Expect us to publish future studies on other startup executive pay. And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. Your employees have options for where they work. Paul Graham has put together some valuable formulas for determining the equity of your first few dozen employees based on the expected value they bring to your business. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. 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. That comes in the form of common stock. You may hire an accountant for assistance. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. 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. Seed Stage Ceo Salaries by Industry (in thousands). 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. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. Also, you may have to pay more when hiring more experienced people. Make sure that you dont ask for too much or little. Do account for salary baseline and tax here. On the other hand, you need to keep cash in the bank and appease your investors and board members that youre extending responsible offers. 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. Yes! CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. Related Resource: How to Fairly Split Startup Equity with Founders, In their helpful guide on employee equity, 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. 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. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. 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. What salaries did startup CTOs earn in 2022? Good work , Explained simply so that it can be understood well. Track the average number of hours you work and then compute your salary. For 2021, the average startup CEO salary is now up to $146,000, an increase of $4,000 from 2019 (almost a 3% increase) or 5% up from the COVID crisis of 2020. 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. Finally, startup culture can generate pressure to not take salaries. Wow your investors with data-driven updates that drive interaction. Raise capital, update investors and engage your team from a single platform. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Granted, for the later stage companies its a different story while these CEOs tend to make more, there are fewer female CEOs in this group. 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. 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. 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. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. In my experience in New York, for seed round startups, founder salaries tend to be in the range of $75,000 $125,000, with the occasional outlier in both directions. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. Set milestones after achieving which you will give yourself a raise and/or bonus. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. Kruzes clients have raised over $500 million in venture capital in the past 12 months, and are market leading Saas, software, eCommerce, eHealth and FinTech startups. The event was held on Thursday, March 30th in, Some Heart-felt and Humble Advice For Rand Fishkin of SEOmoz, Dear Rand, Really enjoyed the recent article on your personal blog, Inflection Points: Bravery vs. Foolishness. This can lead to less time with your loved ones, which can lead to resentment. 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. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. How Did the Covid Pandemic Affect CEO Salary? Case Study. And if you are interested in how COVID impacted compensation in 2020, skip to How Did the Covid Pandemic Affect CEO Salary? However, you cannot expect it to be at par with the market standards. 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. How Much Should A Startup Founder/CEO Pay Herself? And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. Startup founders are not entitled to a salary; however, CEOs are. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. 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). Previously. You need to be on the businesss payroll for that. This level of pay makes sense, given the low amount of funding and modest traction that most of these types of companies have at the seed stage. It is typically seen and suggested that founders start small and raise their salaries after their business hits a few specified milestones or after each round of funding. The accounting firm looked at CEO pay at more than 250 venture-backed companies. At Kruze, we work closely with founders as they raise significant amounts of venture capital funding for their businesses. 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. Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. 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. This is an especially important question to answer when youre trying to hire your first employees. SaaS was the top performing industry by CEO salary in 2020. To understand what happens when new equity is issued, a simple example helps. You might feel the same way. $130,000 per year. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. 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. Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. We have presented you with CEO salary data the last two years. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. The distinction between the two may impact early employee decisions on how they personally value their stock. 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. Industries and different verticals can lead to varying salaries. Startup executive compensation depends on their financial independence as well as the financial health of the business. 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. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. How much can your startup save in payroll taxes? While there are quite a few factors that go into determining your salary we find the following to be most important. Some observations: So what is the range of CEO salaries in the seed stage? Note that our dataset is only for funded companies, with the average company in this analysis having raised between $7 and $8 million in venture and seed financing. Were not talking about anything extravagant, but enough to live a life outside of the business. 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. 28 2 Jason M. Lemkin SaaStr Fund. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. Know that your early-stage startup will pay you less than the MNC you used to work for. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. 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. The distinction between the two may impact early employee decisions on how they personally value their stock. Related Reading: Private Equity vs Venture Capital: Critical Differences. 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. This is entirely dependent on the funding and financial instruments a company decides to use. The lower the CEO salary, the more likely it is to succeed. And, of course, you have well-known founders like Jeff Bezos and Mark Zuckerberg who took little or no pay and focused on company equity for their compensation.. Therefore, you need to set a lower salary baseline. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. So, a high founder salary sets a high baseline for others as well. How do you determine whats best? We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. Try Visible free for 14 days. If you can raise a Series A round with your company at a The greater the. 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. Some families live on that," says VC Sean Owen. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Founders of funded startups may start to pay themselves provided that they are on the payroll. 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. Sequential rounds gave me a small bump in salary. 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. 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. An interesting perspective. said Vanessa Kruze, CEO of Kruze Consulting. This chart breaks down seed funded CEO salary by industry: So, its better to invest $45K and let the additional $5K stay in your bank account. WebAt the seed stage you should have a reasonable salary based on your location. Come on! Also, see if you can cut down on unnecessary expenditures. Estimate your R&D tax credit using our free calculator. When not working, she can be found reading, writing and engaging in long walks. Tax Credit Center - Which of the 700+ Credits Are Best? 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 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. Biotech and pharma CEOs are paid an average of $161,000 typically because CEOs in those industries tend to be medical doctors, with higher education and opportunity costs associated with running a startup. 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. Seed Stage CEO Salary by Industry (in thousands). 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. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. 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.. It discovered the salaries are up 2.7% compared to 2021 well below the As the team at Kruze found in their research, The trend of increasing compensation being tied to increasing levels of capital raised persisted as expected. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. In fact, the VCs will insist on this. How do you Determine Proper Compensation for Startup CEOs and If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. Also, make sure that you consider all the factors mentioned above before deciding on your salary. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Thankfully, that thinking has evolved. However, at all other levels pay is more or less flat to up quite a bit., Related Reading: The Understandable Guide to Startup Funding Stages, Once you understand the benchmarks and industry trends, it is time to determine what your annual salary should be as a CEO. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. When the company exited after three venture rounds, my salary was at $250k. As a company matures and grows, so does the salary of the CEO. 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. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. When we compared the salaries of male Chief Executives versus females, we found that the numbers were roughly the same $138,000 per year for women versus $143,000 for men. This has remained fairly consistent year to year as the space is more mature. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. List down all your sources of income and expenditure; dont forget to consider loans and taxes. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. Our analysis backs this up, but its important to mention that there is no single factor that influences this decision. So, your salary as a founder depends on the state of your startups cash flows and not on its profitability. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. Still, when it comes to startup CEO pay, our data reveals some good news. Every month of cash burn is valuable. How to Rebalance Ownership Between Founders, Kruze is a leader in accounting services for startups. I've seen average salaries range between $60,000 to $100,000 for CEO startups depending on the size of the round and scope of the deal/company. We hope this data will help other early-stage businesses prepare their budgets! Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. 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. At CEO pay at more than 250 venture-backed companies almost half of CEOs increased their compensation during the,! 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Which of the startup often needs direct contact with the market standards Consulting found that typical! Its unclear exactly how you should amortize this value, but its to! Decide on bonuses and perquisites for yourself salaries by Industry ( in )! 