There may be no market rate for a founder’s salary, but it’s not all noodles and couchsurfing. Once there’s a bit of cash coming in, jobs at startups might be more lucrative than you think.
The Australian Startup Salary Guide 2018, a report from executive search firm Think & Grow in partnership with StartupAus, analysed salary data from more than 2,500 individuals and 47 VC-backed firms to shed some light on how much founders pay themselves, and how much they’re paying their staff.
Salaries for founders and chief executives varied wildly, with founders taking home anywhere between $35,000 and $290,000 and chief executive salaries ranging from $40,000 to $320,000.
However, while founder and co-founder salaries tended to gradually increase as startups became more capitalised, the salaries of chief executives (some of whom are likely also founders) did not follow the same trend.
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The report split companies into three categories: those that have raised up to $5 million, those that have raised between $5 and $10 million, and those that have raised between $10 and $50 million.
For those in the first category, the average salary for founders is just over $104,500, but salaries ranged from $35,000 to $290,000.
Chief executives at this stage have an average salary of just over $113,000, with reported salaries ranging from $40,000 to $260,000.
For companies that have raised between $5 and $10 million, the average founder salary increases to just shy of $148,000. At the lower end of the scale, founders are paid $80,000, but the discrepancy between the highest and lowest pay scales is smaller, with the highest-paid founder taking home about $192,000.
Here, the average salary for chief executives jumps significantly to over $220,000, with salaries ranging from $135,000 to $320,000.
For later-stage startups that have raised between $5 and $10 million, the average salary for founders increases again to just under $176,500. The discrepancy between the highest- and lowest-paid founders drops, with pay ranging from $150,000 to just over $200,000.
For chief executives, however, the average salary drops to $178,000, with pay ranging from $90,000 to $314,000.
Whether chief executives are also founders or not, the figures show no discernible trend regarding their salaries. Even for co-founders, the differences in salaries are stark.
Speaking to StartupSmart, StartupAus chief operating officer Alex Gruszka explains many founders are focused entirely on getting their ideas off the ground and growing the business.
If they’re successful, they “stand to be very well rewarded”, he says, and so “they’re prepared to essentially operate at a basic minimum salary”.
While some founders might pay themselves the going market rate for their own skills (hence the six-figure salaries even at early stages), for others it’s a passion project, and a long game, Gruszka says.
When it comes to other employees, however, that attitude might not fly.
“It’s a bit harder to convince someone else to come on a join your vision to do that same thing,” he says.
Early employees might be given equity in the startup, meaning they’re invested in the company’s success, but “it’s somewhat beyond the pale to ask later-stage employees to have the same level of commitment”, Gruzska says.
When onboarding, earlier-stage startups, somewhat predictably, have fewer figures to go on. However, it’s notable that when the better-funded companies start bringing people on board, there’s significantly less discrepancy in the salaries they’re afforded.
The average salary for product leadership roles is near the $200,000 mark. HR and talent roles are typically paid about $150,000 and data engineers and scientists are looking at salaries over $100,000.
At those later stages, there’s a particular demand for developers and data analysts, as well as for product specialists — highlighted in the StartupAus talent gap report as personnel in short supply — and HR people.
Gruszka notes later-stage startups are actually often “really in a good position to pay talent”. And they have to be, because the talent they need is “some of the most in-demand globally”.
To coax a high-quality data engineer or product manager, “you really need to offer a genuinely competitive salary”, he says.
It’s notable that when startups reach a point where they have raised more than $5 million, roles such as chief people officer and head of people and culture, and head of talent start to appear, showing that startups value these roles when they can afford to.
Again, it’s clear more capital means more hires, but according to Gruszka, “there’s an argument for turning your attention towards talent earlier”.
If startups don’t have the budget to hire for HR, there’s a risk they might get the hiring wrong from the beginning, he says.
Hiring for HR first is a “natural organic starting point”, he says.
It’s these first hires that set the tone for HR and culture at the business, says Kimberley Gemell, director of innovation at recruitment firm Ambition, and its startup-focused recruitment arm Hatch.
At the very early stages, founders often haven’t quite yet figured out “who they are and what they stand for”, Gemell says.
But “a founder will set the tone for what their culture is going to be”.
“Often they’re tech people that have a really great idea, but they need a lot of help and guidance to help them articulate what their culture is going to look like in the future,” she says.
Hiring for tech roles in particular is “fiercely competitive”, she says, and so startups have to make sure they’re getting the best people, who fit the best with the culture, as early as possible.
Getting it wrong early can be hugely damaging, Gemell says.
Even if one or two people leave the company at that stage, it “can make or break your business viability”.
From the off, founders should make an effort to be mindful in their hiring practices, making sure they’re not being too insular, and consciously hiring with diversity in mind, Gruszka says.
“Co-founders tend to be similar, have similar networks, tend to be insular in their thinking about some of that stuff,” he adds.
“Be open minded a bit earlier … grow a large, diverse set of people.”
A startup attitude
Having a report outlining the salaries on offer at startups will go some way in “changing the public perception that startups are inherently risky or that jobs are underpaid,” Gruszka says.
Funded startups are actually “quite sophisticated operations with a relatively high level of security and complexity”.
People are often drawn to startups for other reasons, whether that’s additional freedoms or the opportunity to help build something from scratch.
“It doesn’t hurt to say there’s a bunch of competitive market salaries out there on offer,” he says.
And even if they can’t pay quite as much as the corporates, for example, startups may not be trying to attract the kind of people that are solely driven by cash.
Candidates that have a ‘startup’ attitude often choose the opportunity to gain exposure to new and exciting technology over a more competitive pay packet, Gemell says.
Equally, at larger corporations, they’re likely to be siloed into one particular part of the workflow, whereas at startups “they have the opportunity to work on a breadth of project”, she says.
Finally, there’s the culture aspect. Employees are attracted by the prospect of working in a collaborative environment, wearing flip-flops and shorts at work, and even having dogs in the office. They’re also more likely to have the opportunity to go to events and network with other startups, learning more about different technologies as they go.
That said, there’s also a risk factor — the fact remains that startups often fail.
“A startup has to be able to demonstrate viability to a candidate,” Gemell says.
Alex echoes this, noting that any job created by a startup is one the business is going to have to sustain financially, for the good of both startup and employee.
“Hiring too quickly is a genuine burden that puts startups in a bad position,” he says.