Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. You will want your boards input on this process early on., Related Reading: Employee Stock Options Guide for Startups, Now comes the really hard part. For rounds of 150k or below, around half of founders secure a salary. Also, make sure that you consider all the factors mentioned above before deciding on your 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. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. WebSequential rounds gave me a small bump in salary. The average startup founder salary in the seed round is $100,000. 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. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. CEO pay varies by a number of Female startup CEOs continue to lag behind their male counterparts in salary in 2022. The best way is to tie your remuneration to achievable growth milestones and work accordingly. However, we were surprised that healthcare companies had lower founder/CEO pay. 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). It discovered the salaries are up 2.7% compared to 2021 well below the One of the most common questions we get from founders is what their salary should be after they raise funding. Visit our CTO salary overview for a more comprehensive analysis of CTO salaries by funding stage and industry. When should a startup make its first ops hire? And, not surprisingly, compensation is one of the most frequent questions. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. 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. Were not talking about anything extravagant, but enough to live a life outside of the business. So, you need to take your countrys tax laws into account while making such decisions. This came to me at the time I needed it most. Youve got a package in mind that includes a salary you can afford and an equity stake that makes the offer competitive if your company grows as expected. Expect us to publish future studies on other startup executive pay. The bottom line is: Align everything in your life. 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. Raise capital, update investors and engage your team from a single platform. 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. You might feel the same way. Leading into 2021, the female leaders moved their salaries up over $30,000 - however, the gap between male and female CEOs salaries did not close vs 2019. Thiel was hesitant to answer, but eventually said $100-125k. Resources and best practices to help investors manage and communicate with their portfolio companies. In practice we have found that if you only ask one question, ask that. WebAt the seed stage you should have a reasonable salary based on your location. Our analysis backs this up, but its important to mention that there is no single factor that influences this decision. 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. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? Founders are paid only when they work as employees. by using the valuation of your last financing round or the most recent offer you received to purchase your business. This chart breaks down seed funded CEO salary by industry: 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. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. To understand what happens when new equity is issued, a simple example helps. We hope this report simplifies your startup CEO pay decision! 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. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. 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. 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. Did we miss something? If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. This is a crucial incentive; so, outline realistic checkpoints and track them. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. However, when you are also an employee in your company, you receive a salary. Do unprofitable companies need to file tax returns? 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. One estimate found that startup CEOs in Y Combinator, an accelerator, pay themselves an average of $50,000, but when startups start bringing in $7-8 million of financing, that number creeps upward to $130,000. 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. Tax Credit Center - Which of the 700+ Credits Are Best? One of the easiest ways to do that is pay yourself the right amount. *Who is the highest paid person at a startup - see who really gets (cash) compensation at an early-stage company! Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. This is entirely up to the startup or founder. How do you Determine Proper Compensation for Startup CEOs and Some families live on that," says VC Sean Owen. 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. 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. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. 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. So, if your only contribution is money and/or some assistance during the ideation phase, you dont get a salary. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. 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. As a company matures and grows, so does the salary of the CEO. Affordable Monthly Bookkeeping for Startups, Key terms, tips and tricks, free financial models, taxes and more, Kruze is a leader in bookkeeping services for startups, We get your startup ready for the VC process, Projections, budgets and FP&A help for seed venture funded companies, Outsourced CFOs to help manage your growing startup, Industry specific expertise in bookkeeping, tax, FP&A and beyond, Kruze is a leader in startup tax filings, advice and more. The following steps will give you a broad idea of how to go about it. 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. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. Companies that raised between $2 million and $5 million saw almost an 8% increase in Chief Executive Officer salaries. As already mentioned, founders are paid only when they work as employees, not because they started the company. 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). As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. 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. 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). We may monetize some of our links through affiliate advertising. Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. Build relationships, manage a fundraise and build your business. This is an especially important question to answer when youre trying to hire your first employees. The same trend was true for the median startup CEO salary. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. Law enforces it in a few countries. 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. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. They earn through their investments and other personal revenue-generating activities. 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. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. Here is a breakdown by Series A, Series B, etc. The Inflation Reduction Act will provide crucial upgrades to IRS services and personnel, Startup Operations Startup Founders Payroll. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. Startup founders need to decide how much salary is enough. The VCs set my salary without discussing or consulting with me (I know, weird, If you can raise a Series A round with your company at a 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. Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. 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). Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. Remember that every dollar you receive could have been used for your companys growth. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. 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. Kruze Consulting continues to advise founders to accept salaries as soon as theyve acquired funding. The greater the. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. I would like more of this start up articles as I just subscribed to your platform. Therefore, you need to set a lower salary baseline. , 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. List down all your sources of income and expenditure; dont forget to consider loans and taxes. Founders of funded startups may start to pay themselves provided that they are on the payroll. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. And, while we did see many of startups with male leaders also reduce their pay, we arent quite sure why females were more likely to take a pay cut during the pandemic.. 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. See if you are eligible for a salary or not. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Weve kept these previous salary analyses below. Money can be the root of problems in many relationships. How Did the Covid Pandemic Affect CEO Salary? 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. Your employees have options for where they work. Assess the state of your startup and its finances. San Francisco/New Delhi: The average startup CEO salary increased by 2.7 per cent in 2022 to reach $150,000 per annum globally from last year, while the median increased to $140,000, according to a new report. In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. 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. You can also fix an hourly wage rate if you want to. This year, we expanded the data to over 200 of our seed and venture-backed clients and found that in 2019, CEO salaries rose to an average of $142,000 annually, nearly a 10% increase. Lets dive into why we think there are notable difference by industry. So it does pay to be good at fundraising! Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. 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, Tim Jackson writes. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. 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. What are Your VCs Return Expectations Depending on the Stage of Investment? You are probably eligible, Hiring veterans and felons? For example, if you have a 1% equity stake in a startup valued at $100M, which eventually IPOs at $1B, your stake will be worth 1% * $1B * dilution rate dilution rate varies, but a rule of thumb is to assume 10-25% per funding round. ), and their companys industry. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. 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. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. The companies we used to determine this figure have raised collectively more than $2B in funding. While there are quite a few factors that go into determining your salary we find the following to be most important. How to Calculate Your Startup Founder Salary? Startup Founder Salary Guide: How Much To Pay Yourself? 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. Some families live on that," says VC Sean Owen. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. As you would have figured out by now, entrepreneurs dont always earn big bucks. Richard had just raised his first round of funding. Per month. Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. 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. It seems that companies pay 8-12% of their funding to their founders. The distinction between the two may impact early employee decisions on how they personally value their stock. Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. 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. 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. The accounting firm looked at CEO pay at more than 250 venture-backed companies. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. 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. And if you are interested in how COVID impacted compensation in 2020, skip to How Did the Covid Pandemic Affect CEO Salary? Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. How Much Should A Startup Founder/CEO Pay Herself? Mds, and Jack Dorsey taking a $ 1 salary for seed funded startups start... Looked at CEO pay varies by a number of Female startup CEOs continue to lag their... 50,000 in salary excessively hire and spend increases significantly deciding how much to pay yourself to. 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