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. Also, make sure that you consider all the factors mentioned above before deciding on your salary. 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. There is a strong positive correlation between the two. Resources and best practices to help investors manage and communicate with their portfolio companies. So, you need to make a fair assessment of your current financial situation before talking to investors about salary. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. While there is no correct answer to the question, here is my main take-away: it's so critical to be capital-conscious at the seed stage. 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. Certainly, there are a few other factors that will go into a startup founders salary as well. 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. Just like most couples should discuss important things like money and debt before they are married, its a good idea to talk money and salary before you enter into a marriage with a VC. Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. 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. Having the above questions answered will help. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. Upon digging deeper, we realized that this is because of the rise of D2C healthcare companies, which tend to seem more like SaaS businesses and less like a healthcare company with a CEO who has an advanced degree. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. 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 VCs set my salary without discussing or consulting with me (I know, weird, Lets dive into why we think there are notable difference by industry. Richard had just raised his first round of funding. The salary varies by company stage and industry learn more below: One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. So it does pay to be good at fundraising! David Rose agrees. Estimate your R&D tax credit using our free calculator. Design by Lucila Romero. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. 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. No need to stifle reasonable human aspirations but also dont expect a lavish lifestyle when you own a growing company. It is typically seen that founders who have alternate sources of income are not paid as much as the others. 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). The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. If you also have 10,000,000 shares outstanding then you are selling the shares at: $5,000,000 / 10,000,000 = 50 cents per share. 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. 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. 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. On, Stating the obvious, salary needs can vary widely. Sequential rounds gave me a small bump in salary. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. Are you big enough to start on the expansion journey? Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". Tax Credit Center - Which of the 700+ Credits Are Best? 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. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want To understand what happens when new equity is issued, a simple example helps. 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 WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Because of this, startup founder salary is a highly debatable topic. 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. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. $276k Is the Median Startup CEO Salary for a Very Successful Company. 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. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. Please quote the information above when referring to 2020 - 2021 data. 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. Money can be the root of problems in many relationships. This continues a corporate trend that began in 2019. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. The process is usually difficult for first-time founders, especially because of the complexity of the deciding factors. The lower the CEO salary, the more likely it is to succeed. 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). Same with fintech at $129,000. As companies mature, its typical that a compensation committee is formed by non-management board members. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. 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. WebSequential rounds gave me a small bump in salary. However, our research is meant to aid your own, and we are not acting as licensed professionals. The more a CEO pays herself, the less runway available to hit milestones. The largest growth appeared among companies who raised between $5-10 million among this group, average CEO salaries jumped 12% from $145,000 in 2018 to $162,000 in 2019. When the company exited after three venture rounds, my salary was at $250k. Now that you know how important it is to draw a salary, you have to figure out the amount as well. 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. VCs, of course, wanted to stretch every dollar they could. that a founder CEO will be in the 5-20% range, a founder CTO in the 2-10% range, other co-founders between 3-7% and non-founder early employees between 0.5-5%. 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. Photo: Supplied. 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. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. You will want your boards input on this process early on., Now comes the really hard part. How to Calculate Your Startup Founder Salary? Having the above questions answered will help. Professionally, you want to be on top of your game when it comes to making the right decisions for your company. How Much Should A Startup Founder/CEO Pay Herself? ), and the companys industry. As a company matures and grows, so does the salary of the CEO. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. 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. There are a variety factors that drive the difference in founder/CEO pay by industry. Founders are paid only when they work as employees. Yes! Therefore, the assessment of your companys present state is somewhat important when determining your salary. As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. WebWe used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. The right approach wont include a one-size-fits-all answer for every business. The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. Founders of bootstrapped startups dont need to pay themselves. 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 might feel the same way. 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. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? I asked Richard why? This year, we took it up a notch and analyzed data from more than 250 venture-funded companies. The table below shows average and median salaries since 2018. When the company exited after three Stress can create dissension in a relationship, adding pressure to your home life, affecting how you relate to those you love. Start your search now on this startup guide. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. This benchmarking will help you figure out your opportunity cost, that is, the amount of salary money you have forgone to start your own company. 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. Between 2020 and 2021, female startup leaders added $31,000 to their salaries, on average, but 2022 saw only a nominal increase of $1,000 annually for female CEOs. Weve found that there are a variety of factors that can influence the salary of a startup CEO. It discovered the salaries are up 2.7% compared to 2021 well below the Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). Expect us to publish future studies on other startup executive pay. Also, you may have to pay more when hiring more experienced people. 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. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. How do you Determine Proper Compensation for Startup CEOs and 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. As already mentioned, founders are paid only when they work as employees, not because they started the company. 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. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. Read our tips now. The median base pay for an entrepreneur who has successfully raised funding ranges from about $40,000 to more than four times that amount which is what theyre worth according to their stockholders equity (based on pre-money valuation). "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. 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