Early-stage startup compensation runs on two levers: cash and equity, and the earliest hires trade one for the other. Across 450-plus funded startups, seed-stage founders pay themselves roughly $132,000 to $149,000, first employees take equity in the 0.5% to 4% range (median around 1.49%), and total compensation costs land 25% to 35% above base once payroll taxes and benefits are counted. The data below comes from actual payroll records, not survey responses.
For startups, employee compensation costs typically consume over 75% of total operating expenses. As startup accountants who help founders manage runway and cash flow, we know making smart pay decisions is one of the most important activities at the earliest stage. This startup compensation guide provides real compensation data from hundreds of venture-backed startups’ actual payroll records, not survey responses.
We focus on the most common roles startups will hire for at the very earliest stages, such as engineering, sales and marketing, and design. And founders! If you need help developing your compensation plans, Kruze can provide fractional CFO services, and financial modeling.
While Kruze has many clients that have raised hundreds of millions in funding, the non-founder roles listed in this compensation guide are based on the first hires a company makes. This is where we get the most questions, and where founders have the fewest resources to try to understand how to compensate their hires. Later-stage companies often pay more cash comp, and founders running later-stage businesses can turn to recruiters and their HR team for help figuring out how much to pay.
Early-Stage Startup Compensation Guide by Role
When it comes to compensation, early-stage startups typically have three major categories of salary expenses to consider.
- Founder Compensation: Usually the first salary expense after raising funding
- Early Employee Compensation: The critical first hires that help build the initial product and go-to-market
- Consultants: Many startups use consultants early in their life; this varies by the individual startup. In our client base, consulting costs represent about 12.5% of operating costs
Let’s start with founder compensation.
How much do startup founders pay themselves?
Based on our analysis of over 450 funded startups in 2024, here’s what seed-stage founding teams are paying themselves:
- CEO: $132,000
- CTO: $134,000
- COO/Operations: $135,000
- Product/CPO: $149,000
It’s not unusual for the earliest-stage companies to compensate founder CTOs higher than CEOs – that’s not a typo. This is because, in many industries, finding a founding technical founder is a lot harder than finding a CEO.
Founder numbers increase with additional funding. At Series A, the average increases to $183,000, and by Series B, reaches $218,000. Read our entire founder salary report, or check out our annual Startup CEO Salary Report.
Founder Compensation Calculator
This is basically our world-famous CEO Salary Calculator – use it to put in your capital raised, stage, industry, and months of runway to get an estimate of how much compensation is typical across funded startups in the US.
How much should you pay your first engineering, sales, and product hires?
Early-employee cash compensation varies significantly based on role, experience, location, and the startup’s funding level. We’ve analyzed actual payroll data from hundreds of funded startups to determine the typical ranges we see across the most common early hires. Most of our non-biotech clients hire engineers very early after getting funding, then designers, product people, and sales and marketing are typically added quickly.
Engineering Team
Engineering is typically one of the first and most crucial hiring areas. Obviously, the compensation is going to vary widely based on the type of engineer – for example, at the moment, experienced AI/ML hires are incredibly expensive. At the risk of over-generalizing, here are the cash salary ranges based on experience level for engineers that we see in our clients’ payroll systems:
San Francisco Market |
Other Major Tech Hubs |
|
|---|---|---|
Entry-Level |
$75,000 - $105,000 |
$65,000 - $95,000 |
Mid-Level |
$100,000 - $145,000 |
$90,000 - $130,000 |
Senior |
$140,000 - $185,000 |
$125,000 - $162,000 |
Very Senior |
$180,000 - $235,000 |
$160,000 - $210,000 |
Sales Team
Sales compensation typically includes both base salary and commission. The OTE (a sales slang term meaning “on-target earnings”) is usually double the base salary. Many startups hire sales talent after they’ve achieved early product-market fit. Here are the base salary ranges:
San Francisco Market |
Other Major Tech Hubs |
|
|---|---|---|
Entry-Level |
$50,000 - $80,000 |
$45,000 - $72,000 |
Mid-Level |
$80,000 - $110,000 |
$70,000 - $100,000 |
Senior |
$110,000 - $135,000 |
$95,000 - $120,000 |
Very Senior |
$120,000 - $150,000 |
$110,000 - $135,000 |
Product & Design
Product managers and designers are often hired after the core engineering team is in place. Product is an incredibly wide range of possible hires. Some have serious engineering chops, some come from highly paid companies like Apple, and others are junior hires just learning product. Here are the typical ranges:
San Francisco Market |
Other Major Tech Hubs |
|
|---|---|---|
Product |
$130,000 - $185,000 |
$110,000 - $175,000 |
Junior Designer |
$80,000 - $150,000 |
$70,000 - $130,000 |
Senior Designer |
$100,000 - $172,000 |
$99,000 - $155,000 |
Marketing & Operations
When marketing and operations hires happen depends heavily on the startup’s stage and complexity. Companies with operationally intensive models bring on customer support, office managers, or assistants early. Marketing timing is more variable. Some founders prioritize it from the start, while others wait until funding or a specific need makes it unavoidable.
