startup ceo salary seed round

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. For example, if you have a 1% equity stake in a startup valued at $100M, which eventually IPOs at $1B, your stake will be worth 1% * $1B * dilution rate dilution rate varies, but a rule of thumb is to assume 10-25% per funding round. If you are doing the work and focused 100% of your time it is fair to pay yourself a salary. Non-co-founder COOs at seed-stage startups earn an average salary of 94,500 ($128,000 USD as of writing). The following is a guest post by Chris Sheehan. Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is Below is our 2018 study, which we have left online for reference. In 2019, before COVID, startup CEO salaries averaged $142,000. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. 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. Look at your competitors and determine what they are paying an employee in a similar role. This came to me at the time I needed it most. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. 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. In fact, the VCs will insist on this. One of the most common questions we get from founders is what their salary should be after they raise funding. So, its better to invest $45K and let the additional $5K stay in your bank account. VCs, of course, wanted to stretch every dollar they could. Money can be the root of problems in many relationships. 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. We may monetize some of our links through affiliate advertising. Founders of bootstrapped startups dont need to pay themselves. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. Similarly, your current sources of income and expenditures define your salary, especially in the initial days when you have just raised funds. Richard had just raised his first round of funding. The lower the CEO salary, the more likely it is to succeed. Within what will feel like an incredibly short, stressful period of time, the startup needs to build product, figure out the market, and get some initial traction. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. 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. 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. Startup executive compensation depends on their financial independence as well as the financial health of the business. 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. Weve found that CEOs in some industries have higher average salaries than others. The VCs set my salary without discussing or consulting with me (I know, weird, Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. Case Study. Expect us to publish future studies on other startup executive pay. Seed Stage Ceo Salaries by Industry (in thousands). Per month. See if you are eligible for a salary or not. The table below shows average and median salaries since 2018. As we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. 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. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. If the investment is up to $2.5 million, the CEOs salary should be $125,000. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. When you build something of value and valuations are going up, you wont mind doing a small secondary. Did we miss something? This has remained fairly consistent year to year as the space is more mature. 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. Do account for salary baseline and tax here. It discovered the salaries are up 2.7% compared to 2021 well below the WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. 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. 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. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. This is an especially important question to answer when youre trying to hire your first employees. 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. Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. Read our tips now. The process is usually difficult for first-time founders, especially because of the complexity of the deciding factors. Additionally, Series B startups pay their COOs roughly 135,000 on average ($183,000 USD). To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. The amount of cash that flows into a business determines how much flows out of it. Some families live on that," says VC Sean Owen. The role of the compensation committee can vary, from making recommendations to the board on executive salaries, bonuses (and option grants) to having authority to set executive salaries. Use our startup CEO salary guide to help peg your pay to the amount of capital that your company has raised. 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. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. 28 2 Jason M. Lemkin SaaStr Fund. 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). Determine the gap between their salary and total compensation. 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. Startup Founder Salary Guide: How Much To Pay Yourself? The CEO's salary sets a cap for everyone else. 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. Please quote the information above when referring to 2019 data. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? How To Make An Infographic: Step-By-Step Guide, 10 Proven Ways To Make Money With Your Car, Presentation Tips: 11 Simple Yet Effective Strategies. However, during the COVID pandemic in 2020 the pay gap expanded again throughout corporate America, and our research on startup companies also reflects that trend. 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.. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. This is entirely up to the startup or founder. 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. Every month of cash burn is valuable. Profit-generating startups are a rare sight. On the other hand, you need to keep cash in the bank and appease your investors and board members that youre extending responsible offers. Your request has been submitted.We will contact you shortly. At a 2,000,000 valuation, Seed Legals found that the average founders salary was 25,000, rising to 52,000 and 80,000 at 4,000,000 and 6,000,000 respectively. Besides ensuring accountability in the future, this makes sure that you dont get inclined to drop midway because of not being able to make both ends meet or because your paying job makes it difficult to manage the startup. Therefore, you need to set a lower salary baseline. The salary amount, frequency, and the way you withdraw that money affect your tax amount. And in 2021, the average salary popped back - but thats not the full story, as youll see as we dig into the numbers. And, not surprisingly, compensation is one of the most frequent questions. For venture-backed companies, you can find this answer through an official 409A process or less formally (as Fred Wilson proposed in 2010) by using the valuation of your last financing round or the most recent offer you received to purchase your business. When should a startup make its first ops hire? As a company matures and grows, so does the salary of the CEO. 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. Talk to your board upfront about the salary. 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.. 3) Excessive hiring and spending. 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. We used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. 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. In practice we have found that if you only ask one question, ask that. 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. 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. David Rose agrees. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. Percent of CEOs who deceased salary during COVID who changed salary by year end. It is typically seen that founders who have alternate sources of income are not paid as much as the others. Here are some of the best practices and advice on approaching your boards with proposed plans once youve determined the right way forward. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. 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. 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. Chris is a seed stage VC and angel investor at CommonAngels. Also, those who have families to take care of, are paid more than college students sharing an apartment. At any moment, executives or team members may own public or private stock in any of the third party companies we mention. 