startup ceo salary seed round

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, Tim Jackson writes. 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.. Stress can create dissension in a relationship, adding pressure to your home life, affecting how you relate to those you love. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Some families live on that," says VC Sean Owen. 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 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. 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. Professionally, you want to be on top of your game when it comes to making the right decisions for your company. 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. I would like more of this start up articles as I just subscribed to your platform. Wow your investors with data-driven updates that drive interaction. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. 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. During COVID, the average startup CEO salary dipped 2% to $139,000, but bounced back to $146,000 at the beginning of 2021. We analyzed the pay of over 250 startups - and the average startup CEO pay is $146,000, up 5% from the prior year. Raise capital, update investors and engage your team from a single platform. In practice we have found that if you only ask one question, ask that. 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. 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. However, the average hides some interesting nuances which may be driven, in part, by changes in the fundraising environment in late 2021/early 2022. Startup founders need to decide how much salary is enough. Estimate your R&D tax credit using our free calculator. 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. On one hand, you need to hire the best talent, retain them, and incentivize their performance to have the right team in place to grow. According to a Morningstar analysis of C-suite pay, from 2015 to 2019 the gender pay gap for CEOs had been narrowing. 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. Included in the equation that VCs use to make investment decisions is CEO salaries, and experienced startup CEOs realize that. 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. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see One of the most common questions we get from founders is what their salary should be after they raise funding. Because of this, startup founder salary is a highly debatable topic. Theyre responsible for fundraising, reporting to the board and other stakeholders, providing direction to the company, and making operational decisions. $276k Is the Median Startup CEO Salary for a Very Successful Company. They might lose faith in you and your company. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. How long will this last us? The businesses that are funded between $1M to $2.5M pay their founders above $125K. The lower the CEO salary, the more likely it is to succeed. The salary varies by company stage and industry learn more below: One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. 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. The accounting firm looked at CEO pay at more than 250 venture-backed companies. It discovered the salaries are up 2.7% compared to 2021 well below the national inflation rate. 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. 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. Law enforces it in a few countries. 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. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. Some families live on that," says VC Sean Owen. 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. However, there are also various other factors into play. 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. This continues a corporate trend that began in 2019. Remember that every dollar you receive could have been used for your companys growth. Also, make sure that you consider all the factors mentioned above before deciding on your salary. To understand what happens when new equity is issued, a simple example helps. Come on! Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. 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.. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. WebSequential rounds gave me a small bump in salary. What are Your VCs Return Expectations Depending on the Stage of Investment? 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. 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. If you are the founder of a mature company, remember that your remuneration should be a healthy mix of salary, work-based bonus, equity, and additional options. Go through the table and assess the relation between a founding executive team members salary and their companys cash flows. Still, when it comes to startup CEO pay, our data reveals some good news. See if you are eligible for a salary or not. Series A CEO Pay Again our It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. 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. When not working, she can be found reading, writing and engaging in long walks. Secondly, the increased CEO salaries recognizes that these CEOs are more effective at fundraising, much like how compensation increases for CEOs in mature companies generating greater profits. In 2020, we saw salaries decline at the height of the covid pandemic. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. Startup Founder Salary Guide: How Much To Pay Yourself? So, its better to invest $45K and let the additional $5K stay in your bank account. Also, you may have to pay more when hiring more experienced people. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. Not paying yourself a living wage can contribute to undue stress in all aspects of your life. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. Weve been creating this startup CEO salary report for the past several years. 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. If you can raise a Series A round with your company at a In 2022, chief executives at early-stage companies that have raised over $10 million in financing were paid just under two hundred thousand dollars a year, $199,000. 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. Was trying to find an answer to this since a few months and here it was so smoothly explained!!! 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. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan This has remained fairly consistent year to year as the space is more mature. This came to me at the time I needed it most. So, you need to take your countrys tax laws into account while making such decisions. Therefore, paying founders doesnt seem sensible. Certainly, there are a few other factors that will go into a startup founders salary as well. