Start-up CEO Salary

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Investing in new ventures is sometimes characterized as the triumph of hope over experience given the high failure rate of fledging ventures.  The recruitment of a capable, proven CEO or the desire to do so in lieu of an unproven, founder CEO is better characterized as the opposite -- the triumph of experience over hope -- at least in many investors minds. 

So whether it is an unproven CEO, first timer, founder, etc. or a proven, start up CEO, the question of salary is fraught with complexity beyond what are market conditions (a little more on market momentarily).  

That complexity arises from the nature of gap to be filled.  What does the company need from its CEO?  How much can it afford to pay?  How much can one reasonably pay the CEO when it isn't profitable?  How much does equity figure in the compensation equation?   Questions that are all pertinent and particular to the situation at hand.

The VentureOne organization tracks and reports on CEO salary data.

http://www.metrics2.com/blog/2006/10/17/ceo_compensation_at_venturebacked_startups_up_58.html

The linked article shows CEO salaries of IT start-ups averaging $275k.   Most local head hunters in the DC area might describe that as market rate for start-ups with greater than $5M in annual revenues.  For the true start-up without significant revenues, I would suspect the number would be much lower.

Another interesting perspective on this topic is shared by investor, Peter Thiel, who shared his perspective at this year's TechCrunch conference that lower CEO pay correlates positively with company prospects.

http://www.techcrunch.com/2008/09/08/peter-thiel-best-predictor-of-startup-success-is-low-ceo-pay/

His thesis holds water in my opinion as the CEO that is dependent upon equity appreciation can only "win" one way and that way is completely aligned with investors' interest.

Again, every situation is different.  But one should be fully aware that getting to the right answer for start-up CEO compensation is not clear cut.   

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