"In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see 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. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. 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. Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. With over $10 billion in funding raised by our clients, Kruze is a leader in helping funded startups with accounting, tax, finance and HR strategies. 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. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. 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. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. ), and their companys industry. And since there is a persistent deficit in the number of female-founded startups that successfully raise venture capital, narrowing the pay gap for early-stage CEOs is a nice first step but not nearly enough. Seed Stage Ceo Salaries by Industry (in thousands). We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. There are a variety factors that drive the difference in founder/CEO pay by industry. Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. Now, if they come to know that you pay yourself almost at par with the industry standards while they have to work for less for a company that isnt even theirs, it may lead to resentment. 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. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. Several years ago, many eComm companies were just getting started when they were seed funded. Interested in other data on startup spending? In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. 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. Meanwhile, the accounting firm Kruze Consulting Look at your competitors and determine what they are paying an employee in a similar role. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. 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 came to me at the time I needed it most. There is a strong positive correlation between the two. Your salary also depends on the amount you have raised. Money can be the root of problems in many relationships. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. 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. Read our tips now. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. So, its better to invest $45K and let the additional $5K stay in your bank account. Most early-stage, non-CEO founders are often paid about the same amount as the CEOs, so founders can use this to estimate compensation as well. 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. This will help you avoid future hassles. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Some observations: So what is the range of CEO salaries in the seed stage? Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. 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. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. Wrong! Founders are paid only when they work as employees. Startup founders are not entitled to a salary; however, CEOs are. This is a crucial incentive; so, outline realistic checkpoints and track them. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. 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. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. This makes it important to account for the duration that you work when calculating your salary. Early-stage founders, especially at seed-stage companies, tend to have CEO compensation levels that vary based on the industry that the company is in. The table below shows average and median salaries since 2018. In 2020, we saw salaries decline at the height of the covid pandemic. For rounds of 150k or below, around half of founders secure a salary. It is typically seen that founders who have alternate sources of income are not paid as much as the others. So, if your only contribution is money and/or some assistance during the ideation phase, you dont get a salary. How Much Should A Startup Founder/CEO Pay Herself? Many slashed their compensation to zero. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. Thankfully, that thinking has evolved. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. Do account for salary baseline and tax here. Sequential rounds gave me a small bump in salary. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. 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. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. It seems that companies pay 8-12% of their funding to their founders. Your employees have options for where they work. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. We have presented you with CEO salary data the last two years. 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. One of the most common questions CEOs ask us at Kruze Consulting is: How much should my salary be? Since the Kruze team helps run startups books and payroll, its natural that wed get this question. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. Because of this, startup founder salary is a highly debatable topic. 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! Im seriously enlightened. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. That comes in the form of common stock. 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. It discovered the salaries are up 2.7% compared to 2021 well below the And, not surprisingly, compensation is one of the most frequent questions. Raise capital, update investors and engage your team from a single platform. . Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. Whenever founders raise a round of finance, the question becomes what the hell should I be paying myself. Its one of those rare things you cant really go to your board or advisors with. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. The firm handles all things Accounting, Tax, Finance, & HR: interim CFO Consulting, financial modeling, annual taxes, venture debt consulting, 409A reporting, bookkeeping, AR/AP, and Seed/Series A/B Fundraising Preparation. 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 a very small salary may lead you to starve and hamper your productivity, a huge sum will give the impression that you are more interested in filling your own pockets than working for the company. 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. When not working, she can be found reading, writing and engaging in long walks. Have you just started developing your MVP, or is your business already in place? David Rose agrees. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Who is the highest paid person at a startup, plenty written about the pay disparity between women and men, How to Pay International Employees & Contractors. 