If you’re a startup founder, how much should you pay yourself? Not very much, according to data that Compass has shared with The Next Web.
The company collected salary data from 11,160 startups around the world that use its benchmarking tool. In Silicon Valley, 75% of founders pay themselves less than $75,000 per year and 66% pay themselves less than $50,000 per year, according to the data. Average salaries around the world vary from a low of $30,208 in India to a high of $72,363 in Australia.
Back in 2008, investor Peter Thiel posited that a low CEO salary was the best predictor of startup 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.”
While you could argue that having a product that people want to pay for is more important to success than the salary of top executives, being cost-conscious is certainly a sensible mindset for the responsible founder. It seems that the majority of startups align their own salaries with this thinking.
With the exception of India, the salary ranges for startup founders around the world (see the charts at the end of this post) are remarkably similar. Low founder pay is a particularly striking factor in Silicon Valley, when you consider the high cost of living in cities like San Francisco.
Does the stage that a startup is at affect its founders’ salaries? Not as much as you might think. Founders tend to keep their salaries below $45,000 per year until they hit a high-growth product phase. Even then, the average salary for a startup with a mature product is $70,109 – nowhere near enough for a Scrooge McDuck lifestyle.
Funding level appears to be a stronger influence on founder salary, as you might expect, but again, we’re not talking “I’m just going for a swim in my money bin, boys” cash here.
Few startups are transparent when it comes to salaries, so it’s interesting to see at least some aggregate data about the salary landscape as a whole. While the image of the startup founder as a champagne-quaffing, private-jet-hiring spendaholic may still remain for some who remember the days of the first dotcom bubble, it’s a thing of the past for most, it seems. Best save that for after the big exit, eh?
Don’t miss our follow-up: Startup founder salaries: Younger, more inexperienced entrepreneurs pay themselves less