The more a CEO pays herself, the less runway available to hit milestones. Founders of bootstrapped startups dont need to pay themselves. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. With the financial stress that comes with running a startup, the last thing a startup CEO or founder should be worrying about is how theyre going to live day-to-day. Startup compensation guide: see thousands of startup salary and equity data points. So, if you had any doubts about taking a salary, shed them now and start thinking about how much you want to pay yourself. Please quote the information above when referring to 2020 - 2021 data. A Guide to Tax Returns for Seed Stage Startups. The average startup founder salary in the seed round is $100,000. We may monetize some of our links through affiliate advertising. It discovered the salaries are up 2.7% compared to 2021 well below the Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. 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. What are you waiting for? 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. Firstly, and most obviously, companies with more funding are better able to pay their CEOs. At any moment, executives or team members may own public or private stock in any of the third party companies we mention. In 2019, before COVID, startup CEO salaries averaged $142,000. 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. If the company raises a Series A round, its typically to see seed stage salaries adjusted upward. Law enforces it in a few countries. Seed, Series A, Series B, etc.) Come on! 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. Founders in those industries tend to come with academic credentials, and previous experience, that founders in other industries dont always have (M.D., PHD), and thus warrant a higher annual salary. 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. 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. 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. However, it is believed that founders should start small and increase their salaries after later rounds of funding or when their business starts growing. Hardware companies tend to require larger than average amounts of venture capital funding to get to a meaningful size. WebAt the seed stage you should have a reasonable salary based on your location. 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. $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. Kruzes clients have raised over $500 million in venture capital in the past 12 months, and are market leading Saas, software, eCommerce, eHealth and FinTech startups. However, at all other levels pay is more or less flat to up quite a bit. This is somewhat true as well. For 2022, the average startup CEO salary increased by 2.7% from 2021 levels to $150,000, while the median increased to $140,000. 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. This is because these founders tend to have advanced degrees, like MDs, and VCs in those spaces tend to respect higher compensation. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. On the other hand, Mukesh Ambani paid himself INR 4.36 crores in the financial year 2019-2020, that is, around $596,000. Raise capital, update investors and engage your team from a single platform. According to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. that a founder CEO will be in the 5-20% range, a founder CTO in the 2-10% range, other co-founders between 3-7% and non-founder early employees between 0.5-5%. Sequential rounds gave me a small bump in salary. 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. How long will this last us? Calculate your budget by accounting for all your sources of income and expenditure. Several years ago, many eComm companies were just getting started when they were seed funded. 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. David Rose agrees. You might feel the same way. This came to me at the time I needed it most. 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. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. So, its better to invest $45K and let the additional $5K stay in your bank account. Weve kept these previous salary analyses below. Thats why its critical you have the salary discussion before you sign the term sheet and close on that investment. Also, those who have families to take care of, are paid more than college students sharing an apartment. One of the easiest ways to do that is pay yourself the right amount. 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. For rounds of 150k or below, around half of founders secure a salary. CEOs are always on duty, and startup CEOs are even more in demand than the leaders of mature businesses. WebAccording to ZipRecruiter, for example, the average salary for the position of startup CEO is just over $110,000 per year. Interestingly, Female CEOs were more likely to take a pay cut during the pandemic. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. 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. We used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. 28 2 Jason M. Lemkin SaaStr Fund. It seems that companies pay 8-12% of their funding to their founders. Search by stage, location, sector and more. 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. Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. And, if youre making a market salary, you wont feel compelled to make the wrong decision for the company. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? 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. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. The site may also contain links to affiliate websites, and we receive an affiliate commission for any purchases made by you on the affiliate website using such links. Very few entrepreneurs have the courage to be that transparent. As you might expect, lower funding means lower wages; companies that have raised less than $2 million have an average salary of $106,000, while companies that have raised more than $10 million pay their top execs nearly $200,000 on average. When a seed round raises $5 million instead of $500,000, the temptation to excessively hire and spend increases significantly. However, during the COVID pandemic in 2020 the pay gap expanded again throughout corporate America, and our research on startup companies also reflects that trend. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. Every year we analyze CEO pay at hundreds of early-stage companies to try to help our clients set reasonable salaries and compensation for themselves. In other words, although founders do not deserve salaries, whoever is on your startups payroll should be paid. When we compared the salaries of male Chief Executives versus females, we found that the numbers were roughly the same $138,000 per year for women versus $143,000 for men. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. Keep in mind that these rewards are essential to incentivise you and keep you focused. The companies we used to determine this figure have raised collectively more than $2B in funding. 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. The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. 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