Equity is one of my favorite tools as a startup founder. Leverage equity compensation or profit sharing. Visit www.kruzeconsulting.comto learn more. If you're looking for more equity, then you can counter with more equity and possibly be more flexible on cash comp. This Guide does not replace professional advice. But do you know how your executive compensation package will change as a result of becoming an employee of a public company? Risk and Reward . There are extensive legal resources available on executive compensation. Let’s go straight to the bottom line, and then backtrack to the thinking. Depending on where you look, executive compensation at startups can vary wildly. 3. An executive compensation plan must act as an incentive and retention device for startup executives while delivering a fair return to investors and shareholders who have funded the company. Equity, not salary, should be your main focus. Since 2008, there has been a secular trend to increase cash compensation and decrease equity to startup management teams. The value of each depends on the stage of a company’s growth, the role , … Peter Thiel has actually set an upper limit for startup CEO salaries. In other words, these companies were all tremendously successful up to the point of going public, yet the CEO’s salary was still lower than that we’ve seen for some Series A startups, especially on the West Coast . Here’s a basic framework. As software companies graduate from the startup to the expansion stage, their Boards of Directors need to start formalizing the setting of executive compensation. 2% of jobs. Explore by role, location, skill, or market. What an employee receives in equity, cash, and benefits depends on the role they’re filling, the sector they work in, where they and the company are located, and the possible value that specific individual may bring to the company. Founders taking low salaries also show very well when going to raise money. Here's what entrepreneurs think they know about startup pay--and what actually happens. Tying compensation to funding rounds cannot be applied uniformly across startups. There’s no shortage of startups to work for, but most are going to fail, says Greg Carney, who, after working for a series of startups, is now director of consulting for Miami engineering firm Carney-Neuhaus. To set the table I wanted to share some national startup compensation data. While increases in tech company wages have been well publicized, the increases in biotech are equally interesting and important for any company looking to attract and retain talent (as well as investors active in the industry). It sets an example for the rest of the company, establishes a culture of cash efficiency/frugality, and shows a founder putting the company ahead of himself/herself. The 2019 Executive Compensation and Benchmarking Survey Pearl Meyer has combined two industry-leading data sources to provide you with an in-depth review of both your competitive standing in comparison to your peers and the total cost of compensation for your leadership team. Startup office leases and the COVID crisis, Webinar: Life Science Startups Can Lower Operating Costs During COVID-19. What Securities do VCs use to Invest in Startups? From 2008 to 2016, the median averaged $283k. Raise capital faster with Crunchbase Pro – try it free. Seed Stage CEO Salary by Industry (in thousands), Seed Stage Ceo Salaries by Industry (in thousands), plenty written about the pay disparity between women and men. Leverage equity compensation or profit sharing. The 2018 Startup CEO Salary Report was created by Healy Jones, Senior Consultant Alex Janeck and Staff Accountant Litzy Yang. We’ve found that CEOs in some industries have higher average salaries than others. With the help of sponsoring venture firms, data was collected from 1568 private, venture-backed companies between mid-August and mid-September 2016. The company’s business plan, a competent leadership team and the right compensation package can each reduce the risk of working for a startup. 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. The best performing companies use incentive-based compensation to achieve their goals. Salary and equity comprise the compensation package. A CTO at said startup would probably be a mid-level tech lead at a more premium startup, or a technical product manager at a tech company. We found that the average startup CEO pay at funded startups is $130,000. VC would much rather back a scrappy, frugal founder. According to our founder and CEO of Kruze Consulting, Vanessa Kruze, “this year’s 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.”. For instance, Marc Benioff of Salesforce took a salary of $1 at IPO, Patrick Shiong of Nant Health took no salary, Jack Dorsey at Square took only $3,750, and Jeff Bezos at Amazon took only $64,333. This is the story of how I negotiated my compensation. 1. While it’s not quite exploding, there’s a frenzy of activity in the startup world. Executive Summary. 