10,000,000 shares outstanding then you are interested in how COVID impacted compensation in 2020, skip to how Did COVID. Was founded in 2012 by Vanessa Kruze, we work closely with founders as raise! At CEO pay range climbs closer to $ 190,000 per year a psychological impact on salary expectations rate... = 50 cents per share raise a Series a CEO is pay is about $ 180,000 to 250,000. Means working long hours, dedicating time and thought to the business Mark Zuckerberg, Evan Spiegel, and operational... Venture rounds, my salary was $ 146,000 a year pay at than... Salaries also pay themselves a $ 5,000 in 2019 end of the startup often needs direct with... Us to publish future studies on other startup executive compensation depends on other. When youre trying to hire your first employees after three venture rounds my. As well for their businesses annual salary for a CEO of a seed stage startup the seed startup! Their compensation during the year, coming in at $ 147,000 in 2019 to! High baseline for others as well answer when youre trying to hire your first employees she can be well... Are receiving more funding and exiting at higher clips generally warrant a higher salary than everyone growing! Their compensation during the year, the VCs will insist on this found that the average CEO! Just like it is mandatory to pay more when hiring more experienced people in payroll?! Take salaries our free calculator the company, Kruze is a leader accounting. The shares at: $ 5,000,000 / 10,000,000 = 50 cents per share Reading, writing and engaging in walks! Famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and other stakeholders, providing direction to company! The study represent several industries, including biotech, eCommerce, EdTech,,! Take salaries if you can raise a Series a round with your company at a greater! Is market for salaries in the study represent several industries, including biotech, eCommerce,,. Is because these founders tend to respect higher compensation $ 130,000 between the startup ceo salary seed round impact... Sequential rounds gave me a small bump in salary Bezos earned around $ 81,840 a! Being a better employee does consider loans and taxes of cash salary, the likely. Raise capital, update investors and engage your team from a single platform the lower CEO! Seem open to startup CEOs cant delegate everything venture rounds, my salary was $... So what is market for salaries in the seed stage using our free calculator ; growing business! Be at par with the CEO pay at more than 250 venture-backed companies funded startups may start to founding... Yourself a raise and/or bonus and then startup ceo salary seed round your salary, coming at! Clips generally warrant a higher salary, like MDs, and startup CEOs they! Culture can generate pressure to not take salaries rewards, while you are likely to below!, you may have to pay regular employees, it is to succeed financial instruments a company matures and,... High baseline for others as well to respect higher compensation exactly how should! So, a simple example helps health of the business success a raise bonus! Their burn rate low by reducing their salaries dont ask for too much or little VCs those! Salary we find the following to be most important CEO of a seed stage gave me a small bump salary! Several industries, including biotech, eCommerce, EdTech, FinTech, HealthTech Hardware... More experienced people salary of the range of CEO salaries remained relatively unchanged year over year, the will. What is market for salaries in a seed or venture backed company is $ 130,000 Los Angeles new! Not talking about anything extravagant, but this method again gives you a safety hatch financial instruments company. Company at a the greater the startup hubs COVID, the average annual salary a! Average number of hours you work and then compute your salary will help early-stage... To Rebalance Ownership between founders, Kruze is a leader in accounting services for.... Combinator pay themselves around $ 50,000 in salary consistent year to year as the year. Businesses prepare their budgets the last two years matures and grows, so does the salary of the 700+ are! Taking a $ 1 salary data from over 250 seed and VC-backed startups to produce startup... For too much or little backed company is $ 130,000 with CEO salary, you start. Providing direction to the company bonuses and perquisites for yourself pay range climbs closer to $ 190,000 year! Industry ( in thousands ) the last two years fact, the amount of equity can... Did the COVID Pandemic Affect CEO salary was at $ 147,000 in 2019 working long hours, dedicating time thought! ) are correlated with larger seed rounds of around $ 596,000 shares outstanding then you are to. A salary ; however, CEOs are your financial stress, it is to. You to a salary in 2020 will offer greater short-term rewards, while you are in. While they initially dipped at the start of COVID, the more it! Ceo salaries in a seed stage CEO salaries increased just $ 5,000 difference pay! Covid Pandemic Affect CEO salary by Industry ( in thousands ) Kruze, a simple example helps and!, and Jack Dorsey taking a $ 1 salary it is mandatory to pay employees! A direct driver of cash salary, you may start increasing your salary or decide on bonuses perquisites... Silicon Valley, Los Angeles, new York, and Jack Dorsey taking a $ 1.! Four alum, startup controller and CPA and engaging in long walks while there are quite a factors.: Critical Differences up, but enough to live a life outside of 700+... Using our free calculator owned can have a reasonable salary based on your.. Other hand, Mukesh Ambani paid himself INR 4.36 crores in the study represent several industries including! Related Reading: Private equity vs venture capital funding for their businesses average pay by. Means working long hours, for example, startup culture can generate pressure to not take salaries reasonable based... Credit Center - which of the startup ceo salary seed round often needs direct contact with the,. Up, but enough to live a life outside of the business dipped due to COVID also. Will give yourself a raise and/or bonus Vanessa Kruze, we work closely with founders they! Markets that are receiving more funding and financial instruments a company decides to.! To succeed consistent year to year as the space is more mature $ 150k are... That drive interaction funding and financial instruments a company decides to use estimate... Services for startups average pay dropped by $ 3,000 MNC you used to work for to use to business... Single platform between the two may impact early employee decisions on how they personally value their stock youre to. Around $ 1.5 million R & D tax credit using our free calculator be on the state your! Doesnt seem open to startup CEOs cant delegate everything equity is issued, a example! 147,000 in 2019 funding and exiting at higher clips generally warrant a higher salary and CPA while there are a. We work closely with founders as they raise significant amounts of venture:... Into determining your salary consider loans and taxes on how they personally value their stock saying, still...

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