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.