The Reasonable Level of CEO Ownership & Salary for a Startup

At DAN Fund we have 9 portfolio companies at which the founders/CEO own anywhere from 6% to 22% of the business with annual salaries as low as $35,000 per founder to as high as $280,000.  These are wide ranges, so we decided to take a look at 20 well recognized publicly traded tech companies (2 hardware, 18 SaaS) that could be considered startups in the past 15 years to answer two questions: i) upon exit/IPO, what’s an appropriate salary; and ii) what is the common level of ownership.  The results and observations are below.  A link to the data is as follows:

https://www.dropbox.com/s/jdxvw3teeix8gr1/Article%20%20Salaries%20%26%20Ownership.xlsx?dl=0

 

 

 

Year of

Owner-

Salary

Bonus

Options

Total

Company

CEO

S1

ship

Comp

Comp

Comp

Comp

Fitbit

James Park

2014

10.90%

$221,179

$80,000

$7,532,909

$7,844,625

GoPro

Nicholas Woodman

2014

42.50%

$800,000

$1,003,200

$49,591

$1,852,791

Box Inc

Aaron Levie

2014

4.10%

$150,833

$38,750

$87

$189,670

Hubspot

Brian Halligan

2013

4.90%

$238,183

$1,212

$132,376

$371,771

LinkedIn

Jeffrey Weiner

2010

4.10%

$250,000

$1,242

$211,055

$462,297

Marketo

Phillip Fernandez

2012

6.60%

$325,000

$308,750

$1,852,900

$2,486,650

Netsuite

Zachary Nelson

2006

3.60%

$300,000

$12,591

$143,000

$455,591

SalesForce

Marc Benioff

2003

31.60%

$1

$0

$0

$0

Wix.com

Avishai Abrahami

2013

4.60%

NA

NA

NA

NA

WorkDay

David Duffield

2012

53.40%

$33,280

$1,500

$0

$34,780

Zendesk

Mikkel Svane

2013

7.10%

$200,000

$74,906

$0

$274,906

Atlassian

Scott Farquhar

2015

37.20%

$264,862

$23,041

$0

$287,903

Shopify

Tobias Lutke

2015

14.62%

$339,055

$0

$0

$339,055

Xactly

Chris Cabrera

2015

6.60%

$342,000

$124,231

$0

$466,231

MindBody

Richard Stollmeyer

2014

11.20%

$360,000

$106,484

$699,668

$1,166,152

Appfolio

Brian Donahoo

2014

36.50%

$250,000

$1,763,000

$369,000

$2,382,000

Splunk

Godfrey Sullivan

2011

8.10%

$250,000

$500,000

$0

$750,000

ServiceNow

Frank Slootman

2011

5.58%

$150,000

$116,218

$0

$266,218

BazaarVoice

Brett Hurt

2011

14.30%

$250,000

$141,092

$0

$391,092

HortonWorks

Robert Bearden

2013

6.80%

$166,667

$166,667

$727,792

$1,060,626

 

 

 

 

 

 

 

 

Median

 

 

7.60%

$250,000

$80,000

$87

$455,591

Average

 

 

15.72%

$257,424

$234,889

$616,757

$1,109,598

 

-The spread of ownership levels is wide, ranging anywhere from 3.6% on the low end to 53.40% on the high end.  The median ownership level is 7.60% which given the size of these companies, makes every founder a millionaire many times over.  If you’re a founder at a Series A level business, don’t overly stress about dilution if your ownership is low: a good board needs to refill the option pool with every round of which you should be allowed to take part.  As you can see from the Options Comp column above, even founders at the IPO/Exit level take significant share issuances the year before the IPO (the CEO of Fitbit was issued $7mm+ worth of options before exit). 

 

-Salaries also have a wide range with a median of $250k.  They’re as low as $1 taken by Marc Benioff of Salesforce (that’s not a typo) to as high as $800,000, taken by Nick Woodman of GoPro who owns 53% of the business.  I can tell you as a VC, we’re definitely attracted to founders who take low salaries and look to equity as their primary mode of comp, and very rarely get involved in businesses where the founder takes a high salary (we broke the rule once as you can see in the opening paragraph, and never will again).   As an aside, we do see a strong correlation in our own portfolio to founder salary and company performance: the higher the salary, the weaker the performance, but that’s an article for another day.  As a founder, my recommendation is not to ask for pay increases unless you really need one for family purposes.  Instead, ask for equity increases; a good VC should sign off as we love seeing founders want more equity, not cash. 

 

In conclusion, there isn’t a baseline level or equity ownership for a CEO, at least not at exit/IPO.  That said, stay cash efficient so you don’t suffer the effects of dilution and make sure you can take reasonable amounts of equity out of the option pool as the company progresses.     

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