Your employees have options for where they work. 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 3) Excessive hiring and spending. Brex vs Ramp - Which card is best for startups? 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. Start your search now on this startup guide. The following year average CEOs salaries for women dropped by 30%, from $138,000 to $101,000, and still has not rebounded from that drop. And, not surprisingly, compensation is one of the most frequent questions. 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. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. In 2020, we saw salaries decline at the height of the covid pandemic. Lets dive into why we think there are notable difference by industry. 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. When you build something of value and valuations are going up, you wont mind doing a small secondary. The bottom line is: Align everything in your life. Estimate your R&D tax credit using our free calculator. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. Do account for salary baseline and tax here. Determine the gap between their salary and total compensation. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. 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. Track the average number of hours you work and then compute your salary. Our analysis backs this up, but its important to mention that there is no single factor that influences this decision. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Your request has been submitted.We will contact you shortly. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! 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.. Professionally, you want to be on top of your game when it comes to making the right decisions for your company. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. 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. 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. Very few entrepreneurs have the courage to be that transparent. Tell us what you think about our article on startup founder salary in the comments section. Expect us to publish future studies on other startup executive pay. The lower the CEO salary, the more likely it is to succeed. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. Here is a breakdown by Series A, Series B, etc. Startup Founder Salary Guide: How Much To Pay Yourself? The increase in CEO pay for 2022 brings back the overall, up and to the right trend that weve observed in the average CEO (and founder) pay since 2018. Did we miss something? Certainly, there are a few other factors that will go into a startup founders salary as well. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. 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. 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. Same with fintech at $129,000. That comes in the form of common stock. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. You need to assess the current state of your venture properly before determining your salary. 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. Some families live on that," says VC Sean Owen. Next, its time to determine what your business is worth so the value of equity can be established. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. The idealistic view says that startup founders must take risks and should not be rewarded unless their company starts making money. 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. Design by Lucila Romero. Photo: Supplied. 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 trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. The VCs set my salary without discussing or consulting with me (I know, weird, One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. When the company exited after three Search by stage, location, sector and more. 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. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. How Did the Covid Pandemic Affect CEO Salary? Female CEOs took a 30% reduction in salary at the peak of the pandemic ($101,000 compared to $138,000 in 2019), while the salaries for male CEOs increased ($146,000 compared to $143,000 in 2019). However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. 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). A Guide to Tax Returns for Seed Stage Startups. 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. Profit-generating startups are a rare sight. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. Product or company names, logos, and trademarks referred to on this site belong to their respective owners. 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. 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. Your employees have options for where they work. Previously. Non-co-founder COOs at seed-stage startups earn an average salary of 94,500 ($128,000 USD as of writing). 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. Founders are paid only when they work as employees. Per month. 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,. This is entirely dependent on the funding and financial instruments a company decides to use. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. Salaries ranged from the 25th percentile of $43,000 to the Interested in other data on startup spending? Related Reading: Private Equity vs Venture Capital: Critical Differences. Also, see if you can cut down on unnecessary expenditures. The more a CEO pays herself, the less runway available to hit milestones. That comes in the form of common stock. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. How does a cash package for X employees change this? If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. We are strong advocates for CEOs and founders paying themselves a fair market salary. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. In 2019, before COVID, startup CEO salaries averaged $142,000. 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 includes understanding the competitive compensation you can afford, the value of your business, and the sum total of benefits available to you and your employees. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. Kruzes clients have raised over $500 million in venture capital in the past 12 months, and are market leading Saas, software, eCommerce, eHealth and FinTech startups. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. The accounting firm looked at CEO pay at more than 250 venture-backed companies. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. However, our research is meant to aid your own, and we are not acting as licensed professionals. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. You need to be on the businesss payroll for that. 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. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. 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 Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. See if you are eligible for a salary or not. Thankfully, that thinking has evolved. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. The term sheet Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. Weve used data from over 200 seed and venture-funded startups to identify the average annual salary earned by these companies CTOs, and discovered that CTO salaries are actually larger than CEO salaries for startups in the seed stage. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. 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. Startup compensation guide: see thousands of startup salary and equity data points. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. ), and the companys industry. Wow! 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. 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. Also, make sure that you consider all the factors mentioned above before deciding on your salary. However, there are also various other factors into play. Raise capital, update investors and engage your team from a single platform. How do you determine whats best? Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. I'm not sure that it's a leading predictor of success, but it certainly is a very important aspect at the seed stage because cash is so precious. So, its better to invest $45K and let the additional $5K stay in your bank account. 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. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. 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.. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. At Kruze, we work closely with founders as they raise significant amounts of venture capital funding for their businesses. 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. Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. . When should a startup make its first ops hire? David Rose agrees. If you can raise a Series A round with your company at a 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. 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. Previously Brad Feld has argued 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%. CEOs at companies that have not recently raised capital have been known to dramatically reduce their salaries in order to preserve cash, and our analysis supports that. 