Whenever founders raise a round of finance, the question becomes “what the hell should I be paying myself.” It’s one of those rare things you can’t really go to your board or advisors with. You’ll want to pay yourself a fair wage, but it can be a tricky conversation with the people who need to sign off on your salary before you give yourself a bump. Startup accounting firm Kruze Consulting just updated its annual CEO salary report and has some interesting insights to go with it.
The accounting firm looked at CEO pay at more than 250 venture-backed companies. It discovered the salaries are up 2.7% compared to 2021 — well below the national inflation rate. That average represents a 7.9% increase in pay from 2020, when CEO wages took a COVID-19-related nosedive.
The firm reports its figures based on an anonymized dataset comprising more than 250 startups. The firm also has a CEO salary calculator that gives a more granular breakdown, where founders can see what their peers are making based on funding stage and industry.
In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. 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.
“We feel there are three primary drivers for this behavior,” said Healy Jones, VP of Financial Planning & Analysis for Kruze. “Firstly, and most obviously, companies with more funding are better able to pay their CEOs. If fundraising doesn’t seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Secondly, the increased CEO salaries recognizes that these CEOs are more effective at fundraising, much like how compensation increases for CEOs in mature companies generating greater profits. Finally, startup culture can generate pressure to not take salaries. 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. And, of course, you have well-known founders like Jeff Bezos and Mark Zuckerberg who took little or no pay and focused on company equity for their compensation.”
Breaking the numbers down by industry, on average: Hardware company CEOs are near the bottom of the pack, with an average salary of $112,000 per year. Biotech and pharma CEOs are paid an average of $161,000 — typically because CEOs in those industries tend to be medical doctors, with higher education and opportunity costs associated with running a startup. E-commerce founders saw a significant increase over last year, with an average salary of $141,000 — presumably because the sector has seen a great run of successful results, partially due to a downtick in the retail sector and a customer focus toward buying online.