Money can be the root of problems in many relationships. . So, ask only for the amount that you need. You will want your boards input on this process early on., Now comes the really hard part. Some families live on that," says VC Sean Owen. Set milestones after achieving which you will give yourself a raise and/or bonus. Also, you may have to pay more when hiring more experienced people. Raise capital, update investors and engage your team from a single platform. by using the valuation of your last financing round or the most recent offer you received to purchase your business. However, at all other levels pay is more or less flat to up quite a bit. Design by Lucila Romero. Below is our 2019 study, which we have left online for reference. The role of the compensation committee can vary, from making recommendations to the board on executive salaries, bonuses (and option grants) to having authority to set executive salaries. Personally, you dont want to bring that kind of stress home to your partner. The lower the CEO salary, the more likely it is to succeed. Decide how much of their total compensation you would like to pay in cash (AKA their salary). Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. 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 biggest growth in the size of funding raised seed rounds, and therefore the biggest driver of salary growth, came from hardware and SaaS companies. 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. 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. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. We have presented you with CEO salary data the last two years. And in 2021, the average salary popped back - but thats not the full story, as youll see as we dig into the numbers. WebSequential rounds gave me a small bump in salary. Industries and different verticals can lead to varying salaries. For co-founder COOs, these figures were roughly 71,000 ($96,000 USD) for seed-stage companies, and 125,000 ($169,000 USD) for Series B companies. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. 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. The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. 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. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. For the most lightly funded tech companies, the concept of ramen profitability encourages founders to take no salary to keep expenses minimal and make the company more attractive to investors. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Do unprofitable companies need to file tax returns? They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. 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. Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. 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. How Much Should A Startup Founder/CEO Pay Herself? We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. Thiel was hesitant to answer, but eventually said $100-125k. 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. 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. 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! The reason why a few big corporate founders and CEOs dont take a huge salary is that it isnt their only source of income. See if you are eligible for a salary or not. 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. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. Still, when it comes to startup CEO pay, our data reveals some good news. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan A more mature space leading to a higher salary. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. How do you determine whats best? It [a low salary] aligns interest with the equity holders. Every month of cash burn is valuable. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. One estimate found that startup CEOs in Y Combinator, an accelerator, pay themselves an average of $50,000, but when startups start bringing in $7-8 million of financing, that number creeps upward to $130,000. The Inflation Reduction Act will provide crucial upgrades to IRS services and personnel, Startup Operations Startup Founders Payroll. It seems that companies pay 8-12% of their funding to their founders. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. However, you cannot expect it to be at par with the market standards. Founders are paid only when they work as employees. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. Case Study. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. The table below shows average and median salaries since 2018. When the company exited after three venture rounds, my salary was at $250k. 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. 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. 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. For venture-backed companies, you can find this answer through an official 409A process or less formally (as. ) CEO pay varies by a number of We hope this data will help other early-stage businesses prepare their budgets! In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. Salaries ranged from the 25th percentile of $43,000 to the It discovered the salaries are up 2.7% compared to 2021 well below the David Rose agrees. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. Founders of bootstrapped startups dont need to pay themselves. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. There is a strong positive correlation between the two. Also, see if you can cut down on unnecessary expenditures. 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. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Meanwhile, the accounting firm Kruze Consulting This continues a corporate trend that began in 2019. What are Your VCs Return Expectations Depending on the Stage of Investment? 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. 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. You might feel the same way. 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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! What a great article. Brex vs Ramp - Which card is best for startups? The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). Weve found that there are a variety of factors that can influence the salary of a startup CEO. Yes! You can also fix an hourly wage rate if you want to. Tell us what you think about our article on startup founder salary in the comments section. Startup Founder Salary Guide: How Much To Pay Yourself? That comes in the form of common stock. 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.. In 2020, we saw salaries decline at the height of the covid pandemic. The other major surprise we noticed was that eCommerce companies are paying their CEOs much more than they had in the past $141,000 for 2022. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. Estimate your R&D tax credit using our free calculator. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and 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. The distinction between the two may impact early employee decisions on how they personally value their stock. Tax Credit Center - Which of the 700+ Credits Are Best? This is somewhat true as well. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. You need to be on the businesss payroll for that. Finally, startup culture can generate pressure to not take salaries. ), and their companys industry. 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. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. 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. Early-stage companies, as well as all other companies, should evaluate their policies to determine how the gender pay gap increased in the last three years, and see what steps they can take to better support female leaders.. Try Visible free for 14 days. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. 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. 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