This year, we took it up a notch and analyzed data from more than 250 venture-funded companies. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. As a company matures and grows, so does the salary of the CEO. Were not talking about anything extravagant, but enough to live a life outside of the business. Chris is a seed stage VC and angel investor at CommonAngels. So, your salary as a founder depends on the state of your startups cash flows and not on its profitability. There is a strong positive correlation between the two. Assess the state of your startup and its finances. Richard had just raised his first round of funding. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. 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. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). Money can be the root of problems in many relationships. Also, you may have to pay more when hiring more experienced people. How does a cash package for X employees change this? Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. Share your companys key data with our beautiful dashboards. Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. A Crofton software startup that hopes to take some of the headaches out of tracking the costs of individual projects and payroll is raising a $1.5 million seed round. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. Series A CEO Pay Again our 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. Getting someone to join your dream before it is much of anything is an art not a science., Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. This is entirely dependent on the funding and financial instruments a company decides to use. 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. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. 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. Please quote the information above when referring to 2019 data. David Rose agrees. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. The more a CEO pays herself, the less runway available to hit milestones. 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. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. Lets dive into why we think there are notable difference by industry. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. This makes it important to account for the duration that you work when calculating your salary. So, its better to invest $45K and let the additional $5K stay in your bank account. Therefore, the assessment of your companys present state is somewhat important when determining your salary. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. 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. That comes in the form of common stock. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. Your salary also depends on the amount you have raised. Feedough is the one-stop resource for everything related to startups. Case Study. Founders of bootstrapped startups dont need to pay themselves. Product or company names, logos, and trademarks referred to on this site belong to their respective owners. Some families live on that," says VC Sean Owen. WebAt the seed stage you should have a reasonable salary based on your location. 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. 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 accounting firm looked at CEO pay at more than 250 venture-backed companies. Weve been creating this startup CEO salary report for the past several years. 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. 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! Tax Credit Center - Which of the 700+ Credits Are Best? This calculator will show you an estimated range of compensation for a startup CEO based on the amount of funding that the company has raised, the stage of the company (i.e. Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. 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. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. The bottom line is: Align everything in your life. At any moment, executives or team members may own public or private stock in any of the third party companies we mention. Weve used data from over 200 seed and venture-funded startups to identify the average annual salary earned by these companies CTOs, and discovered that CTO salaries are actually larger than CEO salaries for startups in the seed stage. 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. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. The average startup founder salary in the seed round is $100,000. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. In 2022, female CEOs made $20,000 less than males. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. How Much Should A Startup Founder/CEO Pay Herself? Do account for tax. 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). We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. 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. I know of a couple of companies I am invested in where the founders didn't pay themselves anything for quite a while as they were building the foundations of their product. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. 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. A finance enthusiast, literature beau and lifelong learner. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. 28 2 Jason M. Lemkin SaaStr Fund. Determining how to properly compensate employees at a startup is also a tricky task. 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, 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. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. David Rose agrees. How long will this last us? The right approach wont include a one-size-fits-all answer for every business. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. 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. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Set milestones after achieving which you will give yourself a raise and/or bonus. 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. What Salaries Did Startup CEOs Earn in 2022. 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. Salaries ranged from the 25th percentile of $43,000 to the 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. Brex vs Ramp - Which card is best for startups? If you can raise a Series A round with your company at a In 2019, before COVID, startup CEO salaries averaged $142,000. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most 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. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Many slashed their compensation to zero. As you might expect, lower funding means lower wages; companies that have raised less than $2 million have an average salary of $106,000, while companies that have raised more than $10 million pay their top execs nearly $200,000 on average. The salary amount, frequency, and the way you withdraw that money affect your tax amount. 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. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. Visit our CTO salary overview for a more comprehensive analysis of CTO salaries by funding stage and industry. 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. Come on! Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. Did we miss something? For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. A Guide to Tax Returns for Seed Stage Startups. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. One of the easiest ways to do that is pay yourself the right amount. This will help you avoid future hassles. ETtech. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. 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. One of the most common questions CEOs ask us at Kruze Consulting is: How much should my salary be? Since the Kruze team helps run startups books and payroll, its natural that wed get this question. 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