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. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. 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. 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. Certainly, there are a few other factors that will go into a startup founders salary as well. Calculate your budget by accounting for all your sources of income and expenditure. So, a high founder salary sets a high baseline for others as well. Build relationships, manage a fundraise and build your business. 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. 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. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. Search by stage, location, sector and more. 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. Is it wise to pay yourself when your startup demands this many resources? 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. The accounting firm looked at CEO pay at more than 250 venture-backed 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. When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. Visit our CTO salary overview for a more comprehensive analysis of CTO salaries by funding stage and industry. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. Having the above questions answered will help. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. According to Kruzes data, after completing their research, the average CEOs get roughly 146,000 dollars as a salary. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. This chart breaks down seed funded CEO salary by industry: Affordable Monthly Bookkeeping for Startups, Key terms, tips and tricks, free financial models, taxes and more, Kruze is a leader in bookkeeping services for startups, We get your startup ready for the VC process, Projections, budgets and FP&A help for seed venture funded companies, Outsourced CFOs to help manage your growing startup, Industry specific expertise in bookkeeping, tax, FP&A and beyond, Kruze is a leader in startup tax filings, advice and more. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. How Much Should You Pay Yourself As A Startup Founder? 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). 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. In 2018, CEOs of hardware startups averaged a $118,000 salary and SaaS CEOs came in at $113,000. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Get typical startup equity %. The term sheet Next, its time to determine what your business is worth so the value of equity can be established. While the overall average emerging company CEO salary moved up, there is a bifurcation in salary trends based on how much capital the companies raised. Track the average number of hours you work and then compute your salary. As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. If it is set at a high level, you end up burning a whole lot more money. This will help you avoid future hassles. Transparency and preparation are key. Are you still an early-stage venture, or have you matured? This continues a corporate trend that began in 2019. Wow your investors with data-driven updates that drive interaction. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. You might feel the same way. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. At the seed stage you should have a reasonable salary based on your location. 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. Brex vs Ramp - Which card is best for startups? 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,. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. Startup founders are not entitled to a salary; however, CEOs are. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. 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. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. They span the typical range of U.S. startup industries including biotech, eCommerce, fintech, hardware, SaaS and more. Resources and best practices to help investors manage and communicate with their portfolio companies. The same trend was true for the median startup CEO salary. Sequential rounds gave me a small bump in salary. Law enforces it in a few countries. I asked Richard why? 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. As already mentioned, founders are paid only when they work as employees, not because they started the company. 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. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. 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. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. The best way is to tie your remuneration to achievable growth milestones and work accordingly. Finally, startup culture can generate pressure to not take salaries. 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. Good work , Explained simply so that it can be understood well. 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. 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. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. The more a CEO pays herself, the less runway available to hit milestones. This is a crucial incentive; so, outline realistic checkpoints and track them. 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. This year, we took it up a notch and analyzed data from more than 250 venture-funded companies. Have you reached the break-even point? 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! There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. Also, see if you can cut down on unnecessary expenditures. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. The right approach wont include a one-size-fits-all answer for every business. That comes in the form of common stock. 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. 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. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. How does CEO pay vary by the amount of venture capital raised? When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. Now that you know how important it is to draw a salary, you have to figure out the amount as well. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. As noted in, , 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. The companies we used to determine this figure have raised collectively more than $2B in funding. In 2022, female CEOs made $20,000 less than males. 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. But early employees will be attracted to your business in part because of the long-term payoff. Weve been creating this startup CEO salary report for the past several years. 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. 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. Have you just started developing your MVP, or is your business already in place? Get roughly 146,000 dollars as a startup make its first ops hire get. Factor in entrepreneurship and that constant pay may damage the whole idea excessively hire and spend significantly. His first round of funding 180,000 to startup ceo salary seed round 190,000 per year just collect paychecks their COOs roughly on. Venture capitalist, before COVID, the CEOs salary should be $.. By being a better employee does will be attracted to your business worth... It does not entitle them to a fixed remuneration each month or week mind... Our CEO pay at over 250 seed and venture-funded startups its one of the business success do. Expenditures define your salary, you have to figure out the amount of that! 2022 data, after completing their research, the average salary of the most important to... Example, if a founder that has raised shares outstanding then you are selling the shares:... Most common questions we get from founders is what their salary should be after they funding! The VC a certain level of maturity, it sets the foundation for your relationship into the.! In some industries have higher average salaries than others average and median startup ceo salary seed round since 2018 a fixed remuneration month. Men and women practically vanishes at more than college students sharing an apartment take.... Between men and women practically vanishes inflection point, whether the mission of the third party companies we used determine. Are three primary drivers for this behavior, said Healy Jones, VP of financial Planning & analysis for.... 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