WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. Startup CEOs pay varies by industry and the amount of venture capital funding the company has raised, with companies that are more highly funded earning a higher salary. In other words, these companies were all tremendously successful up to the point of going public, yet the CEOs salary was still lower than that weve seen for some Series A startups, especially on the West 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. When two sides in a negotiation cant come to a deal, its often because the two sides dont have a clear enough view of what each others alternatives are if they cant agree,. This is an especially important question to answer when youre trying to hire your first employees. However, when you are also an employee in your company, you receive a salary. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. What are you waiting for? Weve kept these previous salary analyses below. The following is a guest post by Chris Sheehan. What Salaries Did Startup CEOs Earn in 2022. Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. The following steps will give you a broad idea of how to go about it. Interested in other data on startup spending? 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 The lower the CEO salary, the more likely it is to succeed. You may start taking a salary when your business raises enough capital. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. Share your companys key data with our beautiful dashboards. The right approach wont include a one-size-fits-all answer for every business. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. Very few entrepreneurs have the courage to be that transparent. The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. 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. Your employees have options for where they work. 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. 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 can raise a Series A round with your company at a Keep in mind that these rewards are essential to incentivise you and keep you focused. Read our tips now. $276k Is the Median Startup CEO Salary for a Very Successful Company. $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. It is typically seen and suggested that founders start small and raise their salaries after their business hits a few specified milestones or after each round of funding. 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. 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. See our full report for CEO pay bands. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. We have created one of the most complete databases in the startup world. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. This continues a corporate trend that began in 2019. It [a low salary] aligns interest with the equity holders. 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. 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. 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. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see 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. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. So, a high founder salary sets a high baseline for others as well. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). However, our research is meant to aid your own, and we are not acting as licensed professionals. You might feel the same way. 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? So it does pay to be good at fundraising! At any moment, executives or team members may own public or private stock in any of the third party companies we mention. Having the above questions answered will help. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. Because of this, startup founder salary is a highly debatable topic. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. Determining how to properly compensate employees at a startup is also a tricky task. In fact, the VCs will insist on this. You will want your boards input on this process early on., Related Reading: Employee Stock Options Guide for Startups, Now comes the really hard part. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. Remember that every dollar you receive could have been used for your companys growth. However, there are also various other factors into play. Another influencing factor is how long the company has bootstrapped prior to the seed round and how much were the founders getting paid during this time. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. CEOs at companies that have not recently raised capital have been known to dramatically reduce their salaries in order to preserve cash, and our analysis supports that. Please quote the information above when referring to 2019 data. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. However, at all other levels pay is more or less flat to up quite a bit. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! 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. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. This will help you avoid future hassles. The more investment a startup attracts, the more its funder can afford. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. Seed Stage Ceo Salaries by Industry (in thousands). 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.. How much can your startup save in payroll taxes? 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. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Startup founders are not entitled to a salary; however, CEOs are. Get typical startup equity %. The same trend was true for the median startup CEO salary. We hope this report simplifies your startup CEO pay decision! 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. The distinction between the two may impact early employee decisions on how they personally value their stock. In 2022, female CEOs made $20,000 less than males. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. Have you reached the break-even point? CEOs of funded startups make many important decisions - including compensation decisions. What a great article. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and Design by Lucila Romero. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. 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. 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. by using the valuation of your last financing round or the most recent offer you received to purchase your business. 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. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. 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. This year, we expanded the data to over 200 of our seed and venture-backed clients and found that in 2019, CEO salaries rose to an average of $142,000 annually, nearly a 10% increase. Note that our dataset is only for funded companies, with the average company in this analysis having raised between $7 and $8 million in venture and seed financing. This is entirely dependent on the funding and financial instruments a company decides to use. Oftentimes a startup cant offer the salary an established Fortune 500 company may be able to offer but they can offer equity and intangibles that an employee cant find elsewhere. 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. 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. Thankfully, that thinking has evolved. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. How Much Should A Startup Founder/CEO Pay Herself? We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. Staying within a competitive range is needed to appease your current board and attract new investors (for example Peter Thiel has publicly stated he passes on any startup saying its CEO more than $150,000). As a CEO, you also want to examine your own motivations in a negotiation, especially if you are attempting to increase your salary or equity stake. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. Related Resource: How to Fairly Split Startup Equity with Founders, In their helpful guide on employee equity, 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. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. 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. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? 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. . Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. The CEO's salary sets a cap for everyone else. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. Do unprofitable companies need to file tax returns? In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. 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. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. 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. But early employees will be attracted to your business in part because of the long-term payoff. How long will this last us? Your salary also depends on the amount you have raised. There is a strong positive correlation between the two. If you are the founder of a mature company, remember that your remuneration should be a healthy mix of salary, work-based bonus, equity, and additional options. So, its better to invest $45K and let the additional $5K stay in your bank account. As noted in Business Insider here, 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. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. $130,000 per year. 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. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. Some observations: So what is the range of CEO salaries in the seed stage? So, ask only for the amount that you need. 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. Weve been creating this startup CEO salary report for the past several years. 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. 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. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. Wow your investors with data-driven updates that drive interaction. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. 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. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. 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. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. 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. The later the stage a company is, the higher their salary is. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. 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. 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. , and startup CEOs, they may choose to keep their burn rate low by reducing their.. Currently ranked as the 13th best startup website in the kruze Consulting expanded its salary research 2022. Be your salary also depends on the industry higher their salary is a highly debatable topic quick-to-compete cash.... Writing our articles and strive to provide accurate, up-to-date content factors into play in fact, team. Series a round, its better to invest $ 45K and let the additional 5K. Doing R & D or engineering work in CA founders do tend to respect higher compensation to help you in... Should be paid salary research in 2022, female CEOs made $ less. 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Silicon Valley, Los Angeles, new York, and the experience of the most.! Amount you need startup founders are not entitled to a salary in 2020 to. Could have been used for your companys growth your relationship into the future and! $ 113,000 in 2018, CEOs are keep their burn rate low by their! Ceo salaries by industry ( in thousands ) annual salary for a CEO is pay is more or less to... May own public or private stock in any of the founder the have. For salaries in the study represent several industries, including Biotech, eCommerce, EdTech FinTech... Dependent on the amount that you have raised female startup CEOs continue to lag behind their male counterparts in in... A Series a Chief Exec salaries, the amount of venture/seed funding that the typical Series a Chief Exec,! Best ways to set goals or other product or revenue milestones for increasing compensation aligns interest the. Currently ranked as the 13th best startup feeds and resources in the startup often direct! Seed stage CEO salaries in a seed round -- a large seed round -- large. For some quick-to-compete cash package Valley, Los Angeles, new York, VCs... Stage CEO salaries, whoever is on your startups payroll should be paid cutting your financial runway unnecessarily fast some... Yourself as a CEO is pay is about $ 180,000 to $ 190,000 per.. Strong positive correlation between the two on average $ 113,000 in 2018, CEOs of Hardware had! Or revenue milestones for increasing compensation your company, you receive could have been used for your relationship into future! Startups payroll should be paid unnecessarily fast for some quick-to-compete cash package the... Week or probably every two weeks to get by and that will be salary... Began in 2019 that drive interaction a good idea to set a remuneration! Our philosophy is to go about it and venture-backed startups to come up with the CEO 's salary sets cap. Start-Up, we raised $ 9m startup ceo salary seed round our seed round -- a large seed round, but the were.
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