73% of Startup Founders Make $50,000 Per Year or Less

Our survey data shows startup founders are living lean, paying themselves low salaries. Even in Silicon Valley, 75% of founders make less than $75,000 per year.

In 2008, Peter Thiel, venture capitalist and co-founder of PayPal, was the first to publicly propose the idea that higher founder salaries are correlated with lower levels of success. The reason is that founders who sacrifice everything for their startup are more dedicated to their idea, set a strong example for their team and have lower burn rates. More than five years since, the debates continues.

Compass analysis has now made publicly available—for the first time—evidence-based confirmation of this strategy’s validity, with data from more than 11,000 global startups.

We received many questions from founders on the subject of salary, due in part to the extensive online opinions, and wanted to provide fact-based answers back to the community. We don’t expect this will end the debate, but will hopefully help focus it with data. Meanwhile, it seems founders are living lean indeed, and that such frugality is likely to accelerate their success. This also ties in closely with to our previous findings on premature scaling.

The data shows the vast majority—73% of founders—pay themselves less than $50,000 per year, whether their company has been funded or not (not including any ownership stake or additional benefits). 

In Silicon Valley, even with the reportedly highest rents in the U.S., 66% of founders pay themselves less than $50,000 per year and a full three quarters make less than $75,000.

Average salaries ranged from a low of $30,208 in India to a high of $72,363 in Australia, and as a ratio to funding ranged from 1.98% in Silicon Valley to 4.8% in Australia.

Below is the breakdown for a number of startup ecosystems.

Survey details: 11,160 founders provided their salary ranges in $USD equivalents. For this particular survey, we did not ask for options or additional benefits. All null values were removed. Averages were estimated based on the midpoint of each range and applied equally to all geographies. All ecosystem breakdowns include responses from at least 75 companies.

References:

Startup and software leaders can discover their own benchmarks at Compass.co.

Last note: this story has created a lot of great debate and we’re happy to write a follow-up next week to address the many questions, comments and thoughts we’re hearing from all corners, so stay tuned.

This post was updated on 21 January 2013 to use consistent blue graphs rather than multi-colored.

  • http://www.entelo.com John McGrath

    Do you have data on what stage the companies surveyed were at, and how founder salaries change on a per-stage basis?

    A first-year startup that’s unfunded or with a small seed round is a very different animal than one farther down the road, with traction and additional funding.

  • Compass

    Great point, John. We do have that data and will include it in our follow-up. Meanwhile, you can find much of what you’re looking at in The Next Web article: http://thenextweb.com/insider/2014/01/14/salary-founder-favorite-startup-get-probably-high-one/

  • Diana

    In the 0-50k range, would you have the average salary as well as standard deviation by any chance?

  • http://rentini.com vadim

    This data has to be presented rather based on the company structure and their stage than their geo-location. What’s the point of comparing salaries in $USD for an indian founder and the one from the valley? Aren’t their spendings vastly different? How was the success measured? The definition of success for a founder that normally has to stick with a company for at least 5-10 years could be different from what it is for an investor who may cash out on the subsequent round. The only numbers that have some meaning are “a ratio to funding ranged from 1.98% in Silicon Valley to 4.8% in Australia”. Still in all, they made me doubt the math in this article. 2% ratio for 50K salary will correspond to 2.5M in funding. Are you saying that the average funding situation in the Valley is $2.5M? I wish it was…

  • Thomas Johnson

    I think the correlation/causation issue is very unclear for a lot of this. For instance, it seems clear that there is some kind of correlation between low founder salaries and startup success. But maybe it’s not because of founder dedication or willingness to “sacrifice everything”. Perhaps founders who can afford to take lower salaries have higher personal net worth, and so are more able to deal with critical cash flow issues, more easily able to raise funding because of the personal networks that go with high net worth, etc.

    You could construct a number of different narratives for all of these charts.

  • http://www.spendbot.com Dirk McCoy

    I think this data supports my theory: DON’T QUIT YOUR DAY JOB. I assume this data is for full time employees who’ve been VC funded, same as the Startup Genome data, yes? While people working evenings probably are getting less pay from their startup, they’re probably getting more pay from a combination, and given the money and time required to start a company, and the rarity of getting funded, I strongly suggest entrepreneurs keep their day job and do their discovery and validation nights and weekends. They need to get used to 60+ hour work weeks for growth and scale stages anyway.

  • Tom Moore

    Can you differentiate colors in those graphs more?