- CEOs of early-stage startups now make, on average, $142,000 — down from $150,000 last year, WSJ reports.
- Due to the slump in venture funding, some CEOs have even cut their salaries to zero.
- The pay cut is most noticeable for CEOs of crypto, direct-to consumer, ecommerce and telecommunications companies.
The US economy may be approaching a recession soon — and CEOs of American startups are feeling the heat.
Wall Street Journal was the first to report that Kruze Consulting, an accountancy firm for startups, had analyzed more than four hundred of its startup clients’ data in order determine their financial status amid the current economic climate.
The consulting firm found that the average annual salary for CEOs based in the US, many of whom are early-stage founders, has dropped from $150,000 in 2022 to $142,000 as of this year — a four-year low, Kruze told the Wall Street Journal. Some executives have even cut their pay to zero.
The reason is that CEOs want to be prepared for a possible drop in funding from venture capital this year. In the first quarter of 2023, global venture funding reached $58.6 billion — a 13% drop from the same quarter last year, according to a report from CB Insights, a research firm.
Kruze, a Journal reporter, said that as a result of this, startup companies are striking fewer transactions and their valuations are dropping.
Healy, Kruze’s Vice President of Financial Strategy, Healy, Jones told The Journal that when these companies are running out of funding they will try to do anything possible to prolong runway. Some founders, however, are in a more difficult position than others.
The funding is not distributed evenly. Jones, in an email to Insider, said that startups in crypto, direct-to consumer, and ecommerce are the ones who struggle the most with attracting capital. Jones told Insider that “AI is exploding on the other side.”
While many CEOs of early-stage startups are taking significant pay cuts, a select few — including those in biotech and healthtech — have decided to increase their salaries, Jones said.
Pay cuts will hit CEOs at the lower end of the spectrum of funding.
The Journal reported that “you have a few people who are willing to sacrifice earning a wage for a long time. But for the majority, they still need a paycheck in order to pay for their living expenses and bills.” Steven Rosenblatt is a co-founder at venture capital company Oceans.
Rosenblatt has not responded to Insiders’ immediate comment request before publication.
This year’s salary cut findings come at a time when CEOs of major corporations have been taking pay reductions.
According to Securities and Exchange Commission documents filed in January, Tim Cook, Apple’s CEO, will take a 40% cut to his salary in 2023. His compensation package, which was nearly $100 million dollars in 2022, will now be $49 millions in 2023. Apple shareholders raised concerns about Cook’s high salary.
Sundar Pichai said that the top executives of Alphabet (Google’s parent) would be subject to a “significant reduction” in their annual bonuses for an undisclosed amount of time. Pichai stated that the cuts are “related directly to performance of the company.”
A month later, Eric Yuang, the CEO of Zoom, told his employees he will take a 98% pay cut this year and give up his corporate bonus —leaving him with a $10,000 salary. Yuang announced the decision after firing 15%, or 1,300 workers from his company.