Series A Startup CEO Salary

A startup’s Series A financing shouldn’t be a large liquidity event or salary payday for the startup’s founders. While a startup typically receives millions of dollars in a Series A, if too much of that $$$ flows guaranteed to the founders, various incentives get out of whack.

Not all startup founders understand this tenet.

Case Study

Earlier this year, this issue presented itself when a client was the lead investor in a Series A round of about $2MM at a $4MM pre-money. The term sheet was pretty much a done deal, when the startup’s CEO demanded a salary of $25,000. Per month.

My client countered with a reasonable startup CEO salary, but the startup’s CEO didn’t back down from his $300,000/year figure. You can guess what happened to the deal.

In addition, here’s an example of how a startup CEO’s huge salary didn’t help his startup: CEO’s $500,000 Salary Burns Startup Into Fire Sale.

The Importance of Startup CEO Salary

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. According to Peter Theil, Startup CEO salary is a predictor of a startup’s success:

“The lower the CEO salary, the more likely it is to succeed.

The CEO’s salary sets a cap for everyone else. If it is set at a high level, you end up burning a whole lot more money. It aligns his interest with the equity holders. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks.

In practice we have found that if you only ask one question, ask that.”

If a startup CEO’s post-Series A salary is too high, he or she may not have a true sense of urgency to implement and/or create shareholder wealth.

This doesn’t mean a startup CEO must continue to make Costco runs for ramen noodles. But if the startup’s CEO gets a huge salary, the startup CEO could likely view his or her equity stake as “house money” (i.e., even if the startup fails, the CEO won’t feel too bad because he still received got a hefty salary).

Furthermore, a demand for a high startup salary can signal that you don’t believe all those things in your investor pitch.

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39 thoughts on “Series A Startup CEO Salary

  1. Asking for $ 300K/ year at Series A level is clear sign that this was the wrong CEO. Good thing the deal did not close

  2. Asking for $ 300K/ year at Series A level is clear sign that this was the wrong CEO. Good thing the deal did not close

  3. So what’s a reasonable amount? If $3ook is unreasonable, you must have a reasonable range, right?

  4. So what’s a reasonable amount? If $3ook is unreasonable, you must have a reasonable range, right?

  5. @ Mark – Yes, I feel the same.

    @ Scott – Why do you always ask questions that necessitate “It” and “Depends” as the first 2 words? 🙂 FWIW, Peter Theil mentioned that the range of $100-$125k is what he thought was reasonable (per the article linked right before his quote above). There are many variables here, though.

  6. @ Mark – Yes, I feel the same.

    @ Scott – Why do you always ask questions that necessitate “It” and “Depends” as the first 2 words? 🙂 FWIW, Peter Theil mentioned that the range of $100-$125k is what he thought was reasonable (per the article linked right before his quote above). There are many variables here, though.

  7. Dude…. you are the one who wrote an article entitled “Series A Startup CEO Salary”…. and then didn’t mention the number. How very lawyerish of you, Ryan :-). Just keeping it real bro.

    Thanks for giving the range though. Definitely helpful.

  8. Dude…. you are the one who wrote an article entitled “Series A Startup CEO Salary”…. and then didn’t mention the number. How very lawyerish of you, Ryan :-). Just keeping it real bro.

    Thanks for giving the range though. Definitely helpful.

  9. […] , Funding Leave a Comment Startup Lawyer Ryan Roberts publishes a  reminder on the importance of startup CEO pay, both in keeping your burn rate reasonable and attracting […]

  10. Getting a startup to a series A can be a daunting task in itself. Of course the leader (CEO) of the company should be compensated a little at that point. He was the person who likely took the most risk to that point, although not always.

    Personally, I feel like the startup CEO salary should be a “living salary” that covers the necessities but not much more. He’s gotta have all the time to dedicate to his company, without the worry for rent money, or living costs.

    From that point-forward, compensation should be based on performance, but always approved by the board, or majority shareholders.

  11. Getting a startup to a series A can be a daunting task in itself. Of course the leader (CEO) of the company should be compensated a little at that point. He was the person who likely took the most risk to that point, although not always.

    Personally, I feel like the startup CEO salary should be a “living salary” that covers the necessities but not much more. He’s gotta have all the time to dedicate to his company, without the worry for rent money, or living costs.