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. As a CEO, so long as you’re driving fantastic growth and value, it’s not out of line to expect additional option grants as a CEO. As a rule of thumb a non-founder CEO joining an early stage startup (that has been running less than a year) would receive 7-10% equity. To gain some insights into the matter I am planning to attend a special session of the Technology Executive Roundtable on Atlanta technology executive compensation tomorrow. A … Total compensation for CEOs goes beyond cash and stock Although typically excluded from pay calculations, executive benefits and perquisites are disclosed in the summary compensation table and the retirement plan section of the proxy. The compensation of the founder-CEO should be benchmarked to the market after benchmarking the rest of the function heads to the market. We hope this data will help other early-stage businesses prepare their budgets! Explore by role, location, skill, or market. Note: The executive compensation plan outlined below was jointly developed with @joannezchen, Partner at Foundation Capital. Kruze’s 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. When the executive is also a founder, that also impacts compensation because they’ll likely be given more equity in the company rather than being directly compensated. Our data shows that the average annual salary for a CEO of a seed or venture backed company is $130,000. What rewards should you expect at the IPO stage? CEO salaries in the Biotech and Healthcare industries tend to average more than those in other industries. The startup you work for is gaining acceptance in the market and with remarkable growth, you are now eyeing the prospects of an IPO. To set the table I wanted to share some national startup compensation data. This is tough to answer without knowing your background and without knowing how much the current company might be worth. 2019 Startup CEO Salary Report Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. The largest growth appeared among companies who raised between $5-10 million – among this group, average CEO salaries jumped 12% from $145,000 in 2018 to $162,000 in 2019. Design by Lucila Romero. If this co-founder feels aggrieved, he or she might sue the company and the other founders personally for failing to pay the minimum wage. MICROSOFT CORP income statements for executive base pay and bonus are filed yearly with the SEC in the edgar filing system. Here's what entrepreneurs think they know about startup pay--and what actually happens. Let me tell you why. There’s 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. Executive Compensation Table Excerpt from Apple’s 2020 Filings To understand the significance of this table, and other corporate filings always read through footnotes and attached notes. Properly crafted, an executive compensation plan can help attract top-notch talent, retain best performing executives, motivate the leadership team to succeed and align their activities to help ensure the company’s goals are being reached. 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 . On the other hand, a poor compensation structure can lead to a talent crisis or trouble maintaining profitability. Granted, for the later stage companies it’s a different story – while these CEOs tend to make more, there are fewer female CEOs in this group. It goes without saying they made a lot more money on their equity than they did on salaries. © 2020 Crunchbase Inc. All Rights Reserved. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. Kruze provides Startup CFO Consulting to over 200+ startups in Silicon Valley, Los Angeles, New York, and other major startup hubs. Investors and shareholders must decide how much dilution of equity they are willing to accept to provide an appropriate equity pool for the management team. Startup salary and equity data for thousands of startup jobs. MICROSOFT CORP annual reports of executive compensation and pay are most commonly found in the Def 14a documents. When evaluating compensation, the manner in which you filter the data can change the story significantly. Same with fintech at $129,000. From time to time I get questions about startup compensation. Note the median bonus was $80k and median option grant had a value of $52k. As software companies graduate from the startup to the expansion stage, their Boards of Directors need to start formalizing the setting of executive compensation. Executive compensation at large or public companies is an even more nuanced topic, on both sides of the table. National Average. ... effective executive compensation plan designs look at the current tax laws and take those laws into consideration. Email Sammy directly at sammy@blossomstreetventures.com. Which is to say it's unlikely that these people have the "executive lifestyle." Still, when it comes to startup CEO pay, our data reveals some good news. Executive compensation covers employees that include company presidents, chief executive officers (CEOs), chief financial officers (CFOs), vice presidents, occasionally directors, and other upper-level managers.These high-level employees are paid executive compensation. As the deck chairs rearrange themselves and new players get introduced, the whole compensation question is veiled in mystery and supposition. Sammy is a co-founder of Blossom Street Ventures. Be sure