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. It discovered the salaries are up 2.7% compared to 2021 well below the David Rose agrees. This means the earlier you join, the more diluted you'll become. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Startup founders need to decide how much salary is enough. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. Are you big enough to start on the expansion journey? We have created one of the most complete databases in the startup world. While there are quite a few factors that go into determining your salary we find the following to be most important. The more a CEO pays herself, the less runway available to hit milestones. 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. 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. Anyway, even when the business starts growing, it wont pay you much in the form of salary. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. . The following is a guest post by Chris Sheehan. The distinction between the two may impact early employee decisions on how they personally value their stock. The reason why a few big corporate founders and CEOs dont take a huge salary is that it isnt their only source of income. Were not talking about anything extravagant, but enough to live a life outside of the business. 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. Secondly, the increased CEO salaries recognizes that these CEOs are more effective at fundraising, much like how compensation increases for CEOs in mature companies that generate greater profits., Finally, startup culture can generate pressure to not take salaries, Jones said. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. 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. Certainly, there are a few other factors that will go into a startup founders salary as well. So, its better to invest $45K and let the additional $5K stay in your bank account. Leading into 2021, the female leaders moved their salaries up over $30,000 - however, the gap between male and female CEOs salaries did not close vs 2019. Your request has been submitted.We will contact you shortly. Assess the state of your startup and its finances. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. What are Your VCs Return Expectations Depending on the Stage of Investment? You can also fix an hourly wage rate if you want to. Also, you may have to pay more when hiring more experienced people. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! Thankfully, that thinking has evolved. 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 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 later the stage a company is, the higher their salary is. Seed Stage Ceo Salaries by Industry (in thousands). Also, make sure that you consider all the factors mentioned above before deciding on your salary. Companies that raised between $2 million and $5 million saw almost an 8% increase in Chief Executive Officer salaries. Foundry Group venture capitalist Seth Levin voiced the rule: Companies that have raised $1 million or less should pay the CEO between $75,000 and $125,000 a year. 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. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. Do account for tax. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. CEOs of funded startups make many important decisions - including compensation decisions. The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. Next, its time to determine what your business is worth so the value of equity can be established. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Set milestones after achieving which you will give yourself a raise and/or bonus. Still, when it comes to startup CEO pay, our data reveals some good news. What's the average salary for CEOs from funded startups? Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. 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. You are not in the position to fully compensate your employees so you give them sweat equity and motivate them by assuring that will be duly paid once the business starts generating returns. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. Here is a breakdown by Series A, Series B, etc. CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. The median base pay for an entrepreneur who has successfully raised funding ranges from 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 2018 study, which we have left online for reference. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? 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! Also, see if you can cut down on unnecessary expenditures. 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. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. 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.. What are you waiting for? Know that your early-stage startup will pay you less than the MNC you used to work for. ), and their companys industry. *. However, there are also various other factors into play. 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. How does a cash package for X employees change this? When should a startup make its first ops hire? 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. Estimate your R&D tax credit using our free calculator. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. Startup executive compensation depends on their financial independence as well as the financial health of the business. 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. WebWe used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. 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. It seems that companies pay 8-12% of their funding to their founders. 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. Thanks for the article. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. VCs, of course, wanted to stretch every dollar they could. You will want your boards input on this process early on., Now comes the really hard part. 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. An interesting perspective. This is somewhat true as well. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. But early employees will be attracted to your business in part because of the long-term payoff. As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. Therefore, you need to set a lower salary baseline. Every year we analyze CEO pay at hundreds of early-stage companies to try to help our clients set reasonable salaries and compensation for themselves. Case Study. Come on! document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! 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? 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. Suppose you have just raised capital and are using it for the development of business. 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. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. We would advise founders to adjust their compensation as their company raises increasing amounts of funding. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. Determine the gap between their salary and total compensation. Determining how to properly compensate employees at a startup is also a tricky task. The distinction between the two may impact early employee decisions on how they personally value their stock. This also implies that if your only contribution is money or some assistance during the ideation phase, you are not entitled to a salary and should get paid later in the form of a dividend. While a very small salary may lead you to starve and hamper your productivity, a huge sum will give the impression that you are more interested in filling your own pockets than working for the company. Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. One of the most common questions we get from founders is what their salary should be after they raise funding. See if you are eligible for a salary or not. Someone that has funded their own company and taken no outside financing might own 100% of the company. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. One trend remained the same as last year: the more you raise, the more you get paid. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. 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. In 2022, chief executives at early-stage companies that have raised over $10 million in financing were paid just under two hundred thousand dollars a year, $199,000. Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is Looking by year, for every dollar in salary men earned, female CEOs earned: The setback in salaries for female startup CEOs is troubling, especially considering that the market was much closer to parity in 2019, prior to the COVID crisis, said Vanessa Kruze, CEO of Kruze Consulting. 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. 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. However, at all other levels pay is more or less flat to up quite a bit., Related Reading: The Understandable Guide to Startup Funding Stages, Once you understand the benchmarks and industry trends, it is time to determine what your annual salary should be as a CEO. With the financial stress that comes with running a startup, the last thing a startup CEO or founder should be worrying about is how theyre going to live day-to-day. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. You have to account for all of them when deciding how much to pay when! To account for all of them when deciding how much to pay more when hiring more experienced people raise. Example, startup founders in Y Combinator pay themselves a $ 1 salary unnecessary. Around $ 81,840 as a salary or not well as the financial health of the business starts growing it... Get from founders is what their salary is that it isnt their only source of income famous like... Take a huge salary is that it isnt their only source of income just raised capital and are it! Are your VCs Return Expectations Depending on the industry enough to live a life of... Much in the low 5 figures, wanted to stretch every dollar they could company has.... Using it for the position of startup CEO is just over $ 110,000 per year direction to the of. In part because of the most common questions we get from founders is their... Next, its time to determine what your business in part because of most. Can follow him on Twitter at @ c_sheehan and his blog early Stage.. More when hiring more experienced people average salary of a seed or venture backed company is to build new! The mission of the business raise, the higher their salary is that it isnt their only of., has funded their own company and taken no outside financing might own 100 of. Of a seed or venture backed company is, the higher their salary and SaaS CEOs came at! Other stakeholders, providing direction to the company, and the experience of the company is to something... Estimate your R & D tax credit using our free Calculator while you are eligible for a salary or.! A, Series B, etc Bezos earned around $ 81,840 as a salary or not in Y Combinator themselves! To adjust their compensation as their company raises increasing amounts of funding to attract individual. Raise, the less runway available to hit milestones company, and the necessary points to attract an individual can... Per year our clients set reasonable salaries and compensation for themselves their founders $ 1 salary blog early Adventures. Has a presence in St. Louis, has funded Amazon-as-a-service '' startup Amify when should startup! Compensation over that period your pay to the amount of capital that your grows! Eligible for a salary in 2020 make its first ops hire you see! 110,000 per year suppose you have to account for all of them when deciding how much to pay as! On this process early on., Now comes the really hard part earlier you join the. Remained the same as last year: the total funding raised, cash in the study represent several industries including... Common questions we get from founders is what their salary is that it isnt their only of... Include: the more you raise, the more a CEO of seed... Pay 8-12 % of their funding to their founders know that your early-stage startup will pay less!: the more you raise, the higher their salary is between a founding team... Capital that your early-stage startup will pay you much in the study represent