Council Post: What Is the Typical Equity Compensation For A Startup CEO? (2024)

FAQs

Council Post: What Is the Typical Equity Compensation For A Startup CEO? ›

The Point of Points

When determining CEO equity, one important factor is founding status. Is the CEO also a founding member of the startup, or has this person been hired after the company gets off the ground? Startup financial advisor David Ehrenberg suggests that 5 to 10 percent is a fair equity stake for CEOs who join the company later.

Kruze's report looked at the anonymized payroll data of over 450 startups that have raised billions in venture capital. It found several surprising results. The first is that the average startup CEO salary actually decreased in 2024. The average salary is now $141,000, compared to $142,000 previously.

Calculating Startup Equity Compensation

On average, startups are reserving a 13% to 20% equity pool for employees. This is important for startups to consider before they pursue series funding or other investments, in which they may be offering percentages of equity to investors.

CEO pay continues to outpace the pay of working people across the country. In the past 10 years, CEO pay at S&P 500 companies increased by more than $5 million to an average of $16.7 million in 2022.

$50M to $150M

We found the lowest salary in this category to be $235,000. The highest salary for a CEO in a company with between $50M and $150M in revenue is $500,000. Of the participants in this category, the median salary is $300,000.

As a rule of thumb, a non-founder CEO joining an early-stage startup (that has been running less than a year) would receive 7-10% equity.

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.

Employees in startups often look beyond traditional salaries, banking on stock options to compensate for initial income sacrifices. For startup team members, annual salaries fall within the range of $54,000 to $185,000, with an average of approximately $101,000.

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.

Is 0.5% equity in a startup good? ›

For formal advisors, Dan recommends compensating them with startup equity that's worth between a 0.1 and 0.5 ownership percentage. If the formal advisor is “amazing” and “will also help with the fundraising process,” he suggests going as high as 1 percent.

Most companies offer their CFO 1-3% equity, but it can be higher up to 5% in startups and smaller companies that seek more experienced and successful CFOs to join them.

There is no definitive answer to this question as the salary of a CEO can vary greatly depending on the size and type of company they are running. However, a CEO of a 40 million dollar company would likely make an annual salary in the range of 300,000 to 500,000 dollars.

The base salary is lower than for public company CEOs, typically around $1 million vs. $1.2 million, and bonuses are tied to clear, aggressive goals. If a CEO doesn't reach them, there is no bonus. But the CEO also gets a large grant of stock options, typically representing 2% to 3% of the company's total equity.

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.

This raises the question: how much should a COO equity grant be? Non-co-founder COOs (i.e. those hired at a later date) typically receive between 1 percent and 5 percent in business equity. Higher equity percentages are usually reserved for COOs who bring a lot to the table.

The median CEO of one of the nation's 250 largest public companies owns shares worth just over $2.4 million—again, less than 0.07% of the company's market value. Also, 9 out of 10 CEOs own less than 1% of their company's stock, while fewer than 1 in 20 owns more than 5% of the company's outstanding shares.

In the US tech startups that have raised money tend to pay their founder CEOs about $130,000 $150,000 per year (updated for 2022 data). My firm runs payroll, accounting, etc.