We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. One trend remained the same as last year: the more you raise, the more you get paid. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. 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. Feedough is the one-stop resource for everything related to startups. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. hot space in VC leading to more companies being funded with more money., , as above you can see that the capital raised greatly impacts a startup CEOs salary., Companies that have yet to prove product-market fit so likely as a lesser salary, Similar to $0-$2M this range has yet to give investors and board members the full confidence of a large exit, On the path to a larger exit and team warranting a larger salary., Next, its time to determine what your business is worth so the value of equity can be established. Build relationships, manage a fundraise and build your business. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. 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. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. At Kruze, we work closely with founders as they raise significant amounts of venture capital funding for their businesses. Some families live on that," says VC Sean Owen. But early employees will be attracted to your business in part because of the long-term payoff. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). But youre hiring unusual people to take this ride with you and understanding the package that will satisfy their ambition will also likely require rounds of negotiations and probing questions from you about their true motivations. The VCs set my salary without discussing or consulting with me (I know, weird, See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. This is somewhat true as well. 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 What a great article. 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. The greater the. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? However, at all other levels pay is more or less flat to up quite a bit. 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. With the financial stress that comes with running a startup, the last thing a startup CEO or founder should be worrying about is how theyre going to live day-to-day. CEO pay varies by a number of The right approach wont include a one-size-fits-all answer for every business. WebAt the seed stage you should have a reasonable salary based on your location. ), and their companys industry. Tax is one of the most crucial factors to consider when drawing founder salary, especially in mature companies. 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. 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. While the spread of compensation by stage of financing (i.e. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. 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. 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. Series A CEO Pay Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! Not paying yourself enough can turn you into a bad decision-maker. That comes in the form of common stock. 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. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. So, a high founder salary sets a high baseline for others as well. You need to assess the current state of your venture properly before determining your salary. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. 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. Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. As noted in, , 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. 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. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. 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. 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. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. The accounting firm looked at CEO pay at more than 250 venture-backed companies. However, our research is meant to aid your own, and we are not acting as licensed professionals. The average startup founder salary in the seed round is $100,000. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. This has remained fairly consistent year to year as the space is more mature. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. 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. David Rose agrees. Now, if they come to know that you pay yourself almost at par with the industry standards while they have to work for less for a company that isnt even theirs, it may lead to resentment. Assess the state of your startup and its finances. 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. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. This years SaaS and Fintech founders are back to paying themselves more or less the typical amount of compensation, at $123,000 and $127,000 per year, respectively. VCs, of course, wanted to stretch every dollar they could. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. 28 2 Jason M. Lemkin SaaStr Fund. 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. However, we were surprised that healthcare companies had lower founder/CEO pay. There are a variety factors that drive the difference in founder/CEO pay by industry. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. Seed, Series A, Series B, etc. 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. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". One of the most common questions we get from founders is what their salary should be after they raise funding. Search by stage, location, sector and more. Having the above questions answered will help. Salaries ranged from the 25th percentile of $43,000 to the 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,. Therefore, paying founders doesnt seem sensible. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. As you would have figured out by now, entrepreneurs dont always earn big bucks. 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. An interesting perspective. This is entirely up to the startup or founder. Female startup CEOs continue to lag behind their male counterparts in salary, and their average paycheck is still 3.7% below the peak in 2019. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. Please quote the information above when referring to 2019 data. 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, Jason Cohen writes. 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. 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. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. 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. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. 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