San Francisco Market |
Other Major Tech Hubs |
|
|---|---|---|
Head of Marketing |
$200,000 - $325,000 |
$150,000 - $270,000 |
Mid-Level Marketing |
$100,000 - $175,000 |
$80,000 - $145,000 |
Customer Support |
$65,000 - $100,000 |
$60,000 - $94,000 |
Assistant |
$50,000 - $150,000 |
$39,000 - $75,000 |
Cash isn’t the only form of compensation that early startup employees expect – payroll taxes, benefits, and other costs associated with compensation are real factors that founders need to think carefully about as they shape their hiring plans. And other items creep into payroll costs like your payroll software – this can all add up.
What other compensation costs should startups budget for?
Beyond base salary and equity, startups need to budget for high additional compensation-related costs:
Payroll Taxes & Required Benefits (typically adds ~10% to base compensation):
- Federal payroll taxes (Social Security, Medicare)
- State-specific unemployment insurance
- Workers’ compensation insurance
- State disability insurance (in some states)
- Local payroll taxes (in some cities)
Optional Benefits (typically adds 15-25% to base compensation):
- Health insurance (biggest optional benefit cost)
- Dental and vision insurance
- 401(k) plans and matching
- Life and disability insurance
- PTO and vacation time
One-Time Costs:
- Equipment (laptops, monitors): $2,500-$3,000 per employee
- Software licenses
- Onboarding and training costs
When budgeting, we typically recommend planning for total compensation costs to be about 25-35% higher than base salary. This varies significantly by location and benefits package – San Francisco employers typically pay higher payroll taxes and benefits costs than employers in other cities.
Another major part of startup compensation is equity.
How much equity do startup employees get?
Let’s discuss the amount of equity that the earliest employees typically get. This equity is a crucial part of a startup compensation package, as it provides significant upside potential if the company succeeds. It also aligns employee incentives with the long-term success of the startup. Equity packages are often quite customized, and any particular employee may merit a much larger (or smaller) equity amount based on their experience. Read our guide to setting up an option plan here.
Based on recently analyzed data by Carta (the cap table provider) from over 8,000 initial grants at tech startups, here’s what is typical for equity grants to the first employees.
- First hire: 0.5% to 4% equity (median 1.49%)
- Second hire: 0.3% to 2% equity (median 0.85%)
- Third hire: 0.21% to 1.2% equity (median 0.50%)
- Fourth hire: 0.18% to 1% equity (median 0.44%)
- Fifth hire: 0.13% to 0.8% equity (median 0.34%)
The most generous founding teams (90th percentile) grant their first five hires a combined 17.56% of the company, while more conservative teams (25th percentile) grant a combined 1.32%. The median founding team grants about 3.62% total equity to their first five employees.
After the first five hires, equity grants typically decrease significantly. By the tenth hire, the median grant drops to 0.18%. This makes sense – early employees take on more risk and typically accept below-market cash compensation in exchange for more equity upside.
Some important considerations when planning your equity compensation:
- The more funding you’ve raised, the less equity you’ll typically need to grant (since you can offer higher cash compensation)
- Technical hires often command higher equity grants than non-technical roles
- More experienced hires usually expect larger equity packages
- Your option pool needs to be large enough to support 18-24 months of hiring – VCs will expect this during fundraising. You can learn about option pool modeling here.
How does startup equity vesting work?
