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 determining the equity of your first few dozen employees based on the expected value they bring to your business. 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. However, there are also various other factors into play. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. 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. Yes! Even giants like Google and Amazon took years before becoming profitable and even then, their founding workers take salaries. 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. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. 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 could be because there is more capital, or because VCs have witnessed exactly what happens when a founder is under enormous stress and pressure in their personal and professional life: they make bad decisions and things fall apart. CEO founders sometimes ask me for guidance on what is market for salaries in a seed stage startup. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Back in 2008, Peter Thiel did an interview at TechCrunch50 in which he said one of the most important things he looks at before investing is how much the CEO is getting paid. 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 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. Tax Credit Center - Which of the 700+ Credits Are Best? 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. Below is our 2019 study, which we have left online for reference. What's the average salary for CEOs from funded startups? On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. 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. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. 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. Some observations: So what is the range of CEO salaries in the seed stage? As already mentioned, founders are paid only when they work as employees, not because they started the company. Anyway, even when the business starts growing, it wont pay you much in the form of salary. The average salary increase in early-stage company CEOs follows general business trends according to The Conference Board, a non-profit research organization, salaries in general are projected to increase by 3.9% in 2022. We would advise founders to adjust their compensation as their company raises increasing amounts of funding. 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. We had hoped that this expanded difference would shrink in our 2022 data, but unfortunately it did not. Salaries ranged from the 25th percentile of $43,000 to the 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. Share your companys key data with our beautiful dashboards. 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. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. Interested in other data on startup spending? Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. Did you know even money losing startups can get up to $250,000? 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. Industries and different verticals can lead to varying salaries. Startup founders need to decide how much salary is enough. 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. Keep in mind that these rewards are essential to incentivise you and keep you focused. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. 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. Startup executive compensation depends on their financial independence as well as the financial health of the business. 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. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. Calculate your budget by accounting for all your sources of income and expenditure. In 2019, before COVID, startup CEO salaries averaged $142,000. Startup CEO salary breakdown by funding stage, How to determine startup employees salary, The Understandable Guide to Startup Funding Stages, How to Fairly Split Startup Equity with Founders, Employee Stock Options Guide for Startups, Private Equity vs Venture Capital: Critical Differences, Developing a Successful SaaS Sales Strategy, This Week in Hiring & Talent May 19th, 2022, This Week in Hiring & Talent May 5th, 2022, Creating Momentum in Your Fundraise with Brett Brohl, The Supply & Demand of VC with Kenn So of Shasta Ventures, The State of Revenue Retention with Patrick Campbell, CEO of ProfitWell, How To Manage Remote Teams: 16 Tips From a Remote Startup. Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. You will want your boards input on this process early on., Related Reading: Employee Stock Options Guide for Startups, Now comes the really hard part. Please quote the information above when referring to 2020 - 2021 data. 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. Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. While not a direct driver of cash salary, the amount of equity owned can have a psychological impact on salary expectations. 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. But early employees will be attracted to your business in part because of the long-term payoff. 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. Wow your investors with data-driven updates that drive interaction. It [a low salary] aligns interest with the equity holders. However, our research is meant to aid your own, and we are not acting as licensed professionals. Seed Stage CEO Salary by Industry (in thousands). 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. Also, try our Startup CEO Salary Estimator tool on the right. To understand what happens when new equity is issued, a simple example helps. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. Seed, Series A, Series B, etc. The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. 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. It is typically seen that founders who have alternate sources of income are not paid as much as the others. 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. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. 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. What salaries did startup CTOs earn in 2022? Photo: Supplied. Having the above questions answered will help. 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. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. 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.