    From that point-forward, compensation should be based on performance, but always approved by the board, or majority shareholders.

  12. I don’t know where Peter Thiel thinks one will get the best candidate for $125k a year in the Bay area. You can get a college kid for that.

    No one with a family can live off that kind of income. There is a happy balance here. If a CEO is motivated by salary, you have the wrong CEO. He/she needs to make enough to not be distracted with personal finance issues – all energy should be directed at building a great company. That is where the motivated payoff should be placed.

  13. I don’t know where Peter Thiel thinks one will get the best candidate for $125k a year in the Bay area. You can get a college kid for that.

    No one with a family can live off that kind of income. There is a happy balance here. If a CEO is motivated by salary, you have the wrong CEO. He/she needs to make enough to not be distracted with personal finance issues – all energy should be directed at building a great company. That is where the motivated payoff should be placed.

  14. I am highly amused by the statement that "No one with a family can live off that kind of income." Most people do live off of that income… everyday in the Bay Area. The question comes what do you consider living well? It sticks in the throat of people who struggled with basically nothing in the early stages of a start-up to hear someone demand a high salary. They struggled, they worked side jobs, they scratched for money… because they believed in their idea. Do you believe in the product enough to forgo the high pay check so that your product goes to market? I for one would want people who believe in my product. Demanding a high salary tells me that you don't believe 'we' will make it and you want your money now.

    … and to think people judge lawyers for being greedy…

    1. Your statements clearly reflect that you've never been an entrepreneur but you've probably read a lot of books on it. Remember, you never really know until you've walked a mile in a man/woman's shoes.

  15. I am highly amused by the statement that "No one with a family can live off that kind of income." Most people do live off of that income… everyday in the Bay Area. The question comes what do you consider living well? It sticks in the throat of people who struggled with basically nothing in the early stages of a start-up to hear someone demand a high salary. They struggled, they worked side jobs, they scratched for money… because they believed in their idea. Do you believe in the product enough to forgo the high pay check so that your product goes to market? I for one would want people who believe in my product. Demanding a high salary tells me that you don't believe 'we' will make it and you want your money now.

    … and to think people judge lawyers for being greedy…

    1. Your statements clearly reflect that you've never been an entrepreneur but you've probably read a lot of books on it. Remember, you never really know until you've walked a mile in a man/woman's shoes.

  16. ^ Haha, I agree. I'm the CEO of a Techstars Boulder startup and I could definitely, and currently am, living off ~$25k/year. Granted it would be more in the bay area but Boulder isn't cheap and with 100k-125k I would be buying boats, a new car…. I wouldn't even know what to do with that much money 🙂 Well, I could spend it pretty easily but I just feel like I don't need distractions like that right now. 100% goes into my company succeeding!

  17. ^ Haha, I agree. I'm the CEO of a Techstars Boulder startup and I could definitely, and currently am, living off ~$25k/year. Granted it would be more in the bay area but Boulder isn't cheap and with 100k-125k I would be buying boats, a new car…. I wouldn't even know what to do with that much money 🙂 Well, I could spend it pretty easily but I just feel like I don't need distractions like that right now. 100% goes into my company succeeding!

  18. @Ian, my rent is nearly than $25k a year for a small apartment in Mountain View I share with my wife. To that we must add food, car loan and insurance, student loans, and (if I worked for a startup) health insurance. As it is we have trouble just making ends meet with my $62k/year.

    Cost of living in the bay area is HIGH, and I agree with the sentiment that CEOs should be payed enough that personal finances are not an issue. Until you are in a situation where you are living month-t0-month, you don't realize just how much of a detriment that is to focus and productivity. Still, I imagine that cut-off in this area could be as low as $85k for a young professional, or $150k for an older more experienced manager with kids in college.

  19. @Ian, my rent is nearly than $25k a year for a small apartment in Mountain View I share with my wife. To that we must add food, car loan and insurance, student loans, and (if I worked for a startup) health insurance. As it is we have trouble just making ends meet with my $62k/year.

    Cost of living in the bay area is HIGH, and I agree with the sentiment that CEOs should be payed enough that personal finances are not an issue. Until you are in a situation where you are living month-t0-month, you don't realize just how much of a detriment that is to focus and productivity. Still, I imagine that cut-off in this area could be as low as $85k for a young professional, or $150k for an older more experienced manager with kids in college.

