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. Someone that has funded their own company and taken no outside financing might own 100% of the company. The businesses that are funded between $1M to $2.5M pay their founders above $125K. 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. If the CEO is also a founder, it will be much easier to manage their annual salary because the value of their compensation package will likely lean much heavier toward equity than cash. Male CEOs saw a $5,000 salary increase. 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. VCs, of course, wanted to stretch every dollar they could. When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. By the way, to see some survey data on what other people think the founder/CEO salary should be, check out the OnStartups poll on founder salary. Please quote the information above when referring to 2019 data. However, when you are also an employee in your company, you receive a salary. The idealistic view says that startup founders must take risks and should not be rewarded unless their company starts making money. 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. Per month. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. The term sheet I would like more of this start up articles as I just subscribed to your platform. 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. potential bonus money of $0 - $100,000 and equity (ranging from less than 1% - 20%). 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. 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. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. Filter by role, location, stage, startup size. However, as the year ended and many technology companies recovered - and as venture funding continued at unprecedented levels - boards and executives felt comfortable increasing executive compensation to pre-crisis levels., Compared to Their Male Counterparts, Female CEOs Took a Pay Cut During the Pandemic. 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. Remember that every dollar you receive could have been used for your companys growth. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan *. 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. The VCs set my salary without discussing or consulting with me (I know, weird, To understand what happens when new equity is issued, a simple example helps. Breaking the numbers down by industry, on average: Hardware company CEOs are near the bottom of the pack, with an average salary of $112,000 per year. Seed Stage CEO Salary by Industry (in thousands). It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. 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. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. So, a high founder salary sets a high baseline for others as well. An interesting perspective. Build relationships, manage a fundraise and build your business. It seems that companies pay 8-12% of their funding to their founders. Some families live on that," says VC Sean Owen. 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. 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. Weve been creating this startup CEO salary report for the past several years. Of course, read our answers to the two logical follow up questions: When can a startup CEO take a raise - well tell you what the data says! 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. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". This came to me at the time I needed it most. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. Remember that a startup takes years to become profitable; you cannot starve till then. They might lose faith in you and your company. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Sequential rounds gave me a small bump in salary. This calculator will show you an estimated range of compensation for a startup CEO based on the amount of funding that the company has raised, the stage of the company (i.e. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. 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. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. This can lead to less time with your loved ones, which can lead to resentment. 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 In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. Estimate your R&D tax credit using our free calculator. 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. Yes! In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. 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. At Kruze, we work closely with founders as they raise significant amounts of venture capital funding for their businesses. 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. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want to add to it later there's not a lot stopping you. 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). Some families live on that," says VC Sean Owen. 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. ), and their companys industry. Do account for tax. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. Below is our 2019 study, which we have left online for reference. Certainly, there are a few other factors that will go into a startup founders salary as well. Design by Lucila Romero. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. One of the easiest ways to do that is pay yourself the right amount. For 2021, the average startup CEO salary is now up to $146,000, an increase of $4,000 from 2019 (almost a 3% increase) or 5% up from the COVID crisis of 2020. A more mature space leading to a higher salary. They earn through their investments and other personal revenue-generating activities. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. The more a CEO pays herself, the less runway available to hit milestones. Money can be the root of problems in many relationships. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. CEO pay varies by a number of factors, including the executives previous experience, the amount the company has raised, the startups traction and the industry the startup is in. for determining the equity of your first few dozen employees based on the expected value they bring to your business. How To Make An Infographic: Step-By-Step Guide, 10 Proven Ways To Make Money With Your Car, Presentation Tips: 11 Simple Yet Effective Strategies. Startup founders need to decide how much salary is enough. 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. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. 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. Tell us what you think about our article on startup founder salary in the comments section. However, you cannot expect it to be at par with the market standards. Chris is a seed stage VC and angel investor at CommonAngels. 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. Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. When the company exited after three venture rounds, my salary was at $250k. Now that you know how important it is to draw a salary, you have to figure out the amount as well. How much can your startup save in payroll taxes? David Rose agrees. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. Thankfully, that thinking has evolved. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. 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! Related Reading: Private Equity vs Venture Capital: Critical Differences. The following year average CEOs salaries for women dropped by 30%, from $138,000 to $101,000, and still has not rebounded from that drop. A Guide to Tax Returns for Seed Stage Startups. While the spread of compensation by stage of financing (i.e. 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.. See our full report for CEO pay bands. Personally, you dont want to bring that kind of stress home to your partner. The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. , 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. Richard had just raised his first round of funding. Theres been plenty written about the pay disparity between women and men in the U.S. And when it comes to the startup world, that pay gap has remained stubbornly high. Law enforces it in a few countries. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Know that your early-stage startup will pay you less than the MNC you used to work for. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. Are you still an early-stage venture, or have you matured? These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. What Salaries Did Startup CEOs Earn in 2022. That comes in the form of common stock. David Rose agrees. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. 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. 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. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. Do unprofitable companies need to file tax returns? Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. 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