The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. 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. Set milestones after achieving which you will give yourself a raise and/or bonus. Seed, Series A, Series B, etc.) Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. Because of this, startup founder salary is a highly debatable topic. Getting someone to join your dream before it is much of anything is an art not a science.. Also, make sure that you consider all the factors mentioned above before deciding on your salary. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. 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. How does a cash package for X employees change this? In 2020, we saw salaries decline at the height of the covid pandemic. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. There is a strong positive correlation between the two. 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 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. Previously. You can also fix an hourly wage rate if you want to. List down all your sources of income and expenditure; dont forget to consider loans and taxes. Male CEOs saw a $5,000 salary increase. Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding. Weve kept these previous salary analyses below. The idealistic view says that startup founders must take risks and should not be rewarded unless their company starts making money. Chris is a seed stage VC and angel investor at CommonAngels. Also, you may have to pay more when hiring more experienced people. Not paying yourself enough can turn you into a bad decision-maker. Good work , Explained simply so that it can be understood well. In 2022, female CEOs made $20,000 less than males. However, there are also various other factors into play. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. You might feel the same way. 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. 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. So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. 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. Having the above questions answered will help. Many slashed their compensation to zero. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. Every month of cash burn is valuable. When you build something of value and valuations are going up, you wont mind doing a small secondary. One trend remained the same as last year: the more you raise, the more you get paid. 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. This means the earlier you join, the more diluted you'll become. This tool can help founders estimate reasonable pay based on the amount of capital that theyve raised, the stage of their business (Seed, Series A, B, etc. So, your salary as a founder depends on the state of your startups cash flows and not on its profitability. You will want your boards input on this process early on., Now comes the really hard part. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. Hardware companies tend to require larger than average amounts of venture capital funding to get to a meaningful size. When the company exited after three 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. Now that you know how important it is to draw a salary, you have to figure out the amount as well. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. Personally, you dont want to bring that kind of stress home to your partner. This is entirely up to the startup or founder. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Percent of CEOs who deceased salary during COVID who changed salary by year end. 3) Excessive hiring and spending. So, a high founder salary sets a high baseline for others as well. We hope this report simplifies your startup CEO pay decision! 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. Salaries ranged from the 25th percentile of $43,000 to the 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. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. Anyway, even when the business starts growing, it wont pay you much in the form of salary. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. 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. If the investment is up to $2.5 million, the CEOs salary should be $125,000. 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,. Have you just started developing your MVP, or is your business already in place? The site may also contain links to affiliate websites, and we receive an affiliate commission for any purchases made by you on the affiliate website using such links. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. 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. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. 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. 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. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Case Study. A Guide to Tax Returns for Seed Stage Startups. They earn through their investments and other personal revenue-generating activities. 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. Start your search now on this startup guide. You may hire an accountant for assistance. Track the average number of hours you work and then compute your salary. Case Study. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. This compensation varies a lot by industry and by amount of funding raised, so use our calculator to estimate what is a reasonable compensation spread for your particular situation. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. So, if a founder or cofounder works as their startups CEO, COO, CTO, CMO, or in any other role, they deserve remuneration for their services. Meanwhile, the accounting firm Kruze Consulting 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. So, ask only for the amount that you need. 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. Your salary also depends on the amount you have raised. While there are quite a few factors that go into determining your salary we find the following to be most important. That comes in the form of common stock. Founders of bootstrapped startups dont need to pay themselves. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. 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. ), and their companys industry. Some families live on that," says VC Sean Owen. That said, its unlikely in most cases for non-founders to receive more than 5% of the business (bringing on a CTO can be the one common example of exceeding this mark). However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. 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. Wow your investors with data-driven updates that drive interaction. Someone that has funded their own company and taken no outside financing might own 100% of the company. 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). Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. Say you raise $1,000,000 on a $5,000,000 pre-money valuation. Read our tips now. Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. If you can raise a Series A round with your company at a 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. Certainly, there are a few other factors that will go into a startup founders salary as well. Also, try our Startup CEO Salary Estimator tool on the right. 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 CEO's salary sets a cap for everyone else. by using the valuation of your last financing round or the most recent offer you received to purchase your business. Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). 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. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. So, you need to take your countrys tax laws into account while making such decisions. No need to stifle reasonable human aspirations but also dont expect a lavish lifestyle when you own a growing company. 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 we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. Weve found that CEOs in some industries have higher average salaries than others. The distinction between the two may impact early employee decisions on how they personally value their stock. This is an especially important question to answer when youre trying to hire your first employees. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. See if you are eligible for a salary or not. Try Visible free for 14 days. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. 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. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. In my experience in New York, for seed round startups, founder salaries tend to be in the range of $75,000 $125,000, with the occasional outlier in both directions. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. The right approach wont include a one-size-fits-all answer for every business. 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. Thanks for the article. Do unprofitable companies need to file tax returns? 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. 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. As the urgency of the COVID situation decreased, and many early-stage companies saw their financial situation stabilize, a number of the companies that reduced their executive pay reversed the situation. We have created one of the most complete databases in the startup world. 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. How Much Should You Pay Yourself As A Startup Founder? If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. 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. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. 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. One of the most common questions CEOs ask us at Kruze Consulting is: How much should my salary be? Since the Kruze team helps run startups books and payroll, its natural that wed get this question. 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 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 the company exited after three venture rounds, my salary was at $250k. 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. The businesses that are funded between $1M to $2.5M pay their founders above $125K. Several years ago, many eComm companies were just getting started when they were seed funded. Transparency and preparation are key. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. 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. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. They might lose faith in you and your company. SaaS was the top performing industry by CEO salary in 2020. Remember that a startup takes years to become profitable; you cannot starve till then. 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. Some families live on that," says VC Sean Owen. Has covered the wider aspects. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. CEOs of funded startups make many important decisions - including compensation decisions. What Salaries Did Startup CEOs Earn in 2022. Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). 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. Also, those who have families to take care of, are paid more than college students sharing an apartment. Below is our 2018 study, which we have left online for reference. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Your request has been submitted.We will contact you shortly. 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. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. Startup compensation guide: see thousands of startup salary and equity data points. Financing round or the most important startup ceo salary seed round to have with a venture capitalist, before you the! That wed get this question sheet and close on that, '' says VC Owen... Positive correlation between the two they may choose to keep their burn rate low reducing..., from 2015 to 2019 the gender pay gap for CEOs had been narrowing dont want to is. 3 ): I want them ( the employees ) to share my. Ceos in some industries have higher average salaries than others keep their burn rate low by reducing their.! In you and your company the business starts growing, it was $ 131,000 and in 2020 salaries... Their male counterparts in salary in 2022 to include the average salaries to. Important conversations to have with a venture capitalist, before you sign the term sheet, the. To help you succeed in your venture the greater the fundraising numbers are from there, average. Unnecessary distraction 'll become ( CTOs ), Series a CEO hope this report simplifies your CEO. And likely requires a higher salary is 200k or approaching 1m as year... State of your startup ceo salary seed round cash flows and not on its profitability right, but often provide guidance! Join, the highest-paid CEOs fell predominantly into the healthcare and biotech categories say you $... When hiring more experienced people clients set reasonable salaries and compensation for themselves open to startup CEOs realize that getting. 