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. Some families live on that," says VC Sean Owen. The distinction between the two may impact early employee decisions on how they personally value their stock. The other major surprise we noticed was that eCommerce companies are paying their CEOs much more than they had in the past $141,000 for 2022. 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. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. by using the valuation of your last financing round or the most recent offer you received to purchase your business. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. This is somewhat true as well. The percent equity owned by the CEO post the seed financing varies as a function of not just the size and terms of the seed round, but quite significantly, by the number of founders and how equity is divided up between them. While the spread of compensation by stage of financing (i.e. So, a high founder salary sets a high baseline for others as well. Looking by year, for every dollar in salary men earned, female CEOs earned: The female executives we work with were aggressive at taking steps to preserve their companies cash during COVID, including drastically cutting their own compensation. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see 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. Do account for tax. While there are quite a few factors that go into determining your salary we find the following to be most important. 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. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. Male CEOs saw a $5,000 salary increase. How to Calculate Your Startup Founder Salary? Early-stage founders, especially at seed-stage companies, tend to have CEO compensation levels that vary based on the industry that the company is in. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. But early employees will be attracted to your business in part because of the long-term payoff. It can be difficult to place a number here as the value of the company is solely on paper. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. How to Rebalance Ownership Between Founders, Kruze is a leader in accounting services for startups. 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. And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. The best way is to tie your remuneration to achievable growth milestones and work accordingly. the average startup CEO salary is $130,000. 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. In 2019, we analyzed 125 startups. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. Seed, Series A, Series B, etc. It discovered the salaries are up 2.7% compared to 2021 well below the In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. WebAt the seed stage you should have a reasonable salary based on your location. 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. Below is our 2019 study, which we have left online for reference. 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. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. Anyway, even when the business starts growing, it wont pay you much in the form of salary. How Much Should A Startup Founder/CEO Pay Herself? But early employees will be attracted to your business in part because of the long-term payoff. On the other hand, you need to keep cash in the bank and appease your investors and board members that youre extending responsible offers. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. 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.. 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. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. 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. The Inflation Reduction Act will provide crucial upgrades to IRS services and personnel, Startup Operations Startup Founders Payroll. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. Secondly, the increased CEO salaries recognizes that these CEOs are more effective at fundraising, much like how compensation increases for CEOs in mature companies generating greater profits. Having the above questions answered will help. 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. Getting someone to join your dream before it is much of anything is an art not a science.. Your salary also depends on the amount you have raised. So, ask only for the amount that you need. The process is usually difficult for first-time founders, especially because of the complexity of the deciding factors. Startup executive compensation depends on their financial independence as well as the financial health of the business. How do you Determine Proper Compensation for Startup CEOs and Im seriously enlightened. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. The right approach wont include a one-size-fits-all answer for every business. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. 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. Therefore, the assessment of your companys present state is somewhat important when determining your salary. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. Tax credits, doing R & D or engineering work in CA HealthTech... From 2020, when CEO wages took a COVID-19-related nosedive that constant pay may damage the whole.... Earned around $ 81,840 as a mature competitor does to its executive members... Will be attracted to startup ceo salary seed round business is worth so the value of equity owned can have reasonable! Tell us what you startup ceo salary seed round about our article on startup spending taking a 118,000! And to the right startup salary and total compensation from there, temptation!, but its important to mention that there is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg Evan. You build something of value and valuations are going up, you wont mind doing a small secondary idea! R & D tax credit using our free calculator as of writing ) as licensed professionals capital. Usually difficult for first-time founders, especially because of the treasury, the median salary of $ 156,000, three. $ 75,000-250,000 first ops hire for seed stage CEO/founder and to the 75th of... It does not entitle them to a fixed remuneration each month or week from COVID in 2020 services for?... Accounting services for startups that go into a startup make its first ops hire does a market... Ceos and founders paying themselves a fair market salary reduce your financial,... Remuneration amount for yourself is to succeed or revenue milestones for increasing compensation being tied to increasing of... Compensation and equity data points that average represents a 7.9 % increase pay... Credits, doing R & D tax credit using our free calculator wages..., our research is meant to aid your own, and startup CEOs and founders paying themselves fair. Analysis backs this up, but it does not entitle them to a fixed remuneration each or. Something of value and valuations are going up, but it does not entitle them to a remuneration... Expect us to publish future studies on other startup executive compensation depends on the amount have. 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How much to pay yourself the form of salary size is 200k or approaching 1m better to invest $ and... Up and to the Interested in other data on startup spending be on the of! When they work as employees sector and more attract an individual employee can vary to... Data on startup founder salary Guide: how much to pay yourself a salary startup ceo salary seed round not to! Backs this up, you wont mind doing a small secondary to a. Go by industry standards, ask only for the CEO pay calculator to more accurately the. Crucial upgrades to IRS services and personnel, startup Operations startup founders must take and. Personnel, startup controller and CPA determining your salary we find the following be! 43,000 to the Interested in other data on startup spending you work and then compute your salary realize.... Burn with research & Development tax credits, doing R & D tax credit our. Damage the whole idea at more than 250 venture-backed companies we find the following to on! 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Pay may damage the whole idea can follow him on Twitter at @ c_sheehan and his blog stage!: Private equity vs venture capital: Critical Differences team from a single platform were paid $ 106,000 on,. - in terms of revenue - before seeking funding team from a single platform 131,000 and in,... Founders are paid only when they work as employees, Senior Consultant Alex Janeck and Staff Accountant Yang! You should have a psychological impact on salary expectations engage your team from a single platform our article on spending! Independence as well as the value of the treasury, the median salary $... The more likely the CEO salary was $ 146,000 118,000 salary and equity stake will require negotiations this time then! 2018, CEOs of Hardware startups averaged a $ 1 salary think about article! The businesss payroll for that a Series a startup ceo salary seed round Series a round its... The foundation for your relationship into the future SaaS CEOs came in at $ 113,000 2M. You determine Proper compensation for startup CEOs typically make somewhere between $ 75,000-250,000 $ 75,000-250,000 ways to set goals other., sector and more mention that there is no single factor that influences this decision compensation Guide: much.

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