Once a startup has secured its seed round, one of the most pressing questions becomes: how much should founders pay themselves and their first few employees? This dilemma is a perennial concern for venture-backed startups, and Kruze Consulting, a CPA firm specializing in venture-backed startups, has recently shed light on this issue by analyzing average salary ranges for over 450 seed-stage startups.

The Data

Kruze’s analysis is based on actual payroll records, not survey responses. This data provides valuable insights into the compensation landscape of seed-stage startups. The following averages are representative of the findings:

  • CEO: $132,000
  • CTO: $134,000
  • COO/Operations: $135,000
  • Product/CPO: $149,000

These figures might not be alarmingly high, especially considering the Bay Area’s notoriously competitive startup landscape. However, it is essential to note that these salaries are averages and can vary significantly depending on factors like location, industry, and company size.

Raising Rounds: A Guide to Founder Compensation

Founders tend to experience a significant increase in compensation with each funding round. After securing the Series A, the average pay for founder executives jumps to $183,000, while by Series B, it reaches $218,000. This trend is not unique to these specific rounds and can be seen throughout various stages of startup growth.

Employee Salaries: A Breakdown

Kruze’s analysis also provides insights into the compensation packages for initial hires in various roles:

  • Engineering (mid-level): $100,000 to $145,000 (Bay Area); $90,000 to $130,000 (other tech hubs)
  • Sales (mid-level): $80,000 to $110,000 (Bay Area); $70,000 to $100,000 (other)
  • Product titles: $130,000 to $185,000 (Bay Area); $110,000 to $175,000 (other)
  • Marketing (mid-level): $100,000 to $175,000 (Bay Area); $80,000 to $145,000 (other)

These figures offer a glimpse into the competitive landscape of startup salaries. However, it is crucial to remember that these are general guidelines and can vary significantly depending on factors like company size, industry, and location.

Equity Distribution: A Guide for Initial Hires

Employees in seed-stage startups often receive equity as part of their compensation package. Data from Carta covering over 8,000 initial grants provides insight into the typical equity distribution:

  • First hire: 0.5% to 4% equity (median 1.49%)
  • Second hire: 0.3% to 2% equity (median 0.85%)
  • Third hire: 0.21% to 1.2% equity (median 0.50%)
  • Fourth hire: 0.18% to 1% equity (median 0.44%)
  • Fifth hire: 0.13% to 0.8% equity (median 0.34%)

This data offers a general idea of the equity distribution in seed-stage startups. However, it is essential to note that these figures can vary significantly depending on factors like company size, industry, and location.

Conclusion

Navigating pay and equity in seed-stage startups requires careful consideration of various factors. By understanding the average salary ranges for founder executives and employees, as well as the typical equity distribution, startup founders and HR teams can make informed decisions when it comes to compensation packages. While these figures provide a general guide, they should not be taken as absolute benchmarks.