collaboration, ownership, responsibility, etc. Our analysis backs this up, but its important to mention that there is no single factor that influences this decision. 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. WebAt the seed stage you should have a reasonable salary based on your location. Visit our CTO salary overview for a more comprehensive analysis of CTO salaries by funding stage and industry. . 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. Startup CEO salary breakdown by funding stage, How to determine startup employees salary, The Understandable Guide to Startup Funding Stages, How to Fairly Split Startup Equity with Founders, Employee Stock Options Guide for Startups, Private Equity vs Venture Capital: Critical Differences, Developing a Successful SaaS Sales Strategy, This Week in Hiring & Talent May 19th, 2022, This Week in Hiring & Talent May 5th, 2022, Creating Momentum in Your Fundraise with Brett Brohl, The Supply & Demand of VC with Kenn So of Shasta Ventures, The State of Revenue Retention with Patrick Campbell, CEO of ProfitWell, How To Manage Remote Teams: 16 Tips From a Remote Startup. Theres been plenty written about the pay disparity between women and men in the U.S. And when it comes to the startup world, that pay gap has remained stubbornly high. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. What are you waiting for? 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: If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. You need to assess the current state of your venture properly before determining your salary. Male CEOs saw a $5,000 salary increase. When not working, she can be found reading, writing and engaging in long walks. Also, you may have to pay more when hiring more experienced people. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. The bottom line is: Align everything in your life. WebSequential rounds gave me a small bump in salary. 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. How Much Should You Pay Yourself As A Startup Founder? If the investment is up to $2.5 million, the CEOs salary should be $125,000. So, a high founder salary sets a high baseline for others as well. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. How Much Should A Startup Founder/CEO Pay Herself? Series A CEO Pay Again our Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is 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. And, not surprisingly, compensation is one of the most frequent questions. Getting someone to join your dream before it is much of anything is an art not a science.. 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. ), and the companys industry. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. In 2020, approximately 36% of companies reduced their chief executive compensation during COVID. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. 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 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. 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. It seems that companies pay 8-12% of their funding to their founders. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. Seed funding is then followed by multiple larger rounds of venture capital financing, which are named according to their order: Series A, Series B, Series C, etc. It discovered the salaries are up 2.7% compared to 2021 well below the Founders in those industries tend to come with academic credentials, and previous experience, that founders in other industries dont always have (M.D., PHD), and thus warrant a higher annual salary. Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. Photo: Supplied. What's the average salary for CEOs from funded startups? Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. 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. Visit kruzeconsulting.comto learn more. To understand what happens when new equity is issued, a simple example helps. I asked Richard why? 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.. $276k Is the Median Startup CEO Salary for a Very Successful Company. This chart breaks down seed funded CEO salary by industry: We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. 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.. Talk to your board upfront about the salary. Remember that a startup takes years to become profitable; you cannot starve till then. Therefore, the assessment of your companys present state is somewhat important when determining your salary. Startup executive compensation depends on their financial independence as well as the financial health of the business. 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. said Vanessa Kruze, CEO of Kruze Consulting. 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. Try Visible free for 14 days. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. No need to stifle reasonable human aspirations but also dont expect a lavish lifestyle when you own a growing company. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. Also, make sure that you consider all the factors mentioned above before deciding on your salary. As great as it feels to receive money out of your own business, it is usually impractical and will just lead to a portion being lost in taxes. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. 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. If it is set at a high level, you end up burning a whole lot more money. Markets that are receiving more funding and exiting at higher clips generally warrant 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. Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). We have presented you with CEO salary data the last two years. Founders are paid only when they work as employees. US Based Companies that have raised under $100M. You might feel the same way. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. Look at your competitors and determine what they are paying an employee in a similar role. 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.. One of the easiest ways to do that is pay yourself the right amount. We hope this report simplifies your startup CEO pay decision! We are currently ranked as the 13th best startup website in the world and are paving our way to the top. A more mature space leading to a higher salary. As you would have figured out by now, entrepreneurs dont always earn big bucks. Some families live on that," says VC Sean Owen. Whenever founders raise a round of finance, the question becomes what the hell should I be paying myself. Its one of those rare things you cant really go to your board or advisors with. Founders of funded startups may start to pay themselves provided that they are on the payroll. This is an especially important question to answer when youre trying to hire your first employees. Feedough is the one-stop resource for everything related to startups. In practice we have found that if you only ask one question, ask that. 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. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. Also, while deciding your pay, you need to account for the source of investment, that is, where the money is coming from your personal account, investors pockets, or the revenue generated by the company. The largest growth appeared among companies who raised between $5-10 million among this group, average CEO salaries jumped 12% from $145,000 in 2018 to $162,000 in 2019. The best way is to tie your remuneration to achievable growth milestones and work accordingly. There is a strong positive correlation between the two. Seed, Series A, Series B, etc. Same with fintech at $129,000. 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. 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. Below is our 2019 study, which we have left online for reference. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. The average startup founder salary in the seed round is $100,000. Leading into 2021, the female leaders moved their salaries up over $30,000 - however, the gap between male and female CEOs salaries did not close vs 2019. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. One of the most common questions we get from founders is what their salary should be after they raise funding. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. It can be difficult to place a number here as the value of the company is solely on paper. It [a low salary] aligns interest with the equity holders. See our full report for CEO pay bands. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. 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 trend remained the same as last year: the more you raise, the more you get paid. The role of the compensation committee can vary, from making recommendations to the board on executive salaries, bonuses (and option grants) to having authority to set executive salaries. I've seen average salaries range between $60,000 to $100,000 for CEO startups depending on the size of the round and scope of the deal/company. Foundry Group venture capitalist Seth Levin voiced the rule: Companies that have raised $1 million or less should pay the CEO between $75,000 and $125,000 a year. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. Please quote the information above when referring to 2019 data. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want 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. Chris is a seed stage VC and angel investor at CommonAngels. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. Search by stage, location, sector and more. 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. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. 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. Some families live on that," says VC Sean Owen. 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. Lets dive into why we think there are notable difference by industry. CEO Salary by Total Funding Raised - 2022. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. Having the above questions answered will help. 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). For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. Next, its time to determine what your business is worth so the value of equity can be established. Are you still an early-stage venture, or have you matured? According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Many slashed their compensation to zero. The businesses that are funded between $1M to $2.5M pay their founders above $125K. In 2022, female CEOs made $20,000 less than males. David Rose agrees. Some observations: So what is the range of CEO salaries in the seed stage? Therefore, you need to set a lower salary baseline. 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. 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. Good work , Explained simply so that it can be understood well. Richard had just raised his first round of funding. My team and I handle payroll, taxes and the accounting for seed and venture-funded startups, and we analyzed CEO pay at over 125 startups; most of them in Silicon Valley. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. As noted in Business Insider here, Seth Levines observation on CEO salary in 2012 still holds true compared to the 2019 Kruze salary report data above: early on companies that have raised $500,000 or less cap out at $75,000, companies that have raised $1 million or less pay between $75,000-$125,000, companies that have raised between $1-$2.5 million pay closer to $125,000. 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