Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. We hope this data will help other early-stage businesses prepare their budgets! 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). 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. Weve found that there are a variety of factors that can influence the salary of a startup CEO. Therefore, you need to set a lower salary baseline. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. 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. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. CEOs of funded startups make many important decisions - including compensation decisions. In practice we have found that if you only ask one question, ask that. E-commerce founders saw a significant increase over last year, with an average salary of $141,000 presumably because the sector has seen a great run of successful results, partially due to a downtick in the retail sector and a customer focus toward buying online. I'm not sure that it's a leading predictor of success, but it certainly is a very important aspect at the seed stage because cash is so precious. 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. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. This is an especially important question to answer when youre trying to hire your first employees. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want We may monetize some of our links through affiliate advertising. If you can raise a Series A round with your company at a As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. 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. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. 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. Companies that raised between $2 million and $5 million saw almost an 8% increase in Chief Executive Officer salaries. 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. 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.. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. This came to me at the time I needed it most. 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. Chris is a seed stage VC and angel investor at CommonAngels. We are strong advocates for CEOs and founders paying themselves a fair market salary. Read on to see the older Startup CEO Salary Reports that weve published over the years, plus some more of our commentary on how founders should approach their compensation. How Much Should A Startup Founder/CEO Pay Herself? The best way is to tie your remuneration to achievable growth milestones and work accordingly. 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. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. Did we miss something? Have you reached the break-even point? See if you are eligible for a salary or not. Some families live on that," says VC Sean Owen. Are you still an early-stage venture, or have you matured? Expect us to publish future studies on other startup executive pay. 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. Seed, Series A, Series B, etc. It seems that companies pay 8-12% of their funding to their founders. Also, while deciding your pay, you need to account for the source of investment, that is, where the money is coming from your personal account, investors pockets, or the revenue generated by the company. Having the above questions answered will help. Startup Founder Salary Guide: How Much To Pay Yourself? 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. Meanwhile, the accounting firm Kruze Consulting WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Did you know even money losing startups can get up to $250,000? 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. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. At the seed stage you should have a reasonable salary based on your location. 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. As great as it feels to receive money out of your own business, it is usually impractical and will just lead to a portion being lost in taxes. One trend remained the same as last year: the more you raise, the more you get paid. My prior salary as a VP before the company had been $150,000, and they raised it to $180,000, with a performance-tied bonus. Come on! Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. The following data is from the Kruze Consulting 2021 Startup CEO Salary Report:, While the industry certainly has an impact on a CEOs salary the stage and capital raised seem to have the largest impact on a startup CEOs salary, Using the same report, Kruze Consulting 2021 Startup CEO Salary Report, as above you can see that the capital raised greatly impacts a startup CEOs salary., Presumably, as a startup raises more capital they are growing as a company. 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. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. A Guide to Tax Returns for Seed Stage Startups. As already mentioned, founders are paid only when they work as employees, not because they started the company. Calculate your budget by accounting for all your sources of income and expenditure. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. 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. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. However, its important to note that the study surveyed only venture-backed companies with an average funding of $8 million. Below are some of the factors that may influence a startup CEOs salary: Some families live on that," says VC Sean Owen. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. While there are quite a few factors that go into determining your salary we find the following to be most important. 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. 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. David Rose agrees. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. A founder with no mortgage, kids, etc will have different cash needs than a founder that has a minimum cash hurdle to clear (in the absence of being very wealthy), The amount raised in a seed round has an obvious impact. 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. 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. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. Im seriously enlightened. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. CEO Salary by Total Funding Raised - 2022. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. Therefore, paying founders doesnt seem sensible. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan The distinction between the two may impact early employee decisions on how they personally value their stock. The accounting firm looked at CEO pay at more than 250 venture-backed companies. 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. You will want your boards input on this process early on., Now comes the really hard part. So, its better to invest $45K and let the additional $5K stay in your bank account. 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,. When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. Sometimes, too much profit on the balance sheet stirs gossip so it becomes mandatory for founders to take a decent remuneration even when they have enough money to live without it. Determine the gap between their salary and total compensation. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage company! When not working, she can be found reading, writing and engaging in long walks. Back in 2008, Peter Thiel did an interview at TechCrunch50 in which he said one of the most important things he looks at before investing is how much the CEO is getting paid. Startup executive compensation depends on their financial independence as well as the financial health of the business. How to Calculate Your Startup Founder Salary? When should a startup make its first ops hire? The average salary increase in early-stage company CEOs follows general business trends according to The Conference Board, a non-profit research organization, salaries in general are projected to increase by 3.9% in 2022. Personally, you dont want to bring that kind of stress home to your partner. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. Were not talking about anything extravagant, but enough to live a life outside of the business. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. While the overall average emerging company CEO salary moved up, there is a bifurcation in salary trends based on how much capital the companies raised. And if you are interested in how COVID impacted compensation in 2020, skip to How Did the Covid Pandemic Affect CEO Salary? Wow your investors with data-driven updates that drive interaction. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. 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. 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. Every month of cash burn is valuable. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. The lower the CEO salary, the more likely it is to succeed. So, a high founder salary sets a high baseline for others as well. Industries and different verticals can lead to varying salaries. Professionally, you want to be on top of your game when it comes to making the right decisions for your company. We used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. 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. One of the most common questions we get from founders is what their salary should be after they raise funding. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. 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. Brex vs Ramp - Which card is best for startups? Share your companys key data with our beautiful dashboards. Certainly, there are a few other factors that will go into a startup founders salary as well. 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