startup ceo salary seed round

Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. , 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. Track the average number of hours you work and then compute your salary. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. Wow! Law enforces it in a few countries. 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 you build something of value and valuations are going up, you wont mind doing a small secondary. In 2022, female CEOs made $20,000 less than males. Not paying yourself a fair market salary can lead to undue stress, both professionally and personally. Raise capital, update investors and engage your team from a single platform. A finance enthusiast, literature beau and lifelong learner. That comes in the form of common stock. The trend of increasing compensation being tied to increasing levels of capital raised persisted - as expected. See if you are eligible for a salary or not. The one decline we saw was for eCommerce companies, who saw their salaries dip nearly 4% in 2019. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. 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 greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. Founders are paid only when they work as employees. 3) Excessive hiring and spending. You are probably eligible, Hiring veterans and felons? The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. 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. The VCs set my salary without discussing or consulting with me (I know, weird, but this was '03, a different time). The seed-stage-focused firm, which also has a presence in St. Louis, has funded Amazon-as-a-service" startup Amify. This year, we expanded the data to over 200 of our seed and venture-backed clients and found that in 2019, CEO salaries rose to an average of $142,000 annually, nearly a 10% increase. 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,. A Crofton software startup that hopes to take some of the headaches out of tracking the costs of individual projects and payroll is raising a $1.5 million seed round. Wrong! 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. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. 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. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. 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. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. However, at all other levels pay is more or less flat to up quite a bit. Next, its time to determine what your business is worth so the value of equity can be established. We may monetize some of our links through affiliate advertising. While there are quite a few factors that go into determining your salary we find the following to be most important. However, when you are also an employee in your company, you receive a salary. CEOs of funded startups make many important decisions - including compensation decisions. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. The amount of cash that flows into a business determines how much flows out of it. In 2020, we saw salaries decline at the height of the covid pandemic. 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: As already mentioned, founders are paid only when they work as employees, not because they started the company. So, if a founder or cofounder works as their startups CEO, COO, CTO, CMO, or in any other role, they deserve remuneration for their services. Seed, Series A, Series B, etc.) I would like more of this start up articles as I just subscribed to your platform. 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. Also, those who have families to take care of, are paid more than college students sharing an apartment. How much can your startup save in payroll taxes? 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. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. They might lose faith in you and your company. The distinction between the two may impact early employee decisions on how they personally value their stock. Not only does a fair market salary reduce your financial stress, it gives you a safety hatch. The table below shows average and median salaries since 2018. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. Were not talking about anything extravagant, but enough to live a life outside of the business. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. The following table represents the salaries of a few of the most notable tech companies CEOs during their IPOs. The more a CEO pays herself, the less runway available to hit milestones. the average startup CEO salary is $130,000. 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. 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. What salaries did startup CTOs earn in 2022? 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. As most CEOs and founders know, launching a startup means working long hours, dedicating time and thought to the business success. This is an especially important question to answer when youre trying to hire your first employees. If you can raise a Series A round with your company at a Salaries ranged from the 25th percentile of $43,000 to the 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. Richard had just raised his first round of funding. Try Visible free for 14 days. 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. Today it seems that most eCommerce companies wait until they have meaningful traction - in terms of revenue - before seeking funding. Weve found that there are a variety of factors that can influence the salary of a startup CEO. How does CEO pay vary by the amount of venture capital raised? You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. 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. 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. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. Having the above questions answered will help. Owners of mature companies can pay themselves more than growth-stage startup founders even when both generate good revenue. We feel there are three primary drivers for this behavior, said Healy Jones, VP of Financial Planning & Analysis for Kruze. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. Keep in mind that these rewards are essential to incentivise you and keep you focused. If it is set at a high level, you end up burning a whole lot more money. 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. Founders of bootstrapped startups dont need to pay themselves. 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. 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. Say you raise $1,000,000 on a $5,000,000 pre-money valuation. As a company matures and grows, so does the salary of the CEO. 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, Jason Cohen writes. The idealistic view says that startup founders must take risks and should not be rewarded unless their company starts making money. 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. 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 A more mature space leading to a higher salary. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Wonderful article Kavvya!! Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. 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. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. 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.. 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. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Of course, read our answers to the two logical follow up questions: When can a startup CEO take a raise - well tell you what the data says! Profit-generating startups are a rare sight. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. This chart breaks down seed funded CEO salary by industry: 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. 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. 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. 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. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? said Vanessa Kruze, CEO of Kruze Consulting. How to Calculate Your Startup Founder Salary? 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. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. Several years ago, many eComm companies were just getting started when they were seed funded. Also, try our Startup CEO Salary Estimator tool on the right. The same trend was true for the median startup CEO salary. Every stakeholder of the startup often needs direct contact with the CEO, and startup CEOs cant delegate everything. And, while we did see many of startups with male leaders also reduce their pay, we arent quite sure why females were more likely to take a pay cut during the pandemic.. 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.. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. 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.. We would advise founders to adjust their compensation as their company raises increasing amounts of funding. What are you waiting for? For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. 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. And, not surprisingly, compensation is one of the most frequent questions. 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. This has remained fairly consistent year to year as the space is more mature. As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. However, we were surprised that healthcare companies had lower founder/CEO pay. The greater the. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. 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. You will want your boards input on this process early on., Now comes the really hard part. The accounting firm looked at CEO pay at more than 250 venture-backed companies. David Rose agrees. In other words, these companies were all tremendously successful up to the point of going public, yet the CEOs salary was still lower than that weve seen for some Series A startups, especially on the West 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. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. Just like most couples should discuss important things like money and debt before they are married, its a good idea to talk money and salary before you enter into a marriage with a VC. 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. Startup Lessons From The MIT and Harvard Strategy War Game, Recently, I led a team from MIT in the second annual strategy war game with Harvard Business School organized by Fuld and Company. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. 41% of the CEOs who had their salaries reduced later increased them by the end of the year, while 47% kept their salaries flat - and 13% decreased their compensation further. Founders of funded startups may start to pay themselves provided that they are on the payroll. The businesses that are funded between $1M to $2.5M pay their founders above $125K. Determining how to properly compensate employees at a startup is also a tricky task. Getting someone to join your dream before it is much of anything is an art not a science.. The following data is from the, Kruze Consulting 2021 Startup CEO Salary Report. Some families live on that," says VC Sean Owen. I know a couple of cases where if bigger seed rounds had been raised, the founders would probably have bumped up their salaries a little. Feedough is the one-stop resource for everything related to startups. How to Rebalance Ownership Between Founders, Kruze is a leader in accounting services for startups. Below is our 2018 study, which we have left online for reference. 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. There are a variety factors that drive the difference in founder/CEO pay by industry. Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. We spend a lot of time researching and writing our articles and strive to provide accurate, up-to-date content. So, your salary as a founder depends on the state of your startups cash flows and not on its profitability. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Seed Stage CEO Salary by Industry (in thousands). 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. 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. 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. 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. Calculate your budget by accounting for all your sources of income and expenditure. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. 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. 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. The term sheet The more investment a startup attracts, the more its funder can afford. 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.