It can be difficult to place a number here as the value of the company is solely on paper. Someone that has funded their own company and taken no outside financing might own 100% of the company. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. In fact, the VCs will insist on this. 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. Law enforces it in a few countries. 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 Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. There has always been an underlying (unsaid) belief that startup CEOs and founders should have to make personal sacrifices and pour their blood, sweat and tears into their business. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. 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. Thanks for the article. Certainly, there are a few other factors that will go into a startup founders salary as well. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. 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. Try Visible free for 14 days. 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. The VCs set my salary without discussing or consulting with me (I know, weird, 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. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. When you build something of value and valuations are going up, you wont mind doing a small secondary. Your employees have options for where they work. So, ask only for the amount that you need. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. 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. 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. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. 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. And in 2021, the average salary popped back - but thats not the full story, as youll see as we dig into the numbers. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. How Did the Covid Pandemic Affect CEO Salary? Track the average number of hours you work and then compute your salary. It discovered the salaries are up 2.7% compared to 2021 well below the During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. David Rose agrees. We have created one of the most complete databases in the startup world. Remember that a startup takes years to become profitable; you cannot starve till then. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. If you can raise a Series A round with your company at a Industries and different verticals can lead to varying salaries. 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. Has covered the wider aspects. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. This continues a corporate trend that began in 2019. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. Do account for tax. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. 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. The idealistic view says that startup founders must take risks and should not be rewarded unless their company starts making money. Some families live on that," says VC Sean Owen. You may hire an accountant for assistance. 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%. Not paying yourself enough can turn you into a bad decision-maker. Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and 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. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see As already mentioned, founders are paid only when they work as employees, not because they started the company. The businesses that are funded between $1M to $2.5M pay their founders above $125K. Read our tips now. Now, if they come to know that you pay yourself almost at par with the industry standards while they have to work for less for a company that isnt even theirs, it may lead to resentment. 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. 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. , 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. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. Anyway, even when the business starts growing, it wont pay you much in the form of salary. Just like most couples should discuss important things like money and debt before they are married, its a good idea to talk money and salary before you enter into a marriage with a VC. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. 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. 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. CEO pay varies by a number of Was trying to find an answer to this since a few months and here it was so smoothly explained!!! Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Get typical startup equity %. This level of pay makes sense, given the low amount of funding and modest traction that most of these types of companies have at the seed stage. Determining how to properly compensate employees at a startup is also a tricky task. Did you know even money losing startups can get up to $250,000? Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. Every month of cash burn is valuable. 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.. How long will this last us? How does CEO pay vary by the amount of venture capital raised? 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. In 2020, we saw salaries decline at the height of the covid pandemic. Because of this, startup founder salary is a highly debatable topic. 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. Also, those who have families to take care of, are paid more than college students sharing an apartment. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. VCs, of course, wanted to stretch every dollar they could. Male CEOs saw a $5,000 salary increase. 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. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. 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. This came to me at the time I needed it most. potential bonus money of $0 - $100,000 and equity (ranging from less than 1% - 20%). We used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? The bottom line is: Align everything in your life. We are strong advocates for CEOs and founders paying themselves a fair market salary. Still, when it comes to startup CEO pay, our data reveals some good news. WebSequential rounds gave me a small bump in salary. 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. Some families live on that," says VC Sean Owen. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. You will want your boards input on this process early on., Now comes the really hard part. Weve found that CEOs in some industries have higher average salaries than others. The accounting firm looked at CEO pay at more than 250 venture-backed companies. 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. 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.. ), and the companys industry. Weve kept these previous salary analyses below. Non-co-founder COOs at seed-stage startups earn an average salary of 94,500 ($128,000 USD as of writing). 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. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and 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. Are you still an early-stage venture, or have you matured? Richard had just raised his first round of funding. Same with fintech at $129,000. One of the easiest ways to do that is pay yourself the right amount. David Rose agrees. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Some families live on that," says VC Sean Owen. When should a startup make its first ops hire? Case Study. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. When we compared the salaries of male Chief Executives versus females, we found that the numbers were roughly the same $138,000 per year for women versus $143,000 for men. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. The firm also has a CEO salary calculator that gives a more granular breakdown, where founders can see what their peers are making based on funding stage and industry. VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. 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. Founders of bootstrapped startups dont need to pay themselves. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. 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. Ceos make less, by about 7 %, than in 2021 higher compensation market... 8 if you own.7 % of the COVID pandemic the VCs will insist on this process early on. Now! 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