You have to be able to afford the talent you’re recruiting without cutting your financial runway unnecessarily fast for some quick-to-compete cash package. This is an especially important question to answer when you’re trying to hire your first employees. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary. Certainly, there are a few other factors that will go into a startup founder’s salary as well. While there are quite a few factors that go into determining your salary we find the following to be most important. Once you understand the benchmarks and industry trends, it is time to determine what your annual salary should be as a CEO. Related Reading: The Understandable Guide to Startup Funding Stages How to Determine a Startup CEO Salary Startup CEO Salary Calculator $10M+ (Avg) – Likely companies with a solidified model and likelihood of a large exit.$5M-$10M (Avg) – On the path to a larger exit and team warranting a larger salary.$2M-$5M (Avg) – Similar to $0-$2M this range has yet to give investors and board members the full confidence of a large exit.$0-$2M (Avg) – Companies that have yet to prove product-market fit so likely as a lesser salary.However, at all other levels pay is more or less flat to up quite a bit.” 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. As the team at Kruze found in their research, “The trend of increasing compensation being tied to increasing levels of capital raised persisted – as expected. 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 CEO’s salary. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. Presumably, as a startup raises more capital they are growing as a company. Using the same report, Kruze Consulting 2021 Startup CEO Salary Report, as above you can see that the capital raised greatly impacts a startup CEO’s salary. While the industry certainly has an impact on a CEO’s salary - the stage and capital raised seem to have the largest impact on a startup CEO’s salary Startup CEO Salary breakdown by funding stage SaaS – Similar to fintech, a hot space in VC leading to more companies being funded with more money.Hardware – A more mature space leading to a higher salary.Fintech – A hot space in VC leading to more companies being funded with more money.Ecommerce – Ecommerce companies can be started and built with individuals and smaller teams leading to a smaller salary.Biotech – This has remained fairly consistent year to year as the space is more mature.The following data is from the Kruze Consulting 2021 Startup CEO Salary Report : As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. The salary varies by company stage and industry - learn more below: Startup CEO Salary breakdown by Industry While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. Here are some of the best practices and advice on approaching your boards with proposed plans once you’ve determined the right way forward. It includes understanding the competitive compensation you can afford, the value of your business, and the sum total of benefits available to you and your employees. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. How do you determine what’s best? The right approach won’t include a one-size-fits-all answer for every business. On the other hand, you need to keep cash in the bank and appease your investors and board members that you’re extending responsible offers. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. 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.
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