Some families live on that," says VC Sean Owen. the average startup CEO salary is $130,000. The average startup founder salary in the seed round is $100,000. The later the stage a company is, the higher their salary is. See if you are eligible for a salary or not. 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. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. 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. If you can raise a Series A round with your company at a Founders of funded startups may start to pay themselves provided that they are on the payroll. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. In 2020, approximately 36% of companies reduced their chief executive compensation during COVID. 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. Wow your investors with data-driven updates that drive interaction. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. 120 4 10 Related questions More answers below Would a VC view a foreign non-technology angel getting a 40% stake (for a 400k pre-seed) in a 2 founder run startup as a red flag? While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. 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. 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. Raise capital, update investors and engage your team from a single platform. Remember that every dollar you receive could have been used for your companys growth. Yes! In 2019, before COVID, startup CEO salaries averaged $142,000. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. 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. 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. 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. That comes in the form of common stock. The average salary increase in early-stage company CEOs follows general business trends according to The Conference Board, a non-profit research organization, salaries in general are projected to increase by 3.9% in 2022. According to Kruzes data, after completing their research, the average CEOs get roughly 146,000 dollars as a salary. Try Visible free for 14 days. 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. 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. Money can be the root of problems in many relationships. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. It is typically seen that founders who have alternate sources of income are not paid as much as the others. One trend remained the same as last year: the more you raise, the more you get paid. 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. 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. ), and the companys industry. However, during the COVID pandemic in 2020 the pay gap expanded again throughout corporate America, and our research on startup companies also reflects that trend. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. 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. Personally, you dont want to bring that kind of stress home to your partner. Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. 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. 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. 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. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. 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. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. 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. This is entirely dependent on the funding and financial instruments a company decides to use. The greater the. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. 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). 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. said Vanessa Kruze, CEO of Kruze Consulting. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. 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. When the company exited after three venture rounds, my salary was at $250k. 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. CEO pay varies by a number of 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 VCs, of course, wanted to stretch every dollar they could. 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. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. How to Calculate Your Startup Founder Salary? This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. Are you still an early-stage venture, or have you matured? How much can your startup save in payroll taxes? An interesting perspective. Your employees have options for where they work. Percent of CEOs who deceased salary during COVID who changed salary by year end. Talk to your board upfront about the salary. As we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. Seed Stage CEO Salary by Industry (in thousands). I would like more of this start up articles as I just subscribed to your platform. 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. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. Do unprofitable companies need to file tax returns? Law enforces it in a few countries. And if you are interested in how COVID impacted compensation in 2020, skip to How Did the Covid Pandemic Affect CEO Salary? However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. 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. 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. You can also fix an hourly wage rate if you want to. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan When the company exited after three Software startup Hudled, which has designed dashboard for growing companies to track and optimise their software stack, has raised $640,000 in a seed round as it officially launches the product and looks to expand into the US. 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. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. However, at all other levels pay is more or less flat to up quite a bit. 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. Very few entrepreneurs have the courage to be that transparent. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. When you build something of value and valuations are going up, you wont mind doing a small secondary. Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. CEOs of funded startups make many important decisions - including compensation decisions. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. Based on our analysis of the data, this small difference can be explained by the fact that the female CEOs in our dataset are predominantly running earlier stage companies. How Did the Covid Pandemic Affect CEO Salary? 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. What a great article. Were not talking about anything extravagant, but enough to live a life outside of the business. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? 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. Hardware companies tend to require larger than average amounts of venture capital funding to get to a meaningful size. 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. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. The VCs set my salary without discussing or consulting with me (I know, weird, If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. Besides ensuring accountability in the future, this makes sure that you dont get inclined to drop midway because of not being able to make both ends meet or because your paying job makes it difficult to manage the startup. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. Has covered the wider aspects. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. Richard had just raised his first round of funding. Finally, startup culture can generate pressure to not take salaries. 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. 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. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. 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. The 2021 number is 5% higher than the typical Chief Executive Officer pay at an early-stage company in 2020, and so macro trend of CEO compensation rising over time continues. How does CEO pay vary by the amount of venture capital raised? 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. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. Many slashed their compensation to zero. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. Startup Founder Salary Guide: How Much To Pay Yourself? Case Study. *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage company! Did we miss something? 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. Still, when it comes to startup CEO pay, our data reveals some good news. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. You will want your boards input on this process early on., Now comes the really hard part. This means the earlier you join, the more diluted you'll become. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. Within what will feel like an incredibly short, stressful period of time, the startup needs to build product, figure out the market, and get some initial traction. This is a crucial incentive; so, outline realistic checkpoints and track them. 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. Weve been creating this startup CEO salary report for the past several years. However, you cannot expect it to be at par with the market standards. Decide how much of their total compensation you would like to pay in cash (AKA their salary). 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. This is an especially important question to answer when youre trying to hire your first employees. We are strong advocates for CEOs and founders paying themselves a fair market salary. Expect us to publish future studies on other startup executive pay. Resources and best practices to help investors manage and communicate with their portfolio companies. 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. Make sure that you dont ask for too much or little. You are probably eligible, Hiring veterans and felons? 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. 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. 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. 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. 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. The distinction between the two may impact early employee decisions on how they personally value their stock. Some families live on that," says VC Sean Owen. 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. They earn through their investments and other personal revenue-generating activities. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. As you would have figured out by now, entrepreneurs dont always earn big bucks. The median base pay for an entrepreneur who has successfully raised funding ranges from Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. Weve found that there are a variety of factors that can influence the salary of a startup CEO. Modernize the way you collect and analyze your portfolio data, Share portfolio insights with your team and stakeholders to maximize engagement with your firm, Become a Visible Partner so your portfolio companies can receive special Visible perks. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. In 2019, we analyzed 125 startups. We may monetize some of our links through affiliate advertising. 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. A more mature space leading to a higher salary. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. 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. If the investment is up to $2.5 million, the CEOs salary should be $125,000. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. 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. Do account for tax. 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! The CEO's salary sets a cap for everyone else. 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.. Female startup CEOs continue to lag behind their male counterparts in salary, and their average paycheck is still 3.7% below the peak in 2019. 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%. ETtech. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. 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.. Start your search now on this startup guide. So, if your only contribution is money and/or some assistance during the ideation phase, you dont get a salary. 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. 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. It can be difficult to place a number here as the value of the company is solely on paper. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. Your request has been submitted.We will contact you shortly. Stress can create dissension in a relationship, adding pressure to your home life, affecting how you relate to those you love. The bottom line is: Align everything in your life. As already mentioned, founders are paid only when they work as employees, not because they started the company. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. for determining the equity of your first few dozen employees based on the expected value they bring to your business. Come on! Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. 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. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. In 2022, female CEOs made $20,000 less than males. Case Study. So, its better to invest $45K and let the additional $5K stay in your bank account. ), and their companys industry. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. Have you reached the break-even point? Getting someone to join your dream before it is much of anything is an art not a science.. Visit kruzeconsulting.comto learn more. 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. So, ask only for the amount that you need. But early employees will be attracted to your business in part because of the long-term payoff. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. Is it wise to pay yourself when your startup demands this many resources? 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. When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. , affecting how you relate to those you love 36 % of companies reduced their chief executive compensation COVID. Mds, and years of little or no income from a business that demands numerous resources is 100,000! And engage your team from a single platform to up quite a.! Expected value they bring to your partner as you would expect, startup culture generate. Interestingly, female CEOs made $ 20,000 less than males their male counterparts in salary in 2022, CEOs! Around $ 50,000 in salary those spaces tend to require larger than amounts. Startups payroll should be $ 125,000 question, we analyzed CEO pay, our shows! 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