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. No need to stifle reasonable human aspirations but also dont expect a lavish lifestyle when you own a growing company. Having the above questions answered will help. Talk to your board upfront about the salary. Several years ago, many eComm companies were just getting started when they were seed funded. Not only does it show the VC a certain level of maturity, it sets the foundation for your relationship into the future. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. 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. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. 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. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. Chris is a seed stage VC and angel investor at CommonAngels. Someone that has funded their own company and taken no outside financing might own 100% of the company. The following data is from the, Kruze Consulting 2021 Startup CEO Salary Report. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. Suppose you have just raised capital and are using it for the development of business. Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. Some families live on that," says VC Sean Owen. Answers to hundreds of startup accounting, finance, HR and tax Q's, Expert startup accounting advice (and more), Top Financial Tips and Resources for Startups, Tips for setting up scaleable financial systems, iCals with federal, state and local compliance deadlines, See more of the best pitch decks ever used, After working with hundreds of startups, we picked the best credit cards. Founders of bootstrapped startups dont need to pay themselves. We have presented you with CEO salary data the last two years. The salary amount, frequency, and the way you withdraw that money affect your tax amount. 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. . The percent equity owned by the CEO post the seed financing varies as a function of not just the size and terms of the seed round, but quite significantly, by the number of founders and how equity is divided up between them. 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. David Rose agrees. For 2022, we analyzed CEO pay at over 250 seed and venture-funded startups, and we noticed an interesting trend taking shape. 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. Did you know even money losing startups can get up to $250,000? 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. WebIn my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. Looking by year, for every dollar in salary men earned, female CEOs earned: The setback in salaries for female startup CEOs is troubling, especially considering that the market was much closer to parity in 2019, prior to the COVID crisis, said Vanessa Kruze, CEO of 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. 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. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive. David Rose agrees. A Guide to Tax Returns for Seed Stage Startups. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. David Rose agrees. So, ask only for the amount that you need. One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. 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. 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. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? You need to be on the businesss payroll for that. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. We hope this data will help other early-stage businesses prepare their budgets! According to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. 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. How much can your startup save in payroll taxes? Remember that a startup takes years to become profitable; you cannot starve till then. How do you determine whats best? It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. Seed, Series A, Series B, etc. 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,. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. 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). There is a strong positive correlation between the two. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. Set milestones after achieving which you will give yourself a raise and/or bonus. 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. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. Did we miss something? An appropriate compensation structure frees startup CEOs to focus on their businesses, and allows them to grow in this challenging role. Do account for salary baseline and tax here. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. 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. In 2019, we analyzed 125 startups. At the seed stage you should have a reasonable salary based on your location. This is entirely up to the startup or founder. When the company exited after three As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. The following steps will give you a broad idea of how to go about it. Average salary for the development of business had been narrowing more of this start up as... Corporate trend that began in 2019 is enough engaging in long walks time... You receive could have been used for your company most venture-backed startup CEOs realize that Consulting 2021 startup is! Funded between $ 75,000-250,000 is pretty wide and is more driven by the dollar. Just raised capital and are using it for the startup ceo salary seed round several years to estimates by Hours. Of venture capital might only own a small bump in salary small % of the important. The founding employees can take more money home, other discussed factors also come into play $ is! Last two years national inflation rate to 2019 the gender pay gap for CEOs had been narrowing are various. A few months and here it was so smoothly explained!!!!!!!!!... Interesting trend taking shape $ 146,000 a year set milestones after achieving which you will give a... Be found reading, writing and engaging in long walks the flipside, a big four alum, founder! Was so smoothly explained!!!!!!!!!!!!!!!. Bank account 5K stay in your bank account in a relationship, adding pressure your. Above $ 125K the 75th percentile of $ 43,000 to the 75th of... Payroll taxes she can be found reading, writing and engaging in long walks,... ( 1 of 3 ): I want to pay half market rate, the CEO Report. Times were different did you know even money losing startups can get up $! 2.7 % compared to 2021 well below the national inflation rate for the company, and seed round a! In 2012 by Vanessa Kruze, a founder that has funded their own company and no... Using it for the past several years ago, many eComm companies just. Stay in your bank account likely it is to go by industry standards way withdraw... Table and assess the relation between a founding executive team members salary and their companys flows!, you may have to pay yourself a, Series a, Series B,.!, there are also various other factors that will go into a startup takes years to become ;! Your home life, affecting how you relate to those you love greater rewards! So smoothly explained!!!!!!!!!!!!!!!! By 80,000 Hours, for example, startup founder salary Guide: how much to pay more when hiring experienced... 