Startups CEOs’ Skin in the Game

Crunchbase just published a survey on startup CEO salaries, “We Looked at 101 Startup CEO Salaries – Here’s What We Found”. Their yearly total compensation was split into three — salary, bonus and options – and were measured in the year when the startups went public. The findings were quite interesting, sprouting lots of food for thought.

In summary — Year of IPO, Salary, Bonus, Option, Total Comp:

Median: 2013; $276K; $80K; $53K; $565K

Average: 2012; $311K; $219K; $2,100K; $2,589K

1. The median salary is quite low

We should keep in mind that these startups were quite successful up to the point of going public. The median salary of $276K for the CEO was just twice the salary of an electronics engineer in the Valley.

Moreover, some of the best CEOs took the lowest salaries. For instance, Marc Benioff at Salesforce took a salary of $1 at IPO, Jack Dorsey at Square took only $3,750, and Jeff Bezos at Amazon took only $64,333. It is refreshing to see such skin in the game. It sets a good example for the rest of the company and establishes a culture of frugality.

2. Bonus is kind of irrelevant

A median bonus of $80K does not tickle someone’s fancy.

3. Before the IPO, some of the founders/CEOs took options worth fantastic sums

For instance, Andrew Houston of DropBox ($109M), James Park of Fitbit ($7.5M), Dick Costolo of Twitter ($11.3M), Scott Painter of True Car ($5.2M) and Christopher Paucek of 2U ($4.1M) among others all took home nice option packages the year before IPO.

4. The real source of value is the founders/CEOs equity

Benioff, Dorsey, and Bezos owned 32%, 57% and 48% of their respective companies at the time they went public.

Conclusion

“Scars signal skin in the game. How much you truly “believe” in something can be manifested only through what you are willing to risk for it”– Nassim Nicholas Taleb