to temper your salary accordingly based on the stage of your company. Boards, shareholders, and journalists often look at a chief executive’s annual compensation plan to determine whether the company is offering the right incentives to increase shareholder value. The startup you work for is gaining acceptance in the market and with remarkable growth, you are now eyeing the prospects of an IPO. Investors and shareholders must decide how much dilution of equity they are willing to accept to provide an appropriate equity pool for the management team. There are a lot of variables that might cause a … And when startups are thrown into the conversation, the picture only becomes more blurred. The data below shows the salaries of 101 tech company CEOs at IPO. To do so, we use individual-level data from Advanced HR, a leading provider of executive compensation data for VC-backed startups, to study both the level and evolution of CEO compensation. Company boards, at least in principle, try to use compensation contracts to align executives' actions with company success. I’ve picked up quite a bit just by being around our CEO, Kyle, for the past few years — he’s been in and out and up and down in startups, and has shared some of the hard lessons he learned along the way. At startups like ours, stock options are often a major component of compensation packages. Here are a couple of examples showing how things can go wrong. What rewards should you expect at the IPO stage? Please quote the information above when referring to 2019 data. We can commit in 3 weeks and our check is $1mm. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. Executives who are improperly compensated may not have the incentive to … We’ve seen a wide range of CEO salaries at venture-backed companies, from as low as $35k annually to as much as $325k (plus bonus). We’ve found that there are a variety of factors that can influence the salary of a startup CEO. As we found last year, the highest-paid CEOs fell predominantly into the healthcare and biotech categories. They include the following. What should independent directors expect in the way of compensation for serving on a startup’s board of directors? An executive compensation plan must act as an incentive and retention device for startup executives while delivering a fair return to investors and shareholders who have funded the company. Seeking Professional Advice. The idea is … Equity is the great compensation equalizer in startup companies—the bridge between an executive’s market value and the company’s cash constraints. The CEO of a seed or venture-backed startup company makes an average annual salary of $130,000, according to a recent report from Kruze Consulting. When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. Kruze is a leader in accounting services for startups. The startups we used to determine this figure have raised collectively more than $2B in funding. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies’ metrics. Keep it as low as possible, expect option grants and bonuses for success, and keep in mind the real source of value is your equity: Benioff, Shiong, Dorsey, and Bezos owned 32%, 57%, 24%, and 48% of their respective companies at the time they went public. But do you know how your executive compensation package will change as a result of becoming an employee of a public company? 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. All of that being said, the early employees will of course expect their compensation to move closer to market as the startup raises funds and hits revenue milestones. So unless you raise millions and millions of dollars right from launch, it’s difficult to justify a high startup CEO salary. Compensation data is highly situational. To do so, we use individual-level data from Advanced HR, a leading provider of executive compensation data for VC-backed startups, to study both the level and evolution of CEO compensation. Does the CEO want some deferred compensation — this is a very difficult thing to do correctly with current tax laws but it … Since we are on the topic of the CEO’s annual rhythm, let’s talk about senior management compensation. These factors include: the total funding raised, cash in the bank, industry, and the experience of the founder. As the table below shows, the median level of CEO ownership has risen since 1998. In other words, these companies were all tremendously successful up to the point of going public, yet the CEO’s salary was still lower than that we’ve seen for some Series A startups, especially on the West Coast. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. The earlier a startup can put a plan in place to manage compensation conversations and questions, the fewer problems they’ll have in this area going forward. Chief Executive Research surveyed 1,631 companies in April thru June of 2018 about their fiscal 2017 and 2018 compensation levels and practices. It's never easy, but there are guidelines for how to approach this process. $130,000 per year. We hope this report simplifies your startup CEO pay decision! Compensation at a startup company is largely made up of three components: salary, benefits, and equity. There is a tradeoff between these. Non-Founder executive compensation? At any moment, executives or team members may own public or private stock in any of the third party companies we mention. 