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 paying it’s 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. Keep in mind, the median salary of $276k is for the CEO of a company about to go public. The Importance of Startup CEO Salary. Your employees have options for where they work. Here are some of the best practices and advice on approaching your boards with proposed plans once you’ve determined the right way forward. 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. One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. The only exception to the above is the VP of Sales position, for which I’d never deviate from a 50/50 B/V split. Startup CEO salary breakdown by funding stage, How to determine startup employees salary, How to Fairly Split Startup Equity with Founders, Bootstrapping a Beauty Brand with Aishetu Dozie, CEO of Bossy, Why Knowing Your Circadian Rhythm Can Make You More Productive, Mike’s Note #17 — The Founders Forward + My Brother. You can also make room for bonus amounts of equity for any goals exceeded. Executive pay packages differ substantially from typical salaried or hourly employee compensation because unlike typical employee pay, the vast majority of an executive's pay is contingent compensation and structured only to reward the executive for actual, positive company performance and growth in shareholder … Roughly, for every additional $1 million raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. Learnings to Determine a Startup CEO Salary Factors to Consider When Vetting a Potential CEO. Young Entrepreneur Council (YEC) is an invitation-only, fee-based organization comprised of the world's most successful entrepreneurs 45 and younger. Raise capital, update investors and engage your team from a single platform. Building Compensation Package: Startup Equity Compensation Framework 2.0. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. Please see this FAQ about her services or contact her at (650) 326-3412 or at … (if you just need the formula scroll to the bottom). Roughly, for every additional $1,000,000 raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. Visit PayScale to research chief executive officer (ceo) salaries by city, experience, skill, employer and more. The fruits of your team’s labor are at hand. What’s the competitive salary for this position and experience? But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? Founders’Pie Getting started correctly is critical! After working with startups for over a decade, I have dealt with many founders who are presented with the tough decision of handing off the role of CEO to an outsider. Transparent startup compensation packages can keep everyone on the same page and avoid misunderstandings or disappointment, he says. A salary of $100k per year is going to half your runway when compared with a salary of $50k per year. There is a reason why this is is the standard, classic path for founder equity compensation. 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. For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. Next, it’s time to determine what your business is worth so the value of equity can be established. A Startup CEO in your area makes on average $113,587 per year, or $2,628 (2%) more than the national average annual salary of $110,959. The earliest days of your own role as CEO in the company can seem pretty straightforward: You're knee-deep in sales, product development and financials. It's never easy, but there are guidelines for how to approach this process. Anything less than 30% of OTE simply isn’t meaningful enough to produce the alignment between compensation and … 1. The right approach won’t include a one-size-fits-all answer for every business. 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. Roughly, for every additional $1 million raised, a startup CEO will take home between $4,000 and $5,000 more in annual salary. You will want your boards input on this process early on. Â, Now comes the really hard part. As the table below shows, the median level of CEO ownership has risen since 1998. You don’t 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. 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 paying it’s 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. Many executive compensation packages even include the kitchen sink – literally. Any compensation data out there is hard to come by. Components of a CEO Compensation Package. Cash compensation: This is the sum of all standard cash compensation the executive receives for the year. The average private company CEO total compensation package for 2017 was $2,213,679, but the median was a more modest $350,622. Raise capital, update investors and engage your team from a single platform. Transparency and preparation are key. 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. 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. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary.Â. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. Search by stage, location, sector and more. Certainly there are a few other factors that will go into a startup founder’s salary as well. Paul Graham has put together some valuable formulas for determining the equity of your first few dozen employees based on the expected value they bring to your business. Published on: January 30, 2012. “When two sides in a negotiation can’t come to a deal, it’s often because the two sides don’t have a clear enough view of what each other’s alternatives are if they can’t agree,” Tim Jackson writes. 1) No one is ever happy with compensation, and compensation has … A Startup CEO in your area makes on average $113,587 per year, or $2,628 (2%) more than the national average annual salary of $110,959. Biotech Chief Medical Officer Compensation With that history comes the security of established cash reserves and proven markets. ranks number 1 out of 50 states nationwide for Startup CEO salaries. As software companies graduate from the startup to the expansion stage, their Boards of Directors need to start formalizing the setting of executive compensation. However, you should be be earning a fair market-value salary as soon as the company raises real money. The following data is from the Kruze Consulting 2019 Startup CEO Salary Report:Â, 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, Using the same report, Kruze Consulting 2019 Startup CEO Salary Report, as above you can see that the capital raised greatly impacts a startup CEO’s salary.Â, Presumably as a startup raises more capital they are growing as a company. That said, it’s unlikely in most cases for non-founders to receive more than 5% of the business (bringing on a CTO can be the one common example of exceeding this mark). 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. From 2008 to 2016, the median averaged $283k. Having the above questions answered will help. ranks number 1 out of 50 states nationwide for Startup CEO … Presumably as a startup raises more capital they are growing as a company. What rewards should you expect at the IPO stage? Based on recent job postings on ZipRecruiter, the Startup CEO job market in both Chicago, IL and the surrounding area is very active. Transparent startup compensation packages can keep everyone on the same page and avoid misunderstandings or disappointment, he says. For a non-founder CEO at an early stage it could be in the 5-15% range, depending on the experience of the CEO. Using this percentage range keeps you competitive when searching for quality CEO candidates, while also leaving room for incremental improvement once the executive is on board. 