Do founders get paid during funding rounds?
No Salary Initially: In the early stages, especially during the bootstrapping phase, founders may not take a salary. Instead, they might reinvest any profits back into the business to fuel growth. Low Salary: As the startup progresses and starts generating revenue, founders may choose to pay themselves a modest salary.
The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. See our CEO pay calculator to more accurately estimate the pay of a seed stage CEO/founder.
Many early-stage startup founders don't pay themselves anything at all. Since every dollar taken out of the business is one less dollar to use to build and grow the business, most startup founders do not start taking any salary until they raise a seed round of funding. Before this, most are working for equity.
Data from Compass's Startup Genome Report suggests that founders should adjust their salaries based on the startup's funding stage. Pre-seed/Seed stage founders typically draw a salary of $40,000 - $70,000, Series A founders around $75,000 - $125,000, and by Series B and beyond, salaries often exceed $125,000.
This research shows an average of about 28% founder dilution — almost 30% — from Seed round to Series A. Founder dilution from Series A to Series B is about 11%. By Series B, on average founders own less than 30% of the business while investors own more than 55%.
No Salary Initially: In the early stages, especially during the bootstrapping phase, founders may not take a salary. Instead, they might reinvest any profits back into the business to fuel growth. Low Salary: As the startup progresses and starts generating revenue, founders may choose to pay themselves a modest salary.
A “unique snapshot” into founder pay
If the cohort earning zero is included, the average founder's salary was $121,000 per year, and the median was $115,000. At the top end was one outlier who'd scraped together $755,000, but 40% of founders said they paid themselves less than $100,000.
By company size, base, bonus, and total cash compensation all rise as revenue does, with total average cash compensation coming in at $1,427,000 at companies with revenue above $500 million. By industry, CEOs in the consumer industry are paid the most, at $1,050,000 in average total cash compensation.
For a typical Seed round, founders give up 20.5% of the company to their investors. Each round is a unique negotiation between founders, who aim to retain a substantial stake, and investors, who need certain allocation for their fund economics to work.
The short answer to "how much equity should a founder keep" is founders should keep at least 50% equity in a startup for as long as possible, while investors get between 20 and 30%. There should also be a 10 to 20% portion set aside for employee stock options and, in some cases, about 5% left in a reserve pool.
How much does a principal make at Founders Fund?
The highest-paying job at Founders Fund is a Venture Principal with a salary of $270,367 per year (estimate). The lowest-paying job at Founders Fund is a Software Engineer with a salary of $135,349 per year (estimate).
Black-founded startups received less than 0.5% of the $140.4 billion in venture funding all U.S.-based startups received last year. In 2021, Black-founded startups received 1.4% of all U.S. venture funding. In 2022, it was 1.1%.
Because → Seed investors will typically expect 70% owned by active founders and employees. Why? Because → Series A investors will typically expect 50% owned by active founders and employees.
Up to this point, generally speaking, with teams of less than 12 people, the average granted equity for startup employees is 1%. This number can be as high as 2% for the first hires, and in some circ*mstances, the first hire(s) can be considered founders and their equity share could be even greater.
What is equity in a startup? Essentially, startup equity describes ownership of a company, typically expressed as a percentage of shares of stock. On day one, founders own 100%. If you have more than one founder, you can choose how you want to share ownership: 50/50, 60/40, 40/40/20 ,etc.
Paying yourself through owner's draw is generally more suitable for small businesses and startups with a limited number of owners. As the business grows and additional stakeholders, investors, or employees are involved, other forms of compensation, such as salaries or equity grants, typically become more common.
According to ZipRecruiter, for example, the average salary for the position of “startup CEO” is just over $110,000 per year. Salaries ranged from the 25th percentile of $43,000 to the 75th percentile of $156,000, with the 90th percentile at $274,500.
Taxes & Founders Shares
When you sell your founders shares, you'll usually have to pay both federal and state taxes on that income. Most states, including California, don't treat investment income differently than they treat income from a normal salary.
While ZipRecruiter is seeing annual salaries as high as $269,500 and as low as $41,500, the majority of Startup Coo salaries currently range between $111,500 (25th percentile) to $185,000 (75th percentile) with top earners (90th percentile) making $233,000 annually across the United States.
Instances of alternative compensation
For example, in 2010–11 Oracle's founder and CEO Larry Ellison made only $1 in salary, but earned over $77 million in other forms of compensation. In some cases, in lieu of a salary, the executives receive stock options.
Who is highest paid CEO in world?
- Elon Musk. Tesla's CEO Elon Musk is the highest paid CEO in the world. His salary was USD 23.5 billion approximately in the year 2022.
- Tim Cook. Tim Cook, the CEO of Apple, was given an annual salary of USD 99,420,097 in 2022, making him one of the top-paid CEOs.
US CEO compensation
By company size, base, bonus, and total cash compensation all rise as revenue does, with total median cash compensation coming in at $1,639,000 at companies with revenue above $1 billion. By industry, CEOs at financial services firms are paid the most: $1,013,000 in median total cash compensation.
While it's a myth that every startup requires you to work overtime every week, most startup employees put in 50-60 hours per week, and many founders put in 60-100 per week. Your body ultimately needs sleep, food, relaxation, and even boredom to function properly.
Thus, it doesn't matter who does how much. Many believe that an equal split signifies fairness for all and the majority of founders begin with 50/50 equity splits.
The failure rate for new startups is currently 90%. 10% of new businesses don't survive the first year. First-time startup founders have a success rate of 18%.