  20. I lived and worked a startup in Silicon Valley with a wife and kids and know dozens of bay area entrepreneurs launching successful businesses with sub $100k salaries. I now work with an investment firm in the DFW area.

    A guy from San Jose brought me a deal that on the surface looked good, but wanted a $240k salary. His business plan was interesting so i flew out and took a meeting. Ultimately i walked without ever taking the deal to investment committee. His salary was to big a line item for a business at his stage.

    My philosophy is that salary should cover what "grocery money". Total compensation is performance based with quarterly and annual pegs. Each person's grocery money is different – and that assessment is part of the hiring/partnership process. Total comp is in-line with revenue/profitability but should not cannabilize the growth of the business. If it does, you have the wrong team.

  21. I lived and worked a startup in Silicon Valley with a wife and kids and know dozens of bay area entrepreneurs launching successful businesses with sub $100k salaries. I now work with an investment firm in the DFW area.

    A guy from San Jose brought me a deal that on the surface looked good, but wanted a $240k salary. His business plan was interesting so i flew out and took a meeting. Ultimately i walked without ever taking the deal to investment committee. His salary was to big a line item for a business at his stage.

    My philosophy is that salary should cover what "grocery money". Total compensation is performance based with quarterly and annual pegs. Each person's grocery money is different – and that assessment is part of the hiring/partnership process. Total comp is in-line with revenue/profitability but should not cannabilize the growth of the business. If it does, you have the wrong team.

  22. This is crazy!

    Some of the number mentions like 300k, 500k, 240k…

    What kind of startups are we talking about?

    I am almost 40, started a couple companies and sold one. We met a group of local angels last month. Not a good fit for them so directed to a Y-combinator (more internet projects).

    We have tons of experience doing what we do. The program offered was 15k and initially thought they may work out a hybrid mode for us but that never come up when the group met. The results was, we had to decline that deal. $15k for three guys for three months… and they wanted us to go full throttle (110%) and wanted me not to be able to have other source of income. We could have built a minimal viable product for demo for $35.

    So hearing these startup numbers is a little funny.

    The point is we believe in our product and willing reap the reward in the back-end.

    Since then we have helped a university apply for a grant (waiting to hear from that so fingers crossed). And also a software/app giant contacted us to see if we were willing to partner with them with our platform service.

    Bottom line for us…better to walk away from a “good” deal then to be stuck in a bad one. The investors in Ryan’s story did the right thing.

  23. This is crazy!

    Some of the number mentions like 300k, 500k, 240k…

    What kind of startups are we talking about?

    I am almost 40, started a couple companies and sold one. We met a group of local angels last month. Not a good fit for them so directed to a Y-combinator (more internet projects).

    We have tons of experience doing what we do. The program offered was 15k and initially thought they may work out a hybrid mode for us but that never come up when the group met. The results was, we had to decline that deal. $15k for three guys for three months… and they wanted us to go full throttle (110%) and wanted me not to be able to have other source of income. We could have built a minimal viable product for demo for $35.

    So hearing these startup numbers is a little funny.

    The point is we believe in our product and willing reap the reward in the back-end.

    Since then we have helped a university apply for a grant (waiting to hear from that so fingers crossed). And also a software/app giant contacted us to see if we were willing to partner with them with our platform service.

    Bottom line for us…better to walk away from a “good” deal then to be stuck in a bad one. The investors in Ryan’s story did the right thing.

  24. Does anyone have any thoughts about salary/comp for a hired CEO for a company pursuing a Series A round? Are the considerations different than for a founder/CEO? I’m working with a company where the founder is a scientist/inventor, and recognizes she needs an experienced CEO to build the business and raise $.

  25. Does anyone have any thoughts about salary/comp for a hired CEO for a company pursuing a Series A round? Are the considerations different than for a founder/CEO? I’m working with a company where the founder is a scientist/inventor, and recognizes she needs an experienced CEO to build the business and raise $.