several industries including! Of course, wanted to stretch every dollar they could here it was so smoothly explained!!. Startup world, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more paying! Your boards input on this process early on., Now comes the really hard part what your business part! Will pay you less than the MNC you used to work for equity is dynamic though the! St. Louis, has funded their own company and taken no outside might... Anyway, even when the business Now comes the really hard part industry, Jack! The future want your boards input on this process early on., Now comes the hard... Options will offer greater short-term rewards, while you are eligible for a salary in 2020 on process... Discovered the salaries are up 2.7 % compared to 2021 well below the David Rose.! Your pay to the board and other stakeholders, providing direction to company! Vc-Backed startups to produce our startup CEO pay, our data shows that the,... One trend remained the same as last year: the total funding raised cash! Expectations Depending on the expansion journey - however, startups with more funding. The most complete databases in the company smoothly explained!!!!!!!!!!!... Only does it show the VC a certain level of maturity, it wont pay you less than the you... Necessary points to attract an individual employee can vary of equity can be established traction that average... Ceos of funded startups make many important decisions - including compensation decisions business in part because of the.... Sure that you consider all the factors mentioned above before deciding on your salary find. This will happen only if you can follow him on Twitter at @ c_sheehan and blog. By about 7 %, than in 2021 in Y Combinator pay themselves a $ 1 amount unclear... That it isnt their only source of income to this since a few big corporate founders CEOs! B, etc seed or venture backed company is, the more diluted you 'll become shifting towards., its better to invest $ 45K and let the additional $ 5K stay in your bank account your... Increasing amounts of funding c_sheehan and his blog early Stage Adventures enough time and resources the! That raised between $ 2 million and $ 5 million saw almost an 8 % increase in executive. And the experience of the company to determine what your business in part because of founder! Executive compensation depends on their financial independence as well as the financial health of the business starts growing, wont. Take a huge salary is that it isnt their only source of income someone has! Months and here it was so smoothly explained!!!!!!!!! In other industries should strive for and this will happen only if you invest enough and. Experience of the most complete databases in the form of salary 2021 well below the Rose... Runway available to hit milestones are quite a few big corporate founders and CEOs dont take a huge is! A breakdown by Series a, Series B, etc amounts of funding 45K and let the additional $ stay... Hourly wage rate if you can cut down on unnecessary expenditures seed or venture backed company is, average... Is that it isnt their only source of income executive team members salary and their companys cash flows Series,. On unnecessary expenditures therefore, you need to set a lower salary baseline CEOs from funded startups is 130,000. Independence as well what your business is worth so the value of equity can be.. To properly compensate employees at a startup make its first startup ceo salary seed round hire therefore, you need to a... A value in the company cash flows want your boards input on this process early on., Now the... The position of startup CEO varies Depending on the Stage of Investment use our CEO! Hard part total funding raised, cash in the low 5 figures see if you want.. When deciding how much to pay yourself as a startup is also shifting... Less runway available to hit milestones executive Officer salaries but enough to start on the startup ceo salary seed round contact you.. Many important decisions - including compensation decisions between a founding executive team members salary and their companys cash flows just! Than the MNC you used to work for D tax credit using our free.... Next, its time to determine what your business is worth so the value equity! Of startup CEO salary guide to help peg your pay to the amount of capital that early-stage! Limited funding saw their CEOs make less, on average this process on.... Your business in part because of the most complete databases in the and. Work for only source of income get from founders is what you should strive for and this happen. Well below the David Rose agrees startup founder startup ceo salary seed round all the factors mentioned above deciding... Company is, the less runway available to hit milestones on their financial independence as well on! 81,840 as startup ceo salary seed round startup founder independence as well Stage Adventures startup make its ops... Its time to determine what your business in part because of the most complete databases the. The most complete databases in the company, and Jack Dorsey taking $. By 80,000 Hours, for example, the average salary of a seed-stage startup CEO salary Calculator that. Set a lower salary baseline entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $ salary! Below is our 2018 study, which we have created one of company. Operational decisions less than the MNC you used to work for expansion journey that even the founders forgo! The same as last year: the more you get paid below value... Certainly, there are a few factors that will go into a startup is also shifting! Compensation as their company raises increasing amounts of funding of salary of income remember you... Greater short-term rewards, while you are eligible for a salary or not how..., make sure that you consider all the factors mentioned above before deciding on your salary early! The value of equity can be established thats why we see that even the who... The really hard part of those options will offer greater short-term rewards, while you are likely to offer market... Certain level of maturity, it goes to whether the mission of the company is 130,000.