2017 CEO Compensation. 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 noted in Business Insider here, Seth Levine’s observation on CEO salary in 2012 still holds true comparable 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. Using the same report, Kruze Consulting 2019 Startup CEO Salary Report, as above you can see that the capital raised greatly impacts a startup CEO’s salary. The value you settle on will matter a great deal to your first employees and and as it changes, so will the process in how you doll equity in the future. 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. Let me start by saying that building a total compensation package is HARD! Good governance and well-established policies that align closely with the corporation’s overall goals and objectives lay the groundwork for a sound executive compensation program.Most Americans believe that CEOs are grossly overpaid, according to the 2016 Public Perception Survey on CEO Compensation.About 74% of the survey respondents said that they felt CEO compensation … Your typical startup compensation package consists of a combination of salary and equity. Ensure your pay increases with funding. , 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. With the help of strong financial projections to determine what each point is likely to be worth as well as up-to-date balance sheets on where things stand now, a generous and enduring structure can be created that is balanced, yet worthy. Equity establishes a commitment from the CEO through personal stake-holding, but there’s another significant factor that makes it a substantial component: potential return. From time to time I get questions about startup compensation. Cash compensation: This is the sum of all standard cash compensation the executive receives for the year. This is an extremely important component of business planning, but many executives end up “winging” it. A senior director of engineering at a Series A startup would possibly take residence $200,000 in money, and simply zero.58% equity in their enterprise. To set the table I wanted to share some national startup compensation data. As you can see below, the average salary of a seed stage startup CEO varies depending on the industry. Visit PayScale to research chief executive officer (ceo) salaries by city, experience, skill, employer and more. While there are quite a few factors that go into determining your salary we find the following to be most important. You can start with 5% off the bat and add a point year by year. This new CEO will be responsible for overseeing every part of your business, so it's critical to know the overall status of your startup, from financial health all the way down to company culture. But early employees will be attracted to your business in part because of the long-term payoff. About!the!Research! Are you issuing stock options or restricted stock to your first employees? The total number of respondents for CFOs (29, 50, 69) and CEOs (37, 61, 88) increased each 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%. A startup is often not in a position to offer the kind of salary and bonuses that you usually demand, but if you are taking this position because you believe you can take this company to a much higher level of success, then equity can become the most important part of your CEO compensation package. ... As far as magnitude goes, I think it is unlikely for a startup founder or executive to make the same amount of money at a startup as she’d be able to get at an established … A startup is often not in a position to offer the kind of salary and bonuses that you usually demand, but if you are taking this position because you believe you can take this company to a much higher level of success, then equity can become the most important part of your CEO compensation package. “For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula,”, writes. A CEO with a $1 million salary may also receive a $700,000 bonus. Your offer … Startup founders cashing out upon a liquidity event (M&A or IPO). One of the toughest questions a startup founder can ask themselves is, "Should I hire a CEO?" That said, it’s unlikely in most cases for non-founders to receive more than 5% of the business (bringing on a CTO can be the one common example of exceeding this mark). Oftentimes a startup can’t offer the salary an established Fortune 500 company may be able to offer but they can offer equity and intangibles that an employee can’t find elsewhere. You will want your boards input on this process early on. Â, Now comes the really hard part. “Getting someone to join your dream before it is much of anything is an art not a science.”. “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. “When two sides in a negotiation can’t come to a deal, it’s often because the two sides don’t have a clear enough view of what each other’s alternatives are if they can’t agree,”. But you’re hiring unusual people to take this ride with you and understanding the package that will satisfy their ambition will also likely require rounds of negotiations and probing questions from you about their true motivations. When it comes to negotiating a startup salary, the biggest mistake you can make is not negotiating at all. Any candidate coming from a larger, established place in their career may very well have significant offers from other companies that have a more established history. Based on recent job postings on ZipRecruiter, the Startup CEO job market in both Chicago, IL and the surrounding area is very active. 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. In their helpful guide on employee equity, 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. So what factors do you judge your own position with? Try Visible free for 14 days. However, if you use transparent contracts, avoid guaranteeing long-term employment or substantial severance payments to anyone, because doing so can hamper innovation or … Here, we explain the key tax issues that compensation … The distinction between the two may impact early employee decisions on how they personally value their stock. In the end, it isn’t about a perfect percentage amount but rather what that percentage does currently and what it will look like over time. In terms of actual percentage ownership in the company, 5% to 10% is a ballpark area to consider offering your potential CEO. The company’s business plan, a competent leadership team and the right compensation package can each reduce the risk of working for a startup. Curated resources and insights delivered every Thursday in The Visible Weekly, One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. As a CEO, you should be focused on making your company successful, which in turn, makes the equity more valuable. The startup community focuses most of the term sheet discussion on liquidation preferences and anti-dilution, but startup CEO salary is nonetheless an important issue. The big difference is in equity: Startup … Learn about typical startup benefits and compensation, competitive benefits that will make your startup stand out, and more from The Hartford… The necessary points to attract an individual employee can vary is ₹3,001,186 a reason why this is the VP Sales. This specialist, but we will go straight to the above is the,... 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