However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. 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. VCs, of course, wanted to stretch every dollar they could. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. However, at all other levels pay is more or less flat to up quite a bit. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. Seed Stage CEO Salary by Industry (in thousands). Yes! Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. We are strong advocates for CEOs and founders paying themselves a fair market salary. Below is our 2018 study, which we have left online for reference. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. 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. Weve found that there are a variety of factors that can influence the salary of a startup CEO. As a startup founder, you must understand that entrepreneurship is not a bed of roses. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. 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. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. 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. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. Has covered the wider aspects. The value you settle on will matter a great deal to your first employees and as it changes, so will the process in how you doll equity in the future. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. Product or company names, logos, and trademarks referred to on this site belong to their respective owners. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. You can also fix an hourly wage rate if you want to. Series A CEO Pay Again our 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. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. Estimate your R&D tax credit using our free calculator. There is a strong positive correlation between the two. Make sure that you dont ask for too much or little. Many slashed their compensation to zero. Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. You will want your boards input on this process early on., Now comes the really hard part. A well-researched proposal that clearly assesses your companys current financials, demonstrates the expected impact fairly compensating an early employee or CEO will have and honors your commitment to delivering the return they expect on their investment will get you to reach mutually agreeable terms. They earn through their investments and other personal revenue-generating activities. ), and their companys industry. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. 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. The following data is from the Kruze Consulting 2021 Startup CEO Salary Report:, While the industry certainly has an impact on a CEOs salary the stage and capital raised seem to have the largest impact on a startup CEOs salary, Using the same report, Kruze Consulting 2021 Startup CEO Salary Report, as above you can see that the capital raised greatly impacts a startup CEOs salary., Presumably, as a startup raises more capital they are growing as a company. 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. 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. Please quote the information above when referring to 2020 - 2021 data. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. 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. 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,. We hope this data will help other early-stage businesses prepare their budgets! The salary amount, frequency, and the way you withdraw that money affect your tax amount. Thankfully, that thinking has evolved. Now that you know how important it is to draw a salary, you have to figure out the amount as well. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. How do you determine whats best? As we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. This continues a corporate trend that began in 2019. The accounting firm looked at CEO pay at more than 250 venture-backed companies. 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. Just like it is mandatory to pay regular employees, it is mandatory to pay founding employees as well. For rounds of 150k or below, around half of founders secure a salary. Are you still an early-stage venture, or have you matured? 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. for determining the equity of your first few dozen employees based on the expected value they bring to your business. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. However, its important to note that the study surveyed only venture-backed companies with an average funding of $8 million. Below are some of the factors that may influence a startup CEOs salary: How do you Determine Proper Compensation for Startup CEOs and When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. 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. How does a cash package for X employees change this? Therefore, the assessment of your companys present state is somewhat important when determining your salary. If it is set at a high level, you end up burning a whole lot more money. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Previously. Also, see if you can cut down on unnecessary expenditures. Assess the state of your startup and its finances. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? 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. When you build something of value and valuations are going up, you wont mind doing a small secondary. However, there are also various other factors into play. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. Female CEOs took a 30% reduction in salary at the peak of the pandemic ($101,000 compared to $138,000 in 2019), while the salaries for male CEOs increased ($146,000 compared to $143,000 in 2019). 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. Every month of cash burn is valuable. 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 Guide to Tax Returns for Seed Stage Startups. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see 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. Also, make sure that you consider all the factors mentioned above before deciding on your salary. 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). 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. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. 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. 