As per the latest data from Kruze Consulting, a leading financial advisory firm for venture capital-backed startups, the average salary of startup CEOs has returned to its 2019 levels. This dip in salary, down to an average of $142,000 in 2023 from $150,000 in 2022 and $146,000 in 2021, is largely attributed to the increasingly stringent capital markets and the resulting need to extend cash runways.
In a sign of tightening budget constraints, startups are demonstrating increased caution in their financial outlays, particularly when it comes to executive compensation. This frugality is being enforced by investors keen to extend the lifelines of the businesses they have put their money behind. However, it’s not all about budget cutbacks, as the median CEO salary is actually on the rise, defying historical trends.
“Startup CEO salaries are declining as a result of constrained availability of capital to startups. Investors have been advising founders to extend runways as much as possible, resulting in declining salaries,” said Healy Jones, Vice President at Kruze Consulting.
The shift in salary trends suggests a growing divide in the startup world, with companies falling into one of two categories. On one side are those needing to make dramatic cuts in spending to extend their business longevity. On the other, there are those whose robust revenues can justify significant increases in CEO salaries. It’s noteworthy that a larger than average number of CEOs have taken zero salary so far in 2023, while a growing segment is drawing salaries in the range of $150,000 to $200,000.
Interestingly, amid these shifts, the gender pay gap is showing signs of narrowing. Although it’s still significant, the pay difference between male and female startup CEOs is less than it has been in the past few years. In 2019, male CEOs out-earned their female counterparts by $5,000. This difference surged dramatically to $45,000 during the pandemic in 2020. The gap has since been decreasing, reaching $16,000 in 2021, $20,000 in 2022, and $14,000 in 2023. The average male startup CEO earned $145,000 in 2023, while the average female startup CEO made $131,000.
Jones highlights this gender pay disparity as a continuing concern. “The pay gap is narrowing from the massive pandemic spread, but remains wide. We continue to advise VCs to look across their portfolio and make sure that the women who run their companies are compensated in line with their male contemporaries.”
The data, drawn from over 400 of Kruze’s 800+ venture-funded startup clients, spans seed through series-B funded startups across a range of industries, including biotech, SaaS, fintech, hardware, and others. This data is compiled annually in response to a common question from clients regarding appropriate executive compensation levels.
For small business owners, these findings underscore the need for prudent financial management and gender pay equality. They also highlight the need to make strategic decisions in line with market realities, especially during a time when access to venture capital is becoming more challenging. While the salary reduction may be tough for many startup CEOs, it’s part of the journey towards sustainable growth and long-term success in a competitive landscape.
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This article, "Startup CEO Salaries Drop to 2019 Levels" was first published on Small Business Trends
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