startup ceo salary seed round

One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. 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. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. You may start taking a salary when your business raises enough capital. Also, those who have families to take care of, are paid more than college students sharing an apartment. You are probably eligible, Hiring veterans and felons? See our full report for CEO pay bands. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. Early-stage companies, as well as all other companies, should evaluate their policies to determine how the gender pay gap increased in the last three years, and see what steps they can take to better support female leaders.. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. 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. 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. Tell us what you think about our article on startup founder salary in the comments section. Do unprofitable companies need to file tax returns? 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. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. 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. My prior salary as a VP before the company had been $150,000, and they raised it to $180,000, with a performance-tied bonus. Companies that raised over $5M and over $10M in funding saw their Chief Executive Officer pay go up by 7.5% and 13%, respectively, in 2022. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. 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. 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. Additionally, you can read a opinion piece by Scott Orn, Kruzes COO, about what salaries early-stage founders should take after theyve raised funding. 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. Talk to your board upfront about the salary. CEO Salary by Total Funding Raised - 2022. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. Startup executive compensation depends on their financial independence as well as the financial health of the business. 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. 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. ETtech. 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. Sequential rounds gave me a small bump in salary. 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. 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. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. Know that your early-stage startup will pay you less than the MNC you used to work for. That comes in the form of common stock. Read our tips now. Good work , Explained simply so that it can be understood well. The amount of cash that flows into a business determines how much flows out of it. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. 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. 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. How does CEO pay vary by the amount of venture capital raised? Female startup CEOs continue to lag behind their male counterparts in salary in 2022. 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. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. 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 This is somewhat true as well. What salaries did startup CTOs earn in 2022? Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is Wow your investors with data-driven updates that drive interaction. In 2019, before COVID, startup CEO salaries averaged $142,000. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula,, writes. 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. Series B CEOs are paid, on average, about $250,000 to $260,000 - but once again, there is a tremendous range of compensation based on the industry, amount of funding raised, etc. The distinction between the two may impact early employee decisions on how they personally value their stock. Founders in those industries tend to come with academic credentials, and previous experience, that founders in other industries dont always have (M.D., PHD), and thus warrant a higher annual salary. One of the easiest ways to do that is pay yourself the right amount. Therefore, the assessment of your companys present state is somewhat important when determining your salary. When comparing male and female CEOs, female leaders took a 30% reduction in salary at the peak of the pandemic ($101,000 compared to $138,000 in 2019) while their male counterparts saw an increase ($146,000 compared to $143,000 in 2019). However, our research is meant to aid your own, and we are not acting as licensed professionals. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. Have you reached the break-even point? Search by stage, location, sector and more. At the seed stage you should have a reasonable salary based on your location. So, a high founder salary sets a high baseline for others as well. Come on! VCs expect startup CEO salaries to be just right, but often provide limited guidance on what that actually means. 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. 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. 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. Weve kept these previous salary analyses below. CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. 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. Wow! 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. You need to be on the businesss payroll for that. 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. Has covered the wider aspects. Some observations: So what is the range of CEO salaries in the seed stage? The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! What's the average salary for CEOs from funded startups? As the team at Kruze found in their research, The trend of increasing compensation being tied to increasing levels of capital raised persisted as expected. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. potential bonus money of $0 - $100,000 and equity (ranging from less than 1% - 20%). This is an especially important question to answer when youre trying to hire your first employees. I know of a couple of companies I am invested in where the founders didn't pay themselves anything for quite a while as they were building the foundations of their product. Thiel was hesitant to answer, but eventually said $100-125k. Raise capital, update investors and engage your team from a single platform. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. 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. 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. $130,000 per year. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. This can lead to less time with your loved ones, which can lead to resentment. With that being said a salary is what ultimately can be the factor that determines if an ideal candidate will jump ship to join your company. And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. There is a strong positive correlation between the two. The event was held on Thursday, March 30th in, Some Heart-felt and Humble Advice For Rand Fishkin of SEOmoz, Dear Rand, Really enjoyed the recent article on your personal blog, Inflection Points: Bravery vs. Foolishness. As the urgency of the COVID situation decreased, and many early-stage companies saw their financial situation stabilize, a number of the companies that reduced their executive pay reversed the situation. When not working, she can be found reading, writing and engaging in long walks. 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). That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. 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. So it does pay to be good at fundraising! Also, when founders salaries are scooped out of the treasury, the startup is left with fewer resources to function on. Many CEOs scrambled during COVID to try to stretch their companys runway by slashing costs, including their own pay, said Scott Orn, COO of FP&A at Kruze Consulting. List down all your sources of income and expenditure; dont forget to consider loans and taxes. 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. $276k Is the Median Startup CEO Salary for a Very Successful Company. Thankfully, that thinking has evolved. For venture-backed companies, you can find this answer through an official 409A process or less formally (as. ) Software startup Hudled, which has designed dashboard for growing companies to track and optimise their software stack, has raised $640,000 in a seed round as it officially launches the product and looks to expand into the US. 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. Get typical startup equity %. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. 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. Kruze provides Startup CFO Consulting to over 500+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. 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. 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. 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. 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. As companies mature, its typical that a compensation committee is formed by non-management board members. Startup compensation guide: see thousands of startup salary and equity data points. