startup ceo salary seed roundstartup ceo salary seed round

Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. 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. 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. Your employees have options for where they work. 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. $276k Is the Median Startup CEO Salary for a Very Successful Company. 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 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. 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. 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. This data suggests that companies with greater access to capital pay their CEOs more, while those that are more lightly funded set lower levels of compensation. Percent of CEOs who deceased salary during COVID who changed salary by year end. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. We are strong advocates for CEOs and founders paying themselves a fair market salary. At the seed stage you should have a reasonable salary based on your location. 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. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. 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. 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. 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. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. Wow your investors with data-driven updates that drive interaction. Your employees have options for where they work. Start your search now on this startup guide. Also, those who have families to take care of, are paid more than college students sharing an apartment. The amount of cash that flows into a business determines how much flows out of it. Founders of bootstrapped startups dont need to pay themselves. Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. As companies mature, its typical that a compensation committee is formed by non-management board members. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. This year, we took it up a notch and analyzed data from more than 250 venture-funded companies. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. 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. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. What's the average salary for CEOs from funded startups? And even though almost half of CEOs increased their compensation during the year, the average pay dropped by $3,000. You may start taking a salary when your business raises enough capital. Companies that raised between $2 million and $5 million saw almost an 8% increase in Chief Executive Officer salaries. Thankfully, that thinking has evolved. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. 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. Every year we analyze CEO pay at hundreds of early-stage companies to try to help our clients set reasonable salaries and compensation for themselves. 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. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. 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. Certainly, there are a few other factors that will go into a startup founders salary as well. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. Some families live on that," says VC Sean Owen. 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. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. Expect us to publish future studies on other startup executive pay. Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. Make sure that you dont ask for too much or little. Filter by role, location, stage, startup size. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. How does a cash package for X employees change this? If you can raise a Series A round with your company at a Firstly, and most obviously, companies with more funding are better able to pay their CEOs. A Guide to Tax Returns for Seed Stage Startups. Are you still an early-stage venture, or have you matured? The distinction between the two may impact early employee decisions on how they personally value their stock. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. 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. David Rose agrees. It discovered the salaries are up 2.7% compared to 2021 well below the The accounting firm looked at CEO pay at more than 250 venture-backed companies. 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.. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. In fact, the VCs will insist on this. 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. 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. The more investment a startup attracts, the more its funder can afford. 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. 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. The more a CEO pays herself, the less runway available to hit milestones. Tell us what you think about our article on startup founder salary in the comments section. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. Read on to see the older Startup CEO Salary Reports that weve published over the years, plus some more of our commentary on how founders should approach their compensation. Sometimes, too much profit on the balance sheet stirs gossip so it becomes mandatory for founders to take a decent remuneration even when they have enough money to live without it. List down all your sources of income and expenditure; dont forget to consider loans and taxes. In 2020, approximately 36% of companies reduced their chief executive compensation during COVID. 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. Have you just started developing your MVP, or is your business already in place? This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. Typically there would be KPIs and targets built in to unlock further compensation in various time periods. But it's a good idea to set goals or other product or revenue milestones for increasing compensation. 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. 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. 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. Male CEOs saw a $5,000 salary increase. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. CEOs of funded startups make many important decisions - including compensation decisions. Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. WebSequential rounds gave me a small bump in salary. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. The average startup founder salary in the seed round is $100,000. A more mature space leading to a higher salary. There are a variety factors that drive the difference in founder/CEO pay by industry. 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. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. 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. 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. WebAt the seed stage you should have a reasonable salary based on your location. Salaries ranged from the 25th percentile of $43,000 to the 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). This is entirely dependent on the funding and financial instruments a company decides to use. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. 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: WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. Decide how much of their total compensation you would like to pay in cash (AKA their salary). How Did the Covid Pandemic Affect CEO Salary? 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. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. , 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. See our full report for CEO pay bands. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. The bottom line is: Align everything in your life. 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. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. For co-founder COOs, these figures were roughly 71,000 ($96,000 USD) for seed-stage companies, and 125,000 ($169,000 USD) for Series B companies. 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. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see 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. 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. potential bonus money of $0 - $100,000 and equity (ranging from less than 1% - 20%). 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. It [a low salary] aligns interest with the equity holders. The following steps will give you a broad idea of how to go about it. ), and their companys industry. 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. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. Previously. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. As you would have figured out by now, entrepreneurs dont always earn big bucks. This is an especially important question to answer when youre trying to hire your first employees. 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.. 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. Setting aside the impact from COVID in 2020, since 2018 the overall founder/CEO salary trend has been up and to the right. 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. Case Study. You may hire an accountant for assistance. 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. So, ask only for the amount that you need. 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). To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. CEO Salary by Total Funding Raised - 2022. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. One of the easiest ways to do that is pay yourself the right amount. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. So, you need to take your countrys tax laws into account while making such decisions. Calculate your budget by accounting for all your sources of income and expenditure. We have presented you with CEO salary data the last two years. What are you waiting for? 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,. 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. If it is set at a high level, you end up burning a whole lot more money. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Did we miss something? How do you Determine Proper Compensation for Startup CEOs and It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. The following year average CEOs salaries for women dropped by 30%, from $138,000 to $101,000, and still has not rebounded from that drop. Therefore, you need to set a lower salary baseline. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. In 2020, we saw salaries decline at the height of the covid pandemic. ), and the companys industry. numbers are from there, the more likely the CEO pay range climbs closer to $250,000. Series A CEO Pay Again our Please quote the information above when referring to 2019 data. Capital gains is what you should strive for and this will happen only if you invest enough time and resources in the company. So it does pay to be good at fundraising! Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. The reason why a few big corporate founders and CEOs dont take a huge salary is that it isnt their only source of income. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. 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. Determining how to properly compensate employees at a startup is also a tricky task. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Getting someone to join your dream before it is much of anything is an art not a science., Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. The biggest growth in the size of funding raised seed rounds, and therefore the biggest driver of salary growth, came from hardware and SaaS companies. When the company exited after three venture rounds, my salary was at $250k. It can be difficult to place a number here as the value of the company is solely on paper. Startup founders need to decide how much salary is enough. 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,. Below is our 2018 study, which we have left online for reference. 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. Still, when it comes to startup CEO pay, our data reveals some good news. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. 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. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. The VCs set my salary without discussing or consulting with me (I know, weird, Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. This is entirely up to the startup or founder. Seed, Series A, Series B, etc.) The later the stage a company is, the higher their salary is. 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. Here is a breakdown by Series A, Series B, etc. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. 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. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. However, our research is meant to aid your own, and we are not acting as licensed professionals. Share your companys key data with our beautiful dashboards. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. Same with fintech at $129,000. The accounting firm looked at CEO pay at more than 250 venture-backed companies. VCs, of course, wanted to stretch every dollar they could. Weve found that there are a variety of factors that can influence the salary of a startup CEO. This is a crucial incentive; so, outline realistic checkpoints and track them. If the investment is up to $2.5 million, the CEOs salary should be $125,000. In 2019, before COVID, startup CEO salaries averaged $142,000. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. 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. Raise capital, update investors and engage your team from a single platform. 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. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. 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. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. Personally, you dont want to bring that kind of stress home to your partner. The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. Meanwhile, the accounting firm Kruze Consulting Startup founders are not entitled to a salary; however, CEOs are. Set milestones after achieving which you will give yourself a raise and/or bonus. Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. 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. 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.

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