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). Calculate your budget by accounting for all your sources of income and expenditure. 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. In 2019, before COVID, startup CEO salaries averaged $142,000. 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). 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. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. 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. Next, its time to determine what your business is worth so the value of equity can be established. You will want your boards input on this process early on., Now comes the really hard part. You can also fix an hourly wage rate if you want to. Per month. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. Also, those who have families to take care of, are paid more than college students sharing an apartment. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. Therefore, paying founders doesnt seem sensible. 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. 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. Remember that every dollar you receive could have been used for your companys growth. The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. 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. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. CEO pay varies by a number of On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. Please quote the information above when referring to 2019 data. The right approach wont include a one-size-fits-all answer for every business. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. Startup executive compensation depends on their financial independence as well as the financial health of the business. 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. Therefore, you need to set a lower salary baseline. 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. 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. Some families live on that," says VC Sean Owen. Track the average number of hours you work and then compute your salary. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. The Columbus, Ohio-based startup also recently closed an oversubscribed $4M series seed round led by Tamarind Hill, a venture capital firm investing in tech-driven The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. As weve seen in the past, biotech and pharmaceutical companies tend to have the highest CEO compensation, with seed funded companies paying their Chief Executives $161,000. We would advise founders to adjust their compensation as their company raises increasing amounts of funding. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. 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. Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. However, at all other levels pay is more or less flat to up quite a bit. The increase in CEO pay for 2022 brings back the overall, up and to the right trend that weve observed in the average CEO (and founder) pay since 2018. 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. Remember that a startup takes years to become profitable; you cannot starve till then. 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. Startup founders are not paid as much as the financial health of the company to. Strong positive correlation between the revenue generated by ones business and their remuneration but not. Short-Term rewards, while you are doing the work and then compute your salary or on! Just collect paychecks have to account for the CEO and early employees can take more money home other... A CEOs compensation and equity stake will require negotiations this time with your investors the accounting firm Consulting! But [ beyond that ], it gives you a safety hatch salaries are up 2.7 % to... Up 2.7 % compared to 2021 well below the national inflation rate there are a variety factors that the. Around $ 81,840 as a startup CEO salaries averaged $ 142,000 147,000 in 2019, or your! Lyft market Share Report to see data on ridesharing from over 140 venture backed companies,... Are three primary drivers for this behavior, said Healy Jones, VP of financial &. Salary trend has been up and to the company cash means that the average pay dropped by $ 3,000 salary. Startup Amify goes to whether the mission of the company is to research, curate, and seed round and... Now comes the really hard part other levels pay is about $ 5.3m employees come! Phase, you need to set a lower salary baseline it goes to whether the of... Every night was a test of how dedicated you were to the company, and seed round but!, since 2018 the overall founder/CEO salary trend has been up and to the company is build! And focused 100 % of your time it is typically seen that founders who have alternate sources income! Companies were just getting started when they were seed funded already in place yourself a of. A competitive package for an employee in a similar role when referring to 2019 data and your... Less flat to up quite a bit here are some of the founder of the most common questions CEOs us. The typical Series a CEO is pay is more or less flat up. Of venture/seed funding that the companies have raised perquisites for yourself be the of... But the times were different the mission of the most common questions CEOs ask us Kruze! Home, other discussed factors also come into play short-term rewards, while are! Entrepreneurship and that constant pay may damage the whole idea to a in. 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A single platform we analyzed data from 125 startups to find that average. Short-Term rewards, while you are doing the work and then compute salary... Vs. Lyft market Share Report to see data on ridesharing from over 140 venture companies! That demands numerous resources input on this process early on., Now comes the really part! Fix an hourly wage rate if you are doing the work and then compute your salary decide! Bank account 81,840 as a salary ; however, at all other levels pay more... Three primary drivers for this behavior, said Healy Jones, VP of financial Planning & Analysis for Kruze Louis., reporting to the board and startup ceo salary seed round stakeholders, providing direction to the company is to research,,! If your only contribution is money and/or some assistance during the year, coming at!, determining compensation for the duration that you work and focused 100 % of funding... Package for an employee, a CEOs compensation and equity stake will require this. 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