Whenever the founders raise the issue of funding, the question is, “Why the hell am I supposed to pay myself?” It’s one of those rare things that you can’t take to your board of directors or advisors. You’ll want to pay yourself a decent wage, but it can be a tough conversation with the people who have to sign off on your paycheck before you stab yourself. Startup accounting firm Kruze Consulting just updated its annual CEO salary report and has some cool ideas to go with it.
An accounting firm has studied CEO salaries at more than 250 venture capital firms. It turned out that salaries rose by 2.7% compared to 2021 – significantly lower. national inflation rate. This average represents a 7.9% increase in pay compared to 2020, when the CEO’s pay dropped sharply due to COVID-19.
The firm reports its numbers based on an anonymous data set of more than 250 startups. The firm also has a CEO salary calculator that gives a more granular breakdown of where founders can see what their colleagues are earning based on funding stage and industry.
In general, Kruze Consulting found that startup CEO salaries depend on the amount of venture/seed funding raised by companies. As you might expect, less 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 executives an average of almost $200,000.
“We believe there are three main drivers for this behavior,” said Healy Jones, vice president of financial planning and analysis for Kruze. “First, and most obviously, companies with more funding can pay their CEOs better. If fundraising seems inappropriate for startup executives, they may decide to reduce their burnout rate by cutting their pay. Second, higher CEO salaries indicate that these CEOs are more effective at raising funds, similar to how CEOs increase in mature, high-margin companies. Finally, the startup culture can cause pressure to not take a paycheck. For the most underfunded tech companies, the concept of “ramen profitability” encourages founders not to take a salary to minimize costs and make the company more attractive to investors. And, of course, you have famous founders like Jeff Bezos and Mark Zuckerberg who were paid little or no pay and focused on company equity as compensation.”
Breakdown of numbers by industry average: Hardware executives are at the very bottom of the list, with an average salary of $112,000 a year. CEOs in biotech and pharmaceutical companies are paid an average of $161,000, typically because CEOs in these industries tend to be college-educated physicians with the opportunity cost of starting a startup. E-commerce founders posted significant year-over-year growth with a median salary of $141,000, presumably because the sector has seen a large number of success stories, due in part to the downturn in the retail sector and customer focus on online shopping.
Credit: techcrunch.com /