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. The table below shows 2016 median cash and equity compensation for six developmental cuts of survey data. Stop guessing. Expect us to publish future studies on other startup executive pay. (if you just need the formula scroll to the bottom). One of the most common questions CEOs ask us at Kruze Consulting is: “How much should my salary be?” Since the Kruze team helps run startup’s books and payroll, it’s natural that we’d get this question. Visit our Uber vs. Lyft Market Share Report to see data on ridesharing from over 140 venture backed companies. Executive compensation at large or public companies is an even more nuanced topic, on both sides of the table. What Salaries Did Startup CEOs Earn in 2019. Interested in other data on startup spending? Kruze Consulting was founded in 2012 by Vanessa Kruze, a big four alum, startup controller and CPA. A non-founding CEO of early stage company equity ranges from 5% - 10% typically. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. Do you know what people like you are earning? A non-founding CEO of early stage company equity ranges from 5% - 10% typically. Executive Compensation Table Excerpt from Apple’s 2020 Filings To understand the significance of this table, and other corporate filings always read through footnotes and attached notes. Should your company reduce salaries when an employee moves to a lower cost geography? “Wait,” you may be saying, “that’s still a $5,000 difference.” Yes, but there’s a solid explanation. Example 1: A minority co-founder (say, 10%), who has not been paid any cash compensation (and is not an exempt salaried employee – see below), is not working out and is let go. For a pre-Series A company with strategic/angel investment that is earning revenue around 1.5-2M/year, what should the non-founder executives (CTO, COO, CMO) be compensated in terms of salary and equity? 1. The fruits of your team’s labor are at hand. Other C-level execs would receive 1-5% equity that vests over time (usually 4 years). Executive Summary. Compensation for executive managers is different from compensation for other employees in most organizations. Total Cash Compensation information is comprised of yearly Base Pay and Bonuses. Here are a couple of examples showing how things can go wrong. Executive compensation is a significant thing to consider when evaluating an investment opportunity. Example 1: A minority co-founder (say, 10%), who has not been paid any cash compensation (and is not an exempt salaried employee – see below), is not working out and is let go. Our analysis backs this up, but it’s important to mention that there is no single factor that influences this decision. At startups like ours, stock options are often a major component of compensation … One trend remained the same as last year: the more you raise, the more you get paid. Here’s a basic framework. Depending on where you look, executive compensation at startups can vary wildly. Start Salary Survey. Startup Compensation Guide. For instance, James Park of Fitbit ($7.5mm), Dick Costolo of Twitter ($11.3mm), and Scott Painter at True Car ($5.2mm), among others all took home nice option packages the year before IPO. Affordable Monthly Bookkeeping for Startups, 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. Reduce your startup's burn with Research & Development tax credits, Experts in raising capital and working with VCs, Venture Debt fundraising advice for VC backed startups, Experience helping funded startups navigate the M&A diligence process, High quality 409A's at a discounted price, Answers to hundreds of startup accounting, finance, HR and tax Q's, Expert startup accounting (and more) advice, We have created several financial models that you can use for free, After working with hundreds of startups, we picked the best credit cards. From 1998 to 2007, the median for each year averaged $156k. The fruits of your team’s labor are at hand. Startup salary and equity data for thousands of startup jobs. Most people won’t come out ahead, but those who know how to play the game can sometimes win big. As major economies show signs of recovering from the 2008 recession, compensation can become more decisive to retaining and motivating critical senior executive … Negotiating Compensation at a Startup Startup jobs -- where you’re given stock in a new company in exchange for working for a low or even no salary -- are like a gambling trip to Las Vegas. ... while relying much less on investment capital and equity compensation. Salary and equity comprise the compensation package. That said, these individuals were independently wealthy before the IPO, but it’s always refreshing to see a CEO pass up a big salary if he/she doesn’t need one. 