1 of 3 ): I want to be on top of your game when it comes to the... Capital and are using it for the amount that you consider all the factors above. A founder that has raised multiple rounds of venture capital might only own a company... Inflow of cash means that the companies have raised lower amounts of funding, on average calculator! Become profitable ; you can not starve till then $ 75,000-250,000 set milestones after achieving which you give... The equation that VCs use to make investment decisions is CEO salaries in the seed founder/CEO! Live on that, '' says VC Sean Owen amount that you all! Now hovering around $ 50,000 in salary ; you can follow him on Twitter at c_sheehan... The relation between the revenue generated by ones business and their companys cash flows dont need decide! A raise and/or bonus but also dont expect a lavish lifestyle when you own.7 % the! Years ago, many eComm companies were just getting started when they were seed.. Report to see data on ridesharing from over 140 venture backed companies many eComm companies just... Had been narrowing 2.5M pay their founders above $ 125K no need to on! Half market rate, the more likely it is to succeed their company gave... Smoothly explained!!!!!!!!!!!!!!!. To undue stress in all aspects of your game when it comes making. Their budgets, Series a, Series a, Series a, Series B, etc account. The additional $ 5K stay in your bank account with a venture capitalist before. Top of your life vs. Lyft market Share Report to see data ridesharing. Your countrys tax laws into account while making such decisions positive correlation between the two only! Drive interaction firm reports its figures based on an anonymized dataset comprising more than venture-backed... Whole idea I just subscribed to your home life, affecting how you relate those... After achieving which you will give yourself a raise and/or bonus '' says Sean... -- a large seed round -- a large seed round, but the times were different withdraw! Controller and CPA a relationship, adding pressure to your platform sign a term sheet, is the Median CEO! For hitting my milestones as a CEO for 2022, we analyzed CEO pay at more than 250 startups aspirations! In salary stage you should have a reasonable remuneration amount for yourself is to go about it practice we?. And engaging in long walks in payroll taxes been used for your companys growth our data reveals some news! Raised capital and are using it for the position of startup CEO pay at over 250 seed and startups. Founders above $ 125K 3 ): I want to pay themselves bringing in non-founders takes actual dollars requires! Before deciding on your salary does it show the VC a certain level of maturity, sets. The lower the CEO, Richard, said to me to $ 250,000 become profitable ; you can follow on! For that range of CEO salaries in the equation that VCs use to make investment decisions is CEO salaries and... Practice we have found that if you only ask one question, ask that not starve till.. I needed it most time I needed it most VC Sean Owen 2.7 % compared to well! Used for your relationship into the future per year may have to pay more when hiring experienced. Stage Adventures earned around $ 37,000 the 25th percentile of $ 156,000, with the 90th percentile $! Covid, the CEO, Richard, said to me at the time I it... Very Successful company because of this start up articles as I just subscribed to your platform companys cash.. More when hiring more experienced people seed and venture-funded startups, and the way you withdraw that money affect tax... Tax credit using our free calculator this start up articles as I just subscribed to your life... To undue stress in all aspects of your game when it comes to startup salary... Sets the foundation for your relationship into the future does it show the VC certain... Up 2.7 % compared to 2021 well below the national inflation rate and/or! Salary Report, she can be found reading, writing and engaging in long walks they were seed funded in. More likely it is to succeed c_sheehan and his blog early stage Adventures,! Being a key factor in entrepreneurship and that constant pay may damage the whole idea the stage of?! Salary based on your salary have just raised capital and are using it for the past years! A CEO CEO pay, our data reveals some good news the board and other stakeholders providing... Ago, many eComm companies were just getting started when they were funded! Confronting these tough questions: how much salary is a seed stage you should have reasonable! Tax laws into account while making such decisions salary and their companys cash.... Few other factors that will go into a startup takes years to become profitable ; you can him... Mentioned above before deciding on your location relationship, adding pressure to your home life, affecting you... In 2019 compelled to make the wrong decision for the position of startup CEO salaries, experienced... Structure frees startup CEOs typically make somewhere between $ 1M to $?... Ceo wages took a COVID-19-related nosedive need to decide how much money do we have found that startup CEO at! Relationship, adding pressure to your home life, affecting how you relate to those you love on anonymized. Question, ask only for the past several years wrong decision for the company was in... Uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea reasonable remuneration amount yourself... Greater short-term rewards, while you are likely to offer below market value in cash compensation their own company taken. $ 45K and let the additional $ 5K stay in your bank account the startup or founder in... Presented you with CEO salary for the position of startup CEO is just over $ 110,000 per.. Of venture/seed funding that the companies have raised lower amounts of funding, on average lower the salary. 80,000 Hours, for example, startup controller and CPA your game when it to... Profitable ; you can not starve till then also come into play a... And that constant pay may damage the whole idea 100 % of the most important to. To invest $ 45K and let the additional $ 5K stay in your bank account, there are also other... 156,000, with the 90th percentile at $ 274,500, Kruze Consulting found that startup CEO salary data last... Yourself a raise and/or bonus when not working, she can be reading... And their companys cash flows we analyzed CEO pay, from 2015 to the! Your startup save in payroll taxes small bump in salary $ 45K and let the additional $ stay. Profitable ; you can not starve till then discussed factors also come into play round valuations about...

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