  26. Every company is different, how can you say that a start up CEO receiving 300k a year is too much and too greedy, when you have VCs’ and Angels overseeing your company, who are only out for the money in the first place? honestly, they don’t care about the founders dream that much, they are in it for the money. Too many business owners operate off of sheer emotions by trying to appease them in every way possible. I’m not against a start up CEO getting 200k a year, neither am i against a CEO getting paid 40k a year. After all it is the founders’ vision and no one else’s, if they can still lead without getting paid as much, then i say go for it. Money doesn’t make leaders, it motivates them. If that concept is your “DREAM” then no matter how much you get paid, you should STILL remain motivated. If money does deter you from your vision then that only means that (1) you have some growing to do and (2) you really weren’t that passionate for what you are striving for in the first place.

  27. […] for more, but I bet I could have asked for more. Ryan Roberts, the Startup Lawyer, suggests that $300,000 is an unreasonable yearly salary for a CEO to request/demand. Comstudy has a report titled, “Compensation & […]

  28. […] Roberts has a post titled ‘Series A Startup CEO Salary‘ that I thought was interesting. Ryan quotes Peter Theil who suggests, “The lower the […]

  29. […] for more, but I bet I could have asked for more. Ryan Roberts, the Startup Lawyer, suggests that $300,000 is an unreasonable yearly salary for a CEO to request/demand. Comstudy has a report titled, “Compensation & Entrepreneurship […]

  30. Dude…. you are the one who wrote an article entitled “Series A Startup CEO Salary”…. and then didn’t mention the number. How very lawyerish of you, Ryan 🙂 . Just keeping it real bro.

    Thanks for giving the range though. Definitely helpful.

  31. As you said, the CEO shouldn’t have to live off of Ramen noodles either. We’ve been advised that our plan shouldn’t include ANY salary for the founders. Problem with that is, as much as it seems confidence building that the principles can forgo salaries and take incentives or bonuses, for a startup, those numbers may be a long time in coming, and the idea is for the C-level execs to be able to quit their day jobs. I understand that nobody wants to burn capital if execs don’t perform, but starting a company is hard work. It’s misleading to investors to suggest key people will be able to work for free. I too would be interested in knowing what’s realistic.

  32. Startup salary study, pretty cool:

    scribd.com/doc/7494620/2008-CompStudy-Report-in-Technology

  33. Startup founders salary should just cover your bills and nothing more.
    A 20 yr old founder living at home will find 25 K pa fine. A married 35 yr old with two kids, rent / mortage will need say 80k-100k pa depending on his location.

    What any VC funded founder(s) should not worry about is living expenses, wrong decisions get made , as this working for zero thing is pretty stupid in reality.

    If a VC has enough confidence in you and your startup to invest then there should be no problem with you drawing a salary to cover your living expenses while building the company.
    If the VC says no, then find another VC, if hes playing hardball on that then he will play even harder come a follow on round or liquidation event .

  34. From all this discussion it’s a clear: it depends. Building a company in a high cost (but probably popular) area, that has high barriers to entry, requires lots of domain experience, but an equally large market opportunity will point up towards one type of C-suite salary. An opportunity that requires less to start with lower barriers to entry will point down to another type of salary.

    Todd Gitlin of Safire Partners compiled some ACTUAL numbers. These are for CTO, but you can see them here:
    https://docs.google.com/spreadsheet/ccc?key=0Am4rOhDwwPihdEloN1lla1NrVjZlQW02cDNUSFU4ZUE&hl=en#gid=0

  35. It’s easy for Thiel say that, since he is a billionaire.

    Here is a nice study on Startup Salary & Equity Compensation:

    https://blog.wealthfront.com/startup-employee-equity-compensation/

  36. Frankly if you want a high quality CEO expect to pay over 200k. I would say around 250k with 5% stock ownership and 3-5% profit sharing after six months is reasonable. No CEO worth his or her salt would take you on for less. If you want a CEO to give up their career to build your company to stratospheric results, then compensate them. Don’t leave your most important leadership role to amateurs.

  37. This is ridiculous. I’ve started several small companies and when you start a small company, you want as much cash available as you can to develop the company – not to fill your pockets with investment money. A CEO of a startup should not collect more than £50,000 per year (or $80,000) in salary. You increase your own salary based on milestones you meet that increased company profits. Otherwise you’re pretty unethical. I would never invest in someone who pays himself $150,000 and more per year with a brand new company that doesn’t even have a stable clientele!

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