To the uninitiated, the vision of life as a start-up founder is one of workplace independence, long hours in a job you love, and of course, a the six-figure income of a business owner.
As far as the income thing is concerned, the vision is more dream than reality. A recent survey by Compass, a start-up consulting firm, revealed that the average start-up founder’s salary world wide is hardly enough to keep them in designer jeans, much less support anything resembling a lavish lifestyle. In fact, a Starbucks barista does as well as the entrepreneur heading the start-up down the street.
In an article published on thenextweb.com (TNW) on Jan. 14, Martin Bryant writes that the Compass data, shared with TNW, shows that three-quarters of the startup founders surveyed draw a salary of less than $75,000, and 66 percent are paying themselves an annual gross of $50,000 or less.
The survey included data gathered from 11,160 startups around the world.
According to Bryant, Compass found that founders’ average annual salaries were lowest in India, at $30,208. The high water mark was Australia, where start-up founders average $72,363 in salary.
Removing India from the equation, Compass came upon a few surprises, namely that founder pay in the rest of the world was similar, and that start-up founder salaries in the Silicon Valley were hardly enough to cover the area’s high cost of living. Bryant writes that this is in keeping with a cost-consciousness needed to allow the enterprise to survive and grow.
In the Valley, 66 percent of founders pay themselves around $45,000. In Berlin, that percentage rises to 73 percent; to 73 percent in Tel Aviv; 74 percent in London and Sao Paolo; and 79 percent in Toronto.
But Compass also said its data suggests that business phase and funding levels, rather than location, are the better indicator of salary size.
Average salary for founders at the concept stage of the business was $39,907. Salaries increased incrementally through the next four product development phases until the company had a mature product on the market, at which point salaries averaged $70,109.
Similarly, funding appeared to play a role in salary levels. Founders’ salaries ranged from an average $35,529 in businesses with $500,000 or less in working capital to $81,659 in those enterprises backed by more than $10 million.
All in all, the survey would disappoint those who see the start-up lifestyle as a gilded one.
Writes Bryant, “While the image of the startup founder as a champagne-quaffing, private-jet-hiring spendaholic may still remain for some who remember the days of the first dotcom bubble, it’s a thing of the past for most, it seems. Best save that for after the big exit, eh?”
Bryant, Martin. “What Salaries Do Startup Founders Pay Themselves?” TheNextWeb. 1/14/14.