What determines founder salary levels?

One week ago, Compass.co released results from a survey that showed that 73% of startup founders make less than $50k per year and entrepreneurs around the world have been talking about it ever since. To answer some of the many great questions posed, we went back to our data to bring you more answers.

For all data analyzed, current monthly revenue is the greatest predictor of founder salary, with a more than 3.5x difference between the lowest and highest tiers. Until a company makes more than $10k per month in revenue, the average founder salary does not break the $50k mark, and not until the company reaches over $1 million per month in revenue, does the founder salary break $100k. 

This may relate to the all-important burn rate equation. More revenue coming in means more money available to pay back out again without impacting the long-term sustainability of the company. This would tie in closely with Compass’ earlier findings on premature scaling.

One of the most oft-asked questions related to how much a founder’s salary changed by age. We found this is indeed a significant factor in salary, with older founders paying themselves as much as 71% more than younger ones, though the highest salary age range still barely breaks $60,000 per year.

Perhaps even more significant is the fact that 78% of founders are under the age of 40. This may speak to the rigors of entrepreneurship, conflicting family requirements, ageism, technology literacy or a number of other factors we can leave to others to debate. In any case, it may help provide additional perspective on lower salary needs.

Also contrary to the perception of the serial entrepreneur, Compass data found that 67% of founders were working on their first startup, or at least the first in a significant capacity. (Founders were asked to clarify the number of previous startups where they had been one of the first five team members and the company had raised at least $100,000.)

As shown in the graphs above, since founder salary grows by experience level. This is another reason for low average salaries overall.

In the same way Compass found salaries increased by product phase in the previous report, so to do they increase by team size.

And in the same way most founders are working on their first startup, so too are most teams comprised of five or fewer people.

What are your thoughts on founder salaries? What levels seem appropriate to you? We’d love to hear your thoughts and opinions.

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