Next, its time to determine what your business is worth so the value of equity can be established. It is typically seen that founders who have alternate sources of income are not paid as much as the others. $276k Is the Median Startup CEO Salary for a Very Successful Company. How to Rebalance Ownership Between Founders, Kruze is a leader in accounting services for startups. In 2019, before COVID, startup CEO salaries averaged $142,000. Startup Founder Salary Guide: How Much To Pay Yourself? 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. 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. 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. CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. This can lead to less time with your loved ones, which can lead to resentment. 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. 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. 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. 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. $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. David Rose agrees. Our analysis backs this up, but its important to mention that there is no single factor that influences this decision. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. This is entirely up to the startup or founder. 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. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. Anyway, even when the business starts growing, it wont pay you much in the form of salary. Come on! Read our tips now. 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. Seed, Series A, Series B, etc.) 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. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. The average startup founder salary in the seed round is $100,000. Companies that raised between $2 million and $5 million saw almost an 8% increase in Chief Executive Officer salaries. 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. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. Many slashed their compensation to zero. We would advise founders to adjust their compensation as their company raises increasing amounts of funding. Profit-generating startups are a rare sight. 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. 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. 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. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. However, our research is meant to aid your own, and we are not acting as licensed professionals. Sequential rounds gave me a small bump in salary. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan The median base pay for an entrepreneur who has successfully raised funding ranges from Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! 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. What Salaries Did Startup CEOs Earn in 2022. Meanwhile, the accounting firm Kruze Consulting Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. As a startup founder, you must understand that entrepreneurship is not a bed of roses. As companies mature, its typical that a compensation committee is formed by non-management board members. 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). This chart breaks down seed funded CEO salary by industry: Also, make sure that you consider all the factors mentioned above before deciding on your salary. However, when you are also an employee in your company, you receive a salary. , 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. 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. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. 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. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. The salary varies by company stage and industry learn more below: One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). 3) Excessive hiring and spending. 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. Interested in other data on startup spending? 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. If the investment is up to $2.5 million, the CEOs salary should be $125,000. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. Tell us what you think about our article on startup founder salary in the comments section. In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. Per month. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. 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. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). 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. *. Also, those who have families to take care of, are paid more than college students sharing an apartment. With that being said a salary is what ultimately can be the factor that determines if an ideal candidate will jump ship to join your company. Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. At the seed stage you should have a reasonable salary based on your location. Build relationships, manage a fundraise and build your business. Tax Credit Center - Which of the 700+ Credits Are Best? It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. Try Visible free for 14 days. 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. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". 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. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. 28 2 Jason M. Lemkin SaaStr Fund. 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: 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. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. Do account for tax. As you would have figured out by now, entrepreneurs dont always earn big bucks. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. The Inflation Reduction Act will provide crucial upgrades to IRS services and personnel, Startup Operations Startup Founders Payroll. Startup Chief Executives with the highest annual salaries tend to be running companies that have either recently raised capital, or are performing very well and have not raised money for an extended period of time. However, at all other levels pay is more or less flat to up quite a bit. The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. The average startup founder salary in the seed round is $100,000. The accounting firm looked at CEO pay at more than 250 venture-backed companies. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. 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. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. Weve found that there are a variety of factors that can influence the salary of a startup CEO. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. 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. The bottom line is: Align everything in your life. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Share your companys key data with our beautiful dashboards. Several years ago, many eComm companies were just getting started when they were seed funded. The analysis comes from an anonymized dataset comprising more than 250 venture-funded companies and representing more than $2 BN in funding. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. Determining how to properly compensate employees at a startup is also a tricky task. We hope this report simplifies your startup CEO pay decision! 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. It discovered the salaries are up 2.7% compared to 2021 well below the is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. This came to me at the time I needed it most. Who is the highest paid person at a startup, plenty written about the pay disparity between women and men, How to Pay International Employees & Contractors. 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. Percent of CEOs who deceased salary during COVID who changed salary by year end. Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. This will help you avoid future hassles. The firm handles all things Accounting, Tax, Finance, & HR: interim CFO Consulting, financial modeling, annual taxes, venture debt consulting, 409A reporting, bookkeeping, AR/AP, and Seed/Series A/B Fundraising Preparation. Startup compensation guide: see thousands of startup salary and equity data points. The salary amount, frequency, and the way you withdraw that money affect your tax amount. Some families live on that," says VC Sean Owen. The following is a guest post by Chris Sheehan. See our full report for CEO pay bands. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. 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. How do you determine whats best? CEOs of funded startups make many important decisions - including compensation decisions. To sum up the common traits that go into determining your salary as a CEO, check out the common FAQs and takeaways below: In 2021, the average CEO salary was $147,000.At the end of the day, it is entirely dependant on the business, industry, and lifecycle. If you can raise a Series A round with your company at a Your salary also depends on the amount you have raised. Did you know even money losing startups can get up to $250,000? 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). One of the easiest ways to do that is pay yourself the right amount. 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. Startups with $10 million or more in funding saw their average Chief Executives pay rise 8% from $160,000 in 2018 to $173,000 in 2019. Feedough is the one-stop resource for everything related to startups. Having the above questions answered will help. The same trend was true for the median startup CEO salary. David Rose agrees. 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. You need to assess the current state of your venture properly before determining your salary. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. What a great article. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. Also, you may have to pay more when hiring more experienced people. Because of this, startup founder salary is a highly debatable topic. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. Salaries ranged from the 25th percentile of $43,000 to the 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. Now that you know how important it is to draw a salary, you have to figure out the amount as well. Very few entrepreneurs have the courage to be that transparent. The best way is to tie your remuneration to achievable growth milestones and work accordingly. This is somewhat true as well. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. This compensation varies a lot by industry and by amount of funding raised, so use our calculator to estimate what is a reasonable compensation spread for your particular situation. 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. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. As you might expect, lower funding means lower wages; companies that have raised less than $2 million have an average salary of $106,000, while companies that have raised more than $10 million pay their top execs nearly $200,000 on average. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. While the spread of compensation by stage of financing (i.e. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. Track the average number of hours you work and then compute your salary. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. A more mature space leading to a higher salary. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. The term sheet If you also have 10,000,000 shares outstanding then you are selling the shares at: $5,000,000 / 10,000,000 = 50 cents per share. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. 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. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. 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. This is entirely dependent on the funding and financial instruments a company decides to use. We may monetize some of our links through affiliate advertising. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. WebAt the seed stage you should have a reasonable salary based on your location. The companies we used to determine this figure have raised collectively more than $2B in funding. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. 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. Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. In fact, the VCs will insist on this. 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.. Wow! Not only does a market salary enable you to cover the cost of living and a good housing arrangement, it also ensures the financial stress doesnt lead to bad decisions at the company. This means the earlier you join, the more diluted you'll become. This is an especially important question to answer when youre trying to hire your first employees. Have you reached the break-even point? Firstly, and most obviously, companies with more funding are better able to pay their CEOs. So, you need to take your countrys tax laws into account while making such decisions. the average startup CEO salary is $130,000. As such, their founders and CEOs, at least at the most early stages, often draw lower than average salaries in 2022, $112,000 per year. Stress can create dissension in a relationship, adding pressure to your home life, affecting how you relate to those you love. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. This continues a corporate trend that began in 2019. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. How to Calculate Your Startup Founder Salary? $130,000 per year. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate.
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