There is a strong positive correlation between the two. 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. On, Stating the obvious, salary needs can vary widely. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. When the company exited after three 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. Now that you know how important it is to draw a salary, you have to figure out the amount as well. What are Your VCs Return Expectations Depending on the Stage of Investment? Im seriously enlightened. In 2020, approximately 36% of companies reduced their chief executive compensation during COVID. 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. Build relationships, manage a fundraise and build your business. For venture-backed companies, you can find this answer through an official 409A process or less formally (as. ) If the investment is up to $2.5 million, the CEOs salary should be $125,000. 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. David Rose agrees. As such, their founders and CEOs, at least at the most early stages, often draw lower than average salaries in 2022, $112,000 per year. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. They might lose faith in you and your company. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. You dont want to walk away from a tough negotiation having damaged your relationship with investors on your own compensation or shown irresponsibility when proposing packages for early employees. According to our founder and CEO of Kruze Consulting, Vanessa Kruze, this years data indicates that startup CEOs are making around 10% more than last year, which is to be expected since funding rounds increased in size year over year.. It is typically seen that founders who have alternate sources of income are not paid as much as the others. However, at all other levels pay is more or less flat to up quite a bit. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). Money can be the root of problems in many relationships. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. 3) Excessive hiring and spending. 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. 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. The lower the CEO salary, the more likely it is to succeed. This year, we took it up a notch and analyzed data from more than 250 venture-funded companies. David Rose agrees. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. 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. Seed, Series A, Series B, etc. 28 2 Jason M. Lemkin SaaStr Fund. What salaries did startup CTOs earn in 2022? , 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. Assess the state of your startup and its finances. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. Photo: Supplied. 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. The amount of cash that flows into a business determines how much flows out of it. In practice we have found that if you only ask one question, ask that. 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. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. Brex vs Ramp - Which card is best for startups? Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. What's the average salary for CEOs from funded startups? 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. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. Several years ago, many eComm companies were just getting started when they were seed funded. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. *. David Rose agrees. How Much Should A Startup Founder/CEO Pay Herself? This is an especially important question to answer when youre trying to hire your first employees. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. For rounds of 150k or below, around half of founders secure a salary. 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. Every month of cash burn is valuable. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. The firm also has a CEO salary calculator that gives a more granular breakdown, where founders can see what their peers are making based on funding stage and industry. How much can your startup save in payroll taxes? Same with fintech at $129,000. Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. Wrong! 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. Remember that every dollar you receive could have been used for your companys growth. Look at your competitors and determine what they are paying an employee in a similar role. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. 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. You may start taking a salary when your business raises enough capital. Is it wise to pay yourself when your startup demands this many resources? Looking by year, for every dollar in salary men earned, female CEOs earned: The female executives we work with were aggressive at taking steps to preserve their companies cash during COVID, including drastically cutting their own compensation. 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. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. Personally, you dont want to bring that kind of stress home to your partner. 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. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. 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. The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). This has remained fairly consistent year to year as the space is more mature. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. Are you still an early-stage venture, or have you matured? 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. Startup Founder Salary Guide: How Much To Pay Yourself? Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. Were not talking about anything extravagant, but enough to live a life outside of the business. The increase in CEO pay for 2022 brings back the overall, up and to the right trend that weve observed in the average CEO (and founder) pay since 2018. 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. Wow! Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. Do account for salary baseline and tax here. You need to assess the current state of your venture properly before determining your salary. 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. How to Rebalance Ownership Between Founders, Kruze is a leader in accounting services for startups. Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding. When should a startup make its first ops hire? Estimate your R&D tax credit using our free calculator. Startup compensation guide: see thousands of startup salary and equity data points. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. This is a crucial incentive; so, outline realistic checkpoints and track them. 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. 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. But early employees will be attracted to your business in part because of the long-term payoff. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. While a very small salary may lead you to starve and hamper your productivity, a huge sum will give the impression that you are more interested in filling your own pockets than working for the company. 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. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. 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. 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. Answers to hundreds of startup accounting, finance, HR and tax Q's, Expert startup accounting advice (and more), Top Financial Tips and Resources for Startups, Tips for setting up scaleable financial systems, iCals with federal, state and local compliance deadlines, See more of the best pitch decks ever used, After working with hundreds of startups, we picked the best credit cards. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. Finally, startup culture can generate pressure to not take salaries. Therefore, the assessment of your companys present state is somewhat important when determining your salary. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. Anyway, even when the business starts growing, it wont pay you much in the form of salary. How does CEO pay vary by the amount of venture capital raised? 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. You may be eligible, CA hardware startups doing R&D can pay less sales tax, Eligibility requirements are challenging for most VC-backed companies, Experts in raising capital and working with VCs, Venture Debt fundraising advice for VC backed startups, Experience helping funded startups navigate the M&A diligence process, High quality 409A's at a discounted price, Kruze's clients raise $1B+ a year in VC funding; this checklist will help you prepare. 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. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. If you can raise a Series A round with your company at a There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. The median base pay for an entrepreneur who has successfully raised funding ranges from Please quote the information above when referring to 2020 - 2021 data. So what is the range of CEO salaries in the seed stage? 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. Try Visible free for 14 days. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. Good work , Explained simply so that it can be understood well. 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. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. 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. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. Your salary also depends on the amount you have raised. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. 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. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. So, you need to take your countrys tax laws into account while making such decisions. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. Below is our 2019 study, which we have left online for reference. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. Search by stage, location, sector and more. You are probably eligible, Hiring veterans and felons? Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. 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. The best way is to tie your remuneration to achievable growth milestones and work accordingly. 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