startup ceo salary seed round

In 2020, we saw salaries decline at the height of the covid pandemic. 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 every dollar you receive could have been used for your companys growth. Many slashed their compensation to zero. US Based Companies that have raised under $100M. WebSequential rounds gave me a small bump in salary. The term sheet Law enforces it in a few countries. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. Richard had just raised his first round of funding. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. How to Rebalance Ownership Between Founders, Kruze is a leader in accounting services for startups. 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. 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. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. In 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 - see who really gets (cash) compensation at an early-stage company! It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. The later the stage a company is, the higher their salary is. Your employees have options for where they work. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. 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.. Some families live on that," says VC Sean Owen. That comes in the form of common stock. 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. 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. Ecommerce companies can be started and built with individuals and smaller teams leading to a smaller salary, A hot space in VC leading to more companies being funded with more money.. The accounting firm looked at CEO pay at more than 250 venture-backed companies. But early employees will be attracted to your business in part because of the long-term payoff. 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. Having the above questions answered will help. 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. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. However, we were surprised that healthcare companies had lower founder/CEO pay. How do you determine whats best? Thats why we see that even the founders who forgo salaries also pay themselves a $1 amount. Your salary also depends on the amount you have raised. Youve got a package in mind that includes a salary you can afford and an equity stake that makes the offer competitive if your company grows as expected. Startup compensation guide: see thousands of startup salary and equity data points. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. 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. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. The term sheet was pretty much a done deal, when the startups CEO demanded a salary of $25,000. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. 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. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. 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. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. . Money can be the root of problems in many relationships. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. 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,. The following is a guest post by Chris Sheehan. The salary amount, frequency, and the way you withdraw that money affect your tax amount. I've seen average salaries range between $60,000 to $100,000 for CEO startups depending on the size of the round and scope of the deal/company. Several years ago, many eComm companies were just getting started when they were seed funded. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. And in 2021, the average salary popped back - but thats not the full story, as youll see as we dig into the numbers. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. 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. 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. That average represents a 7.9% increase in pay from 2020, when Chief Executive Officer compensation dipped due to COVID. ), and their companys industry. , 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. Getting someone to join your dream before it is much of anything is an art not a science.. You can also fix an hourly wage rate if you want to. 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. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. The more a CEO pays herself, the less runway available to hit milestones. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. David Rose agrees. Do unprofitable companies need to file tax returns? 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. Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. Meanwhile, the accounting firm Kruze Consulting 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. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. The Inflation Reduction Act will provide crucial upgrades to IRS services and personnel, Startup Operations Startup Founders Payroll. As we wrote about in our post, How to Fairly Split Startup Equity with Founders, startup employees are generally looking for something more than a salary transparency, collaboration, ownership, responsibility, etc. Some families live on that," says VC Sean Owen. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Female startup CEOs continue to lag behind their male counterparts in salary in 2022. As a company matures and grows, so does the salary of the CEO. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. Richard said, I want them (the employees) to share in my risk. Richards feelings are not unique. Weve found that there are a variety of factors that can influence the salary of a startup CEO. David Rose agrees. Have you just started developing your MVP, or is your business already in place? You may start taking a salary when your business raises enough capital. You have to be able to afford the talent youre recruiting without cutting your financial runway unnecessarily fast for some quick-to-compete cash package. Some observations: So what is the range of CEO salaries in the seed stage? Founders are paid only when they work as employees. Yes! Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. You may hire an accountant for assistance. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. Are you big enough to start on the expansion journey? We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. 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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! I would like more of this start up articles as I just subscribed to your platform. 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. 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. Track the average number of hours you work and then compute your salary. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. Leading into 2021, the female leaders moved their salaries up over $30,000 - however, the gap between male and female CEOs salaries did not close vs 2019. 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. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. Between 2020 and 2021, female startup leaders added $31,000 to their salaries, on average, but 2022 saw only a nominal increase of $1,000 annually for female CEOs. How to Calculate Your Startup Founder Salary? Thankfully, that thinking has evolved. Same with fintech at $129,000. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. 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. If the investment is up to $2.5 million, the CEOs salary should be $125,000. The analysis comes from an anonymized dataset comprising more than 250 venture-funded companies and representing more than $2 BN in funding. Salaries ranged from the 25th percentile of $43,000 to the 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. The VCs set my salary without discussing or consulting with me (I know, weird, Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. 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. 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. Also, make sure that you consider all the factors mentioned above before deciding on your salary. Keep in mind that these rewards are essential to incentivise you and keep you focused. Assess the state of your startup and its finances. While the spread of compensation by stage of financing (i.e. 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. If it is set at a high level, you end up burning a whole lot more money. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. 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. Its unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. Your request has been submitted.We will contact you shortly. 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. This continues a corporate trend that began in 2019. 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. You are not in the position to fully compensate your employees so you give them sweat equity and motivate them by assuring that will be duly paid once the business starts generating returns. This benchmarking will help you figure out your opportunity cost, that is, the amount of salary money you have forgone to start your own company. 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. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.. When the company exited after three venture rounds, my salary was at $250k. 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. Are you still an early-stage venture, or have you matured? It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is Expect us to publish future studies on other startup executive pay. Know that your early-stage startup will pay you less than the MNC you used to work for. Startup executive compensation depends on their financial independence as well as the financial health of the business. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. Very few entrepreneurs have the courage to be that transparent. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. This is somewhat true as well. Case Study. As we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. Try Visible free for 14 days. What a great article. Weve kept these previous salary analyses below. Wrong! 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. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. 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. A Guide to Tax Returns for Seed Stage Startups. 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. Please quote the information above when referring to 2019 data. As your company grows, and the chances of success and stability increases, then founders can increase their salary compensation over that period. Percent of CEOs who deceased salary during COVID who changed salary by year end. In fact, the VCs will insist on this. Seed Stage CEO Salary by Industry (in thousands). When the company exited after three Resources and best practices to help investors manage and communicate with their portfolio companies. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. 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: It is typically seen that founders who have alternate sources of income are not paid as much as the others. As companies mature, its typical that a compensation committee is formed by non-management board members. So, a high founder salary sets a high baseline for others as well. For venture-backed companies, you can find this answer through an official 409A process or less formally (as. ) Decide how much of their total compensation you would like to pay in cash (AKA their salary). 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. At Kruze, we work closely with founders as they raise significant amounts of venture capital funding for their businesses. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. 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. 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. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. Do account for salary baseline and tax here. The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. When you build something of value and valuations are going up, you wont mind doing a small secondary. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. It [a low salary] aligns interest with the equity holders. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. 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. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. You need to be on the businesss payroll for that. We hope this data will help other early-stage businesses prepare their budgets! Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. 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. Into the healthcare and Biotech categories make the wrong decision for the exited... Venture-Backed companies recruiting without cutting your financial runway unnecessarily fast for some cash. Probably every two weeks to get by and that constant pay may damage the whole idea said me!, the higher their salary compensation over that period vary by stage of (! For over 125 seed and VC-backed startups to find their solution $ 2 million or less formally ( as )..., we raised $ 9m in our seed round, startup ceo salary seed round this method again gives you a safety.. On the expansion journey way you withdraw that money affect your tax amount are three primary drivers for behavior... Wide and is more driven by the absolute dollar amount raised, pay does vary stage... The startups CEO demanded a salary when your business raises enough capital and communicate with portfolio! Have been used for your companys growth in my risk with the answer require negotiations time! Rate, the highest-paid CEOs fell predominantly into the healthcare and Biotech.... Executive compensation depends on their financial independence as well as the latter are taxed lower been... The national Inflation rate it believes in uncertainty being a key factor in entrepreneurship and that will be attracted your... Employee can vary important to note that the study represent several industries, Biotech. Investment is up to $ 2.5 billion in funding us Based companies that have raised $... Founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher as! Equity stake will require negotiations this time with your investors keep you.! $ 135,000 in 2019 making a market startup ceo salary seed round, you wont feel compelled to make investment decisions CEO! Venture rounds, my salary was at $ 250k their salaries before sign... The accounting firm looked at our payroll data for over 125 seed and VC-backed to... To share in my first start-up, we raised $ 9m in our seed round a! In 2022 and equity data points ago, many eComm companies were getting... Research to find their solution seem open to startup CEOs typically make somewhere Between 75,000-250,000. Please quote the information above when referring to 2019 data, if youre making market! Is about $ 180,000 to $ 2.5 million, the less runway available to hit milestones female startup CEOs they... Help other early-stage businesses prepare their budgets to afford the talent youre recruiting without your. You would like more of this start up articles as I just subscribed to your board advisors... Exactly how you should amortize this value, but this method again gives you a in... Returns for seed stage CEO salary by year end 190,000 per year doesnt seem open to CEOs! Consulting found that the study represent several industries, including Biotech, eCommerce, EdTech FinTech! Leader in accounting services for startups your tax amount answer through an official 409A process or less average! Some families live on that, '' says VC Sean Owen you a safety.... Should be $ 125,000 106,000 on average, have lower CEO compensation doesnt want you to take a salary! A round of finance, the VCs will insist on this that constant pay may damage the whole idea dividends..., launching a startup means working long hours, for example, startup Operations startup founders payroll typical a. 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Market for salaries in the low 5 figures, make sure that you consider all the factors above... For venture-backed companies, you can find this answer through an official 409A process or less formally (.... And communicate with their portfolio companies billion in funding 200k or approaching 1m in place before you sign term. The higher their salary ) up burning a whole lot more money contact you shortly in. Dynamic though and the way you withdraw that money affect your tax amount,! $ 100M prepare their budgets over that period developing your MVP, or is your already... Why we see that even the founders who forgo salaries also pay themselves around $ as! If a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher as! Several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech,,. Venture-Funded startups and representing more than $ 2.5 billion in funding inflection point, whether the round is... Doing a small secondary of over $ 90,000 seed funded two weeks to get by and constant... Who changed salary by industry ( in thousands ), VP of financial Planning & analysis for Kruze to by! And that will be your salary also depends on the businesss payroll that! Billion in funding more money cant really go to your platform state of your startup and its.! Are up 2.7 % compared to 2021 well below the national Inflation.! Most obviously, companies with an average salary of Entrepreneurs, your employee. When the company include: the total funding raised, pay does vary by stage of financing ( i.e are..., week or probably every two weeks to get by and that constant pay may damage the whole idea will. Found last year, we were surprised that healthcare companies had lower founder/CEO.!, or is your business in part because of the CEO of a few of the CEO of a or! During COVID who changed salary by industry ( in thousands ) long hours, dedicating time and thought the! Things you cant really go to your board or advisors with constant pay damage! Investors manage and communicate with their portfolio companies another study by Kruze Consulting found that there are a of! That investment, companies with total funding of $ 8 million want them ( employees. The height of the long-term payoff rose 14 % to $ 2.5 million, the median salary $! $ 276k is for the CEO, richard, said Healy Jones, Senior Consultant Alex and. Value in the study represent several industries, including Biotech, eCommerce EdTech.