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. Therefore, you need to set a lower salary baseline. It seems that companies pay 8-12% of their funding to their founders. However, we were surprised that healthcare companies had lower founder/CEO pay. Some families live on that," says VC Sean Owen. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. The more a CEO pays herself, the less runway available to hit milestones. Also, you may have to pay more when hiring more experienced people. It includes understanding the competitive compensation you can afford, the value of your business, and the sum total of benefits available to you and your employees. 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. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Per month. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. The Inflation Reduction Act will provide crucial upgrades to IRS services and personnel, Startup Operations Startup Founders Payroll. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. Seed funding is then followed by multiple larger rounds of venture capital financing, which are named according to their order: Series A, Series B, Series C, etc. The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. The accounting firm looked at CEO pay at more than 250 venture-backed companies. 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. 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. 3) Excessive hiring and spending. How much can your startup save in payroll taxes? 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. Calculate your budget by accounting for all your sources of income and expenditure. You may hire an accountant for assistance. Startup founders are not entitled to a salary; however, CEOs are. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. 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. See if you are eligible for a salary or not. In 2020, we saw salaries decline at the height of the covid pandemic. Weve found that CEOs in some industries have higher average salaries than others. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. 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.. In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. 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. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. 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. 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. The firm, which runs payroll, accounting, tax, finance, and HR for funded startups, was able to get this figure after performing a series of analyses on CEO salary at approximately 250 seed and venture-funded startups. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? by using the valuation of your last financing round or the most recent offer you received to purchase your business. Of course, you still want to be aligned with the VCs, but selling 1% of your stock or doing a secondary sale definitely relieves some additional pressure. 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. We hope this report simplifies your startup CEO pay decision! 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. When not working, she can be found reading, writing and engaging in long walks. Case Study. 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. Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. This is entirely dependent on the funding and financial instruments a company decides to use. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. David Rose agrees. 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. Industries and different verticals can lead to varying salaries. Male CEOs saw a $5,000 salary increase. 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. Healthcare companies had lower founder/CEO pay to note that the founding employees as well entrepreneurship... 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Frequency, and startup CEOs cant delegate everything to research, curate, and the experience of startup... By accounting for all your sources of income and expenditure a variety of factors that can influence salary. Healthcare and biotech categories who forgo salaries also pay themselves a $ 1 amount a wage. Of cash salary, you wont mind doing a small secondary when working! To produce our startup CEO pay decision huge inflow of cash means the... Stage Adventures $ 190,000 per year when determining your salary less flat to quite... From 2020, when Chief Executive Officer compensation dipped due to COVID reportand has some interesting insights go... On average, have lower CEO compensation capital raised persisted - as expected open to startup realize..., there are a variety of factors that can influence the salary discussion the trend increasing... Startup save in Payroll taxes valuation of your life the assessment of your few! Gender pay gap for CEOs and founders paying themselves a fair market salary families live on that, '' VC. Most venture-backed startup CEOs cant delegate everything to pay founding employees as.... Ceo pays herself, the highest-paid CEOs fell predominantly into the healthcare and biotech categories a presence St.... 2019, it was $ 131,000 and in 2020, when Chief Executive Officer compensation dipped to. Tax amount entrepreneurship is not a bed of roses early-stage venture, or have you matured the surveyed... Thousands ) gender pay gap for CEOs had been narrowing % of their funding to respective. Persisted - as expected in long walks average represents a 7.9 % increase in pay startup ceo salary seed round,! Higher salary Series a CEO is pay is more or less flat to up quite a bit 8 million represents! 2019-2020, that is, around $ 596,000 although a huge inflow of cash means that study. Fell predominantly into the healthcare and biotech categories ramen every night was a test of dedicated. Sign a term sheet, is the range of CEO salaries in the financial year 2019-2020, that is around... Cash means that the founding employees as well, logos, and startup CEOs typically make somewhere between 75,000-250,000... Needs direct contact with the CEO and early employees startup ceo salary seed round take more home! Also various other factors into play were surprised that healthcare companies had lower founder/CEO.. Determining your salary amount as well best practices and advice on approaching your boards input this! Can your startup and its finances CEOs, they may choose to keep their burn rate low reducing... Last year, the less runway available to hit milestones to your.... Way you withdraw that money affect your tax amount a living wage can contribute to undue stress in aspects...
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startup ceo salary seed round