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. Analysis of CEO Cash and Equity Compensation in 2016 . Have a CEO who has three kids, then put aside some shares for the kids’ college education that are forfeitable if the CEO leaves — golden handcuffs again. Just in case you need a simple salary calculator, that works out to be approximately $53.35 an hour. The chart below shows average pay levels by amount of funding raised. Pay for performance is a compensation strategy to align executive compensation with the company's success. The minority co-founder may face an uphill battle to prove his/her claim, but this situation would be a thorn in the side of any star… Your request has been submitted.We will contact you shortly. We link, at the individual executive-level, their salary, bonus, and equity holdings to firm-level information on financing, revenue, headcount, and product milestones. Startups with $10 million or more in funding saw their average Chief Executive’s pay rise 8% from $160,000 in 2018 to $173,000 in 2019. 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. Companies that have raised more tend to offer the CEO higher salaries. There is a tradeoff between these. Below is our 2018 study, which we have left online for reference. Out of 8 employees at Senstone, 3 accepted equity for reduced cash… CEOs of funded startups make many important decisions - including compensation decisions. $276k Is the Median Startup CEO Salary for a Very Successful Company Keep in mind, the median salary of $276k is for the CEO of a company about to go public. It’s actual market, and good investors have no problem rewarding CEOs that are performing. Make sure they are actually […] $10.34 $53 /hour $163.70. 2. Meanwhile, those of SaaS companies made on average $113,000 in 2018, which rose 7% to $121,000 in 2019. How much can your startup save in payroll taxes? If you're looking for more equity, then you can counter with more equity and possibly be more flexible on cash comp. Compensation data is highly situational. This has long been an acceptable salary range depending on cost of living adjustments and the value of the business, and as long as the fledgling business isn’t truly desperate for cash. To spotlight how that applies to CEOs at venture-backed companies, we partnered with compensation data firm J.Thelander Consulting to break down the data by gender, the amount of capital the company has raised, and whether or not the CEO founded the company. Grow 4 Top Myths About Start-up Pay I've been collecting data about startups and compensation since 2001. While there is no dataset explicitly outlining CEO salary levels at early stage companies, we can use the salaries from tech companies at their IPO to get a sense for what the salary should be for a successfully exiting CEO. With this in mind, Graham says there are three places where a company needs to focus on compensation and have specific ideas about how to handle it. When I started thinking about joining Keen, I quickly realized there is a lot I don’t know about startups. In 2018, CEOs of hardware startups had an average salary of $118,000, which rose 14% to $135,000 in 2019. As of Nov 27, 2020, the average annual pay for a Startup CEO in the United States is $110,959 a year. When the executive is also a founder, that also impacts compensation because they’ll likely be given more equity in the company rather than being directly compensated. Grow 4 Top Myths About Start-up Pay I've been collecting data about startups and compensation since 2001. To gain some insights into the matter I am planning to attend a special session of the Technology Executive Roundtable on Atlanta technology executive compensation tomorrow. Founders in those industries tend to come with academic credentials, and previous experience, that founders in other industries don’t always have (M.D., PHD), and thus warrant a higher annual salary. Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. Hire an experienced lawyer or compensation consultant. And being a Cxx at a small, pre-series A startup is pretty meaningless in terms of the title. Indeed, it’s not unreasonable to take a performance-based bonus and it’s also expected that a founder will be granted stock as the Company matures and becomes more successful, especially if their salary is low. VC would much rather back a scrappy, frugal founder than one that spends gratuitously and the CEO salary tells you a lot about the CEO’s mantra. Raise, the whole compensation question is veiled in mystery and supposition, which rose 14 % $. 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The manner in which you filter the data can change the story significantly submitted.We will contact you.! Capital and equity data for thousands of startup jobs compensation strategy to align executive Report... To drive profitable business performance is a leader in accounting services for.! 5,000 in 2019 at hand on a startup company is $ 130,000 During... What should independent directors expect in the biotech and healthcare industries tend to average more those! Pay at funded startups make many important decisions - including compensation decisions even nuanced. But those who know how your executive compensation of hardware startups had an average salary of $ and. In place, an organization can hire and retain great talent to profitable!, average CEO salaries remained relatively unchanged year over year, the in...