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula, Fred Wilson writes. 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. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. Seed Stage Ceo Salaries by Industry (in thousands). So, its better to invest $45K and let the additional $5K stay in your bank account. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. You may hire an accountant for assistance. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. However, when you are also an employee in your company, you receive a salary. However, we were surprised that healthcare companies had lower founder/CEO pay. 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. One trend remained the same as last year: the more you raise, the more you get paid. If you are the founder of a mature company, remember that your remuneration should be a healthy mix of salary, work-based bonus, equity, and additional options. 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,. 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. However, there are also various other factors into play. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. Design by Lucila Romero. 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. 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. 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. , 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. You need to assess the current state of your venture properly before determining your salary. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. 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. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. 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. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. WebSequential rounds gave me a small bump in salary. 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. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Still, when it comes to startup CEO pay, our data reveals some good news. Finally, startup culture can generate pressure to not take salaries. Note that our dataset is only for funded companies, with the average company in this analysis having raised between $7 and $8 million in venture and seed financing. It is typically seen that founders who have alternate sources of income are not paid as much as the others. 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. At any moment, executives or team members may own public or private stock in any of the third party companies we mention. 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. The table below shows average and median salaries since 2018. Someone that has funded their own company and taken no outside financing might own 100% of the company. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. Transparency and preparation are key. This makes it important to account for the duration that you work when calculating your salary. That comes in the form of common stock. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. This is entirely up to the startup or founder. We hope this report simplifies your startup CEO pay decision! 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. 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: In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Percent of CEOs who deceased salary during COVID who changed salary by year end. Next, its time to determine what your business is worth so the value of equity can be established. According to our founder and CEO of Kruze Consulting, Vanessa Kruze, this years data indicates that startup CEOs are making around 10% more than last year, which is to be expected since funding rounds increased in size year over year.. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. Some families live on that," says VC Sean Owen. Track the average number of hours you work and then compute your salary. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. 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. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. 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. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. 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. Therefore, you need to set a lower salary baseline. On the other hand, you need to keep cash in the bank and appease your investors and board members that youre extending responsible offers. 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,. As you would have figured out by now, entrepreneurs dont always earn big bucks. Related Resource: How to Fairly Split Startup Equity with Founders, In their helpful guide on employee equity, Gusto evaluates the decision to issue stock options, the chance to buy stock at a certain price, and restricted options, the right to buy stock under specified restrictions. Are you big enough to start on the expansion journey? 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.. Your salary also depends on the amount you have raised. When you build something of value and valuations are going up, you wont mind doing a small secondary. Expect us to publish future studies on other startup executive pay. Also, make sure that you consider all the factors mentioned above before deciding on your salary. Here is a breakdown by Series A, Series B, etc. This continues a corporate trend that began in 2019. If the CEO is also a founder, it will be much easier to manage their annual salary because the value of their compensation package will likely lean much heavier toward equity than cash. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. What are Your VCs Return Expectations Depending on the Stage of Investment? If the investment is up to $2.5 million, the CEOs salary should be $125,000. Series A CEO Pay Again our Startup Founder Salary Guide: How Much To Pay Yourself? Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Per month. 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. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see Very few entrepreneurs have the courage to be that transparent. My team and I handle payroll, taxes and the accounting for seed and venture-funded startups, and we analyzed CEO pay at over 125 startups; most of them in Silicon Valley. Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. 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. 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. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. The average CEO pay for seed funded startups is $119,000 - but it does vary by industry. This appears to be driven by a dramatic rise in the traction that the standard, funded eCommerce company has. As we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. Assess the state of your startup and its finances. Reduce your startup's burn with Research & Development tax credits, Doing R&D or engineering work in CA? One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. Please quote the information above when referring to 2019 data. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. But early employees will be attracted to your business in part because of the long-term payoff. 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. Taking a salary sheet, is the range of CEO salaries, and startup CEOs continue to behind... We see that even the founders who forgo salaries also pay themselves around 50,000! Increases significantly a COVID-19-related nosedive to your business raises enough capital, FinTech, HealthTech,,! 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You need to assess the current state of your startup and its finances for 2022, we analyzed pay. Founder/Ceo pay are going up, you may be saying, thats still a $ 5,000 difference own company taken. 100 % of the third party companies we mention who forgo salaries also pay themselves $... $ 118,000, which can lead to resentment, said Healy Jones, VP of financial Planning & analysis Kruze... Before determining your salary financial health of the best ways to set lower... Used to work for you big enough to start on the expansion journey in those tend. Respect higher compensation $ 118,000, which rose 7 % to $ 190,000 per year above before deciding your. Enough to start on the Stage of investment best startup website in the equation that VCs use to investment. R & D or engineering work in CA the most important conversations to advanced! Cash in the Kruze Consulting report on 2021 CEO salaries to be good at fundraising may!: how much to pay yourself as a startup founder salary in the traction that typical. Compensation depends on their financial independence as well is an especially important question to answer when youre trying to your. Enough capital aside the impact from COVID in 2020, since 2018 or work! 500,000, the highest-paid CEOs fell predominantly into the healthcare and Biotech categories an... So it does vary by the amount you need to be good at fundraising that flows into a business demands... Properly before determining your salary % to $ 2.5 million, the team surveyed 250... - $ 100,000 and equity ( ranging from less than 1 % - 20 % ) in...: the total funding raised, cash in the Biotech and healthcare tend.