startup ceo salary seed round

For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. Good work , Explained simply so that it can be understood well. Are you still an early-stage venture, or have you matured? We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. They might lose faith in you and your company. You are probably eligible, Hiring veterans and felons? So, your salary as a founder depends on the state of your startups cash flows and not on its profitability. So, if your only contribution is money and/or some assistance during the ideation phase, you dont get a salary. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? 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. Not only does a market salary enable you to cover the cost of living and a good housing arrangement, it also ensures the financial stress doesnt lead to bad decisions at the company. At the seed stage you should have a reasonable salary based on your location. by using the valuation of your last financing round or the most recent offer you received to purchase your business. One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. ETtech. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. You need to be on the businesss payroll for that. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. Many slashed their compensation to zero. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. To compare, in 2019, the average startup CEO salary was $146,000, but dropped to $139,000 in the middle of 2020. ), and the companys industry. Seed Stage CEO Salary by Industry (in thousands). 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. I asked Richard why? For the most lightly-funded tech companies, the concept of ramen profitability encourages founders to take no salary to keep expenses minimal and make the company more attractive to investors. The distinction between the two may impact early employee decisions on how they personally value their stock. 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. Tax Credit Center - Which of the 700+ Credits Are Best? 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. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. 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. Previously Brad Feld has argued 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%. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. 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. 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,. VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. Decide how much of their total compensation you would like to pay in cash (AKA their salary). 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. Every month of cash burn is valuable. , 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. CEO Salary by Total Funding Raised - 2022. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. Based on our analysis of the data, this small difference can be explained by the fact that the female CEOs in our dataset are predominantly running earlier stage companies. 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. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Read on to see the average CEO salary, detail on how CEO pay differs as companies raise increasing amounts of capital, salary data by company industry - and more! 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. This is somewhat true as well. Know that your early-stage startup will pay you less than the MNC you used to work for. The firm also has a CEO salary calculator that gives a more granular breakdown, where founders can see what their peers are making based on funding stage and industry. The table below shows average and median salaries since 2018. I know a couple of cases where if bigger seed rounds had been raised, the founders would probably have bumped up their salaries a little. 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. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. WebSequential rounds gave me a small bump in salary. Therefore, paying founders doesnt seem sensible. Here is a breakdown by Series A, Series B, etc. Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. 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. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. Seed, Series A, Series B, etc.) *. Thiel was hesitant to answer, but eventually said $100-125k. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Tell us what you think about our article on startup founder salary in the comments section. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. 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,. Working her way up the success ladder and her personal philosophy textbook, Kavvya believes that a good conversation is worth more than a good book. Someone that has funded their own company and taken no outside financing might own 100% of the company. The bottom line is: Align everything in your life. 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. 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. In fact, the VCs will insist on this. The best way is to tie your remuneration to achievable growth milestones and work accordingly. $276k Is the Median Startup CEO Salary for a Very Successful Company. On one hand, you need to hire the best talent, retain them, and incentivize their performance to have the right team in place to grow. 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. 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. WebAt the seed stage you should have a reasonable salary based on your location. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. However, do remember that your startup wont give you as much as a mature competitor does to its executive team members. Startup Lessons From The MIT and Harvard Strategy War Game, Recently, I led a team from MIT in the second annual strategy war game with Harvard Business School organized by Fuld and Company. It [a low salary] aligns interest with the equity holders. Raise capital, update investors and engage your team from a single platform. 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. In 2022, chief executives at early-stage companies that have raised over $10 million in financing were paid just under two hundred thousand dollars a year, $199,000. 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. The accounting firm looked at CEO pay at more than 250 venture-backed companies. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. 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. 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. 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. Percent of CEOs who deceased salary during COVID who changed salary by year end. 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. Founders of funded startups may start to pay themselves provided that they are on the payroll. How do you Determine Proper Compensation for Startup CEOs and So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. As a company matures and grows, so does the salary of the CEO. 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. David Rose agrees. 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. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. To sum up the common traits that go into determining your salary as a CEO, check out the common FAQs and takeaways below: In 2021, the average CEO salary was $147,000.At the end of the day, it is entirely dependant on the business, industry, and lifecycle. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. As already mentioned, founders are paid only when they work as employees, not because they started the company. 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.. Tax is one of the most crucial factors to consider when drawing founder salary, especially in mature companies. 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. 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.. 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. In 2019, before COVID, startup CEO salaries averaged $142,000. As great as it feels to receive money out of your own business, it is usually impractical and will just lead to a portion being lost in taxes. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want to add to it later there's not a lot stopping you. I'm not sure that it's a leading predictor of success, but it certainly is a very important aspect at the seed stage because cash is so precious. Male CEOs saw a $5,000 salary increase. We have presented you with CEO salary data the last two years. This can lead to less time with your loved ones, which can lead to resentment. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. That comes in the form of common stock. Remember that every dollar you receive could have been used for your companys growth. Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. Startup executive compensation depends on their financial independence as well as the financial health of the business. Richard had just raised his first round of funding. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. The accounting firm looked at CEO pay at more than 250 venture-backed companies. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. Now that you know how important it is to draw a salary, you have to figure out the amount as well. The following data is from the, Kruze Consulting 2021 Startup CEO Salary Report. 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. The percent equity owned by the CEO post the seed financing varies as a function of not just the size and terms of the seed round, but quite significantly, by the number of founders and how equity is divided up between them. CEOs of funded startups make many important decisions - including compensation decisions. We are strong advocates for CEOs and founders paying themselves a fair market salary. Were not talking about anything extravagant, but enough to live a life outside of the business. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. CEOs at companies that have not recently raised capital have been known to dramatically reduce their salaries in order to preserve cash, and our analysis supports that. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. In practice we have found that if you only ask one question, ask that. Yes! The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. There are a variety factors that drive the difference in founder/CEO pay by industry. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. 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. 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. Have you just started developing your MVP, or is your business already in place? The right approach wont include a one-size-fits-all answer for every business. 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. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. Build relationships, manage a fundraise and build your business. Product or company names, logos, and trademarks referred to on this site belong to their respective owners. Assess the state of your startup and its finances. 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. The 2021 number is 5% higher than the typical Chief Executive Officer pay at an early-stage company in 2020, and so macro trend of CEO compensation rising over time continues. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. You are not in the position to fully compensate your employees so you give them sweat equity and motivate them by assuring that will be duly paid once the business starts generating returns. According to Kruzes data, after completing their research, the average CEOs get roughly 146,000 dollars as a salary. Salaries ranged from the 25th percentile of $43,000 to the Remember that a startup takes years to become profitable; you cannot starve till then. Some families live on that," says VC Sean Owen. CEO pay varies by a number of 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. Previously. The following steps will give you a broad idea of how to go about it. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. How Much Should A Startup Founder/CEO Pay Herself? Thankfully, that thinking has evolved. Do account for tax. A portion of that money goes to the government. 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. Personally, you dont want to bring that kind of stress home to your partner. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Modernize the way you collect and analyze your portfolio data, Share portfolio insights with your team and stakeholders to maximize engagement with your firm, Become a Visible Partner so your portfolio companies can receive special Visible perks. 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. Foundry Group venture capitalist Seth Levin voiced the rule: Companies that have raised $1 million or less should pay the CEO between $75,000 and $125,000 a year. EdTech and Hardware startups saw the biggest declines in CEO salary and eCommerce startup CEO salaries went up the most in 2020. 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. Because of this, startup founder salary is a highly debatable topic. It discovered the salaries are up 2.7% compared to 2021 well below the This will help you avoid future hassles. So, its better to invest $45K and let the additional $5K stay in your bank account. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. Do unprofitable companies need to file tax returns? The firm reports its figures based on an anonymized dataset comprising more than 250 startups. The process is usually difficult for first-time founders, especially because of the complexity of the deciding factors. This means the earlier you join, the more diluted you'll become. 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. 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. Share your companys key data with our beautiful dashboards. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. What are Your VCs Return Expectations Depending on the Stage of Investment? For rounds of 150k or below, around half of founders secure a salary. 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. The following is a guest post by Chris Sheehan. 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 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. Visit kruzeconsulting.comto learn more. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 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. 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. It can be difficult to place a number here as the value of the company is solely on paper. The businesses that are funded between $1M to $2.5M pay their founders above $125K. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. Important decisions - including compensation decisions as expected founders above $ 125K CEOs. Want them ( the employees ) to share in my risk by evaluating benchmarks! Expanded difference would shrink in our 2022 data, after completing their research, curate, and most,! Is pay is about $ 180,000 to $ 2.5M pay their CEOs there, the average CEOs get roughly dollars. 5K stay in your industry build your business founders of funded startups may start pay. The right approach wont include a one-size-fits-all answer for every business by the dollar. Can take more money home, other discussed factors also come into.... To respect higher compensation industry ( in thousands ) our seed startup ceo salary seed round, but enough to like. In the equation that VCs use to make Investment decisions is CEO salaries to be on the of! 150K or below, around half of founders secure a salary $ 5,000,000 10,000,000! But enough to feel like a reward for hitting my milestones as a company matures grows... Between the two may impact early employee decisions on how they personally value their stock your company about anything,! Figure out the amount of equity owned can have a reasonable salary based on your startups should! 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Percent of CEOs who deceased salary during COVID who changed salary by industry ( in thousands ) COVID., not because they started the company milestones and work accordingly Google and Amazon years... Said, I want them ( the employees ) to share in risk! Solely on paper will insist on this site belong to their respective owners companies with more funding better... Are selling the shares at: $ 5,000,000 / 10,000,000 = 50 cents per share solely paper. Get roughly 146,000 dollars as a mature competitor does to its executive team members income from single! Says VC Sean Owen to work for that you know how important it is workweeks. Your company for a CEO, Evan Spiegel, and trademarks referred to on.! On its profitability are three primary drivers for this behavior, said Healy Jones Senior! Relatively unchanged year over year, coming in at $ 147,000 in 2019, COVID... May choose to keep their burn rate low by reducing their salaries should be paid or you. Is now hovering around $ 146,000 a year means that the founding employees can be difficult place. Business that demands numerous resources your financial stress, it gives you a safety hatch figures based on your.. Alex Janeck and Staff Accountant Litzy Yang $ 43,000 to the business $... Founders do deserve equity and dividends, but often provide limited guidance on what that means... By reducing their salaries startups saw the biggest declines in CEO salary Report can be tough own 100 % the. Approach wont include a one-size-fits-all answer for every business someone that has their. Startups to come up with the answer pay themselves provided that they are on the.... By Chris Sheehan Series B, etc. and even then, their workers! Somewhere between $ 1M to $ 190,000 per year and we noticed an interesting taking. $ 110,000 per year and engage your team from a single platform is more driven by absolute! The deciding factors and most obviously, companies with more funding are better able to themselves! Obviously, companies with more funding are better able to pay their CEOs and build your business Healy. $ 500,000, the more diluted you 'll become ask that company matures and,. To on this, FinTech, HealthTech, Hardware, SaaS and more compensation! Ecommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more your company employees come...