Equity is incredibly precious at early-stage companies. And not every employee works out – so a vesting schedule is a great way to protect the company from having a lot of “dead” equity on the cap table. Most early-stage startups use a standard equity compensation vesting schedule to incentivize employees to stick around for multiple years and to avoid having a lot of the company owned by people no longer working there. Here’s how typical startup equity vesting works:
- Four-year vesting period
- One-year cliff (meaning no equity vests until the first work anniversary)
- After the cliff, equity vests monthly
- Sometimes there is “double-trigger” acceleration if there is an acquisition
For example, if an employee is granted 1% equity compensation, here’s how it typically vests.
- Year 0-1: 0% (nothing vests until the cliff)
- At 1 year: 25% vests (0.25% in this example)
- Months 13-48: The remaining 75% vests in equal monthly installments (approximately 0.021% per month)
The one-year cliff is important – it means that if an employee leaves before their first anniversary, they get no equity. This protects the company from having to manage tiny equity stakes from employees who don’t work out in the first year. Even if you are using cap table software (which you 100% should be doing), managing tons of tiny little equity holders is a pain. You don’t want to chase down too many signatures, etc., and you open yourself up to more liability since there are more people who could sue you.
Some startups offer accelerated vesting if the company is acquired. This is more likely offered to senior hires. The most common version is “double-trigger” acceleration, which means:
- The company is acquired (“first trigger”)
- The employee is terminated without cause within a certain period (“second trigger”)
This startup compensation structure gives employees some protection in acquisition scenarios while not making the company less attractive to acquirers.
How do 409A valuations affect employee equity?
When offering equity compensation, startups must ensure they’re granting options at fair market value to comply with IRS regulations. This means having a 409A valuation performed by a qualified third party. This valuation sets your company’s common stock price, which determines the strike price of the options you grant to employees.
You’ll need your first 409A valuation before you start granting employee options. Understanding typical 409A valuation costs can help you budget appropriately, especially since valuations typically need to be updated:
- Every 12 months
- After raising a new round of funding
- When there’s a material event that could impact your startup's valuation
Getting this wrong can have serious tax implications for your employees. So work with an accredited valuation provider. And remember to have the board quickly approve option grants when you make a new hire. You don’t want a new hire waiting months to officially get their options, as they may end up with a higher strike price if the company raises money.
How should you balance cash versus equity?
When structuring startup compensation packages for early employees, startups must balance their limited cash runway against the need to preserve equity for future hires. The basic rule of thumb is that more cash compensation means less equity, and vice versa. However, the balance varies significantly by role and candidate experience.
More experienced hires often have higher cash requirements due to personal obligations like mortgages and families. We’ve seen some founders try to balance out the cash compensation by lowering equity – this doesn’t always work for highly experienced early employees, who know what they are worth. Technical roles often command both higher cash and equity due to intense market demand, particularly for specialized skills like AI/ML.
Some roles have traditional compensation structures that you’ll need to work within. Sales roles, for example, are typically more cash-heavy with compensation heavily weighted toward commission. However, early sales hires might still receive meaningful equity packages if they’re taking a risk on an unproven product.
The amount of funding you’ve raised also impacts this balance. As you raise more capital, you can typically weigh compensation more toward cash and less toward equity. The company has less risk for new hires, and you need to preserve equity for future rounds and hires. In theory, each share and percent of equity should be worth more since the company’s valuation is going up.
Creating Your Early-Stage Startup Compensation Strategy
Creating the right compensation structure is one of the most important and challenging aspects of building a startup. People will make or break your success. This startup compensation guide provides real-world data to help you make informed decisions about both cash and equity packages. Remember that every startup is unique – use these ranges as a starting point, then adjust based on your:
- Available funding and runway
- Industry and technical requirements
- Geographic location and remote work strategy
- Stage of growth and hiring priorities
- Specific candidate experience and negotiating leverage
The most successful startups create clear compensation philosophies early, document their decisions, and stay consistent while remaining flexible enough to adapt to changing market conditions. They balance the need to preserve cash and equity while building competitive packages that can attract and retain top talent.
Most importantly, don’t try to save money by skimping on important infrastructure around compensation – use a cap table management system, get your 409A valuations done on time, and work with qualified accountants and lawyers to ensure you’re handling payroll taxes and equity grants correctly. Making mistakes in these areas can be extremely costly to fix later.
Getting compensation right early protects your runway and your cap table. Contact us to discuss how we can help with compensation planning, equity management, and other accounting needs.