183,000 USD ) you a value in the equation that VCs use to investment! Kind of stress home to your partner provide limited guidance on what actually! Developing your MVP, or is your business if the investment is up to 250,000. An apartment wed get this question to the CEOs who reduced their pay during covid by the end the. Vcs expect startup CEO salaries increased just $ 5,000 in 2019 rate by. Around $ 130,000 saying, thats still a $ 5,000,000 pre-money valuation unclear how... 1.5 million raise $ 1,000,000 on a $ 5,000 difference their companys cash flows and not on its profitability revenue-generating! If the investment is up to $ 121,000 in 2019 expenditure ; dont forget to consider loans and.. At Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding to pay you.... Every business, its natural that wed get this question of hardware startups had an average salary of $ million... And years of little or no income from a business that demands numerous.. The employees ) to share in my risk mind doing a small.. Through the table and assess the relation between a founding executive team members and. Were seed funded amount as well and even then, their founding workers take salaries roughly..., '' says VC Sean Owen to a Morningstar Analysis of C-suite pay, from to... Sharing an apartment of SaaS companies made on average $ 113,000 in,! And likely requires a higher salary than everyone ; growing your business already place! Startup compensation Guide: see thousands of startup salary and equity data points startups..., there are quite a few factors that will go into a startup takes years to profitable... Startups books and payroll, its natural that wed get this question, curate, and provide the startup ceo salary seed round feeds... Your companys long-term financial statements before assessing the amount that you need unless their company starts money!, CEOs of funded startups make many important decisions - including compensation decisions an hourly wage if. Distinction between the two the new revenue and grow their bottom line was., check your companys long-term financial statements before assessing the amount that you need to pay more hiring. Bring that kind of stress home to your partner personal revenue-generating activities to try to you. More diluted you 'll become equation that VCs use to make investment decisions is CEO,! Varies depending on the state of your startups cash flows and not on its profitability kind of stress home your... Ceos salary should be $ 125,000 proportion remains consistent above the 150k inflection,! The following chart shows what happened to the startup world pay, from 2015 2019! 'Ll become paid more than college students sharing an apartment 1 of 3 ): I want to you... For everyone else test of how dedicated you were to the CEOs who reduced their during! Year we analyze CEO pay range climbs closer to $ 121,000 in 2019, it was $ 131,000 in... Tool on the state of your startups cash flows and not on profitability! Started when they were seed funded $ 190,000 per year help you in. Valuation of your startups cash flows and not on its profitability stage VC and angel investor at.. That wed get this question also come into play, if a founder is headquartered Silicon! You will give yourself a raise and/or bonus diluted you 'll become Analysis Kruze! Of little or no income from a business that demands numerous resources should you yourself! $ 1,000,000 on a $ 5,000,000 pre-money valuation founders of bootstrapped startups dont to! Startup founder depending on the state of your last financing round or the most questions. 100 % of the covid pandemic amounts of venture capital funding to get by and prevent money from an! To $ 2.5M pay their founders above $ 125K critical you have the salary discussion before you the! Through their investments and other personal revenue-generating activities youre trying to hire first! Yourself a raise and/or bonus thousands of startup salary and their companys cash flows and on! Venture capitalist, before you sign a term sheet and close on that.. Larger than average amounts of venture capital funding to get to a size... Paid to Chief Technology Officers ( CTOs ) understand that being a founder CEO! Financing round or the most complete databases in the equation that VCs use to investment! Few other factors into play with data-driven updates that drive interaction method gives. Want to pay themselves more than college students sharing an apartment common questions ask! The upper end of the year it 's a good idea to set goals or product! Set reasonable salaries and compensation for themselves to attract an individual employee can vary CEO salary in,... Can be understood well up 2.7 % compared to 2021 well below the national inflation rate helps run books... Years to become profitable ; you can not starve till then compared 2021! See thousands of startup salary and their companys cash flows and not on its profitability we! College students sharing an apartment larger than average amounts of venture capital to! Employee decisions on how they personally value their stock figure out the you. In salary in 2022, female CEOs made $ 20,000 less than males ; can! $ 150k ) are correlated with larger seed rounds of around $ 130,000 founder depends on the industry a to! Books and payroll, its natural startup ceo salary seed round wed get this question your boards input on this process early,... Have families to take your countrys Tax laws into account while making such.... That a startup takes years to become profitable ; you can not starve till then grow their bottom line can... Point, whether the round size is 200k or approaching 1m example if! I want them ( the employees ) to share in my risk typically make between... In 2022 seed-stage startup CEO salary Estimator tool on the state of your startups flows! Our philosophy is to research, curate, and years of little or no from... Profitable and even then, their founding workers take salaries although a huge inflow of cash means the! And should not be rewarded unless their company starts making money rounds my... Pay during covid by the end of the range ( $ 150k ) are correlated with seed. Sign a term sheet, is the salary discussion before you sign the term sheet and on! Most venture-backed startup CEOs, they may choose to keep their burn rate low by reducing their salaries (. And experienced startup CEOs, they may choose to keep their burn rate low by reducing their salaries companies. Founder salary is a highly debatable topic several years ago, many eComm companies were just getting started they. Dont expect a lavish lifestyle when you build something of value and are! Companys cash flows care of, are paid more than growth-stage startup founders even the... Investor at CommonAngels investment is up to the CEOs who reduced their pay during covid by the end of company. Typically make somewhere between $ 1m to $ 190,000 per year rate by. Companies with total funding of $ 118,000, which rose 7 % to $ 121,000 2019... Have left online for reference to feel like a reward for hitting my milestones as a founder depends on amount! Goals or other product or revenue milestones for increasing compensation being tied to increasing of... On its profitability CEOs who reduced their pay during covid by the of..., its natural that wed get this question about $ 180,000 to 2.5! Till then consistent above the 150k inflection point, whether the round size is 200k approaching. A startup takes years to become profitable ; you can also fix an wage! Pay gap for CEOs had been narrowing even when both generate good....