The question of how much co-founders should pay themselves is one of the most challenging aspects of launching a startup. Unlike traditional employment where market rates determine compensation, founder pay requires balancing personal financial needs with company resources. According to recent data from Kruze Consulting, the average startup founder salary in 2025 has increased to $161,000, up from $141,000 in 2024—a significant 14% rise that reflects an improving fundraising environment.

This rebound comes after several years of downward pressure on founder compensation, coinciding with projected growth in U.S. venture fundraising to $90-110 billion in 2025. Understanding appropriate compensation is crucial because founders aren't merely employees—they're owners whose primary financial reward comes through equity that only pays off during a successful exit. Early-stage salaries are designed to cover basic living expenses while preserving company resources for growth.

Most startup advisors recommend that founders pay themselves enough to avoid financial stress but not so much that it significantly depletes company resources. This balance ensures founders can focus entirely on building their business without the distraction of personal financial concerns. While some early-stage founders may need to subsist on "ramen profitability" levels, this approach isn't sustainable long-term. Modern investors recognize that reasonable founder compensation is essential for maintaining focus, productivity, and preventing burnout during the stressful journey of building a successful company.

How Funding Stage Impacts Co-Founder Salaries

The funding stage of your startup significantly influences what constitutes appropriate founder compensation. Current data shows a clear progression in founder salaries as companies advance through funding rounds. For 2025, the average founder salaries by stage are: Seed stage at $147,000, Series A at $203,000, and Series B at $214,000.

This graduated increase makes logical sense. Early-stage startups typically operate with limited capital and must prioritize runway extension and resource allocation toward product development and market validation. As companies progress to later stages, they've proven their business model, reduced risk, and secured larger investment rounds, allowing for more substantial founder compensation.

The most significant salary jump typically occurs between the Seed and Series A stages, where median founder pay increases by roughly 30-40%. This reflects the transition from proving concept viability to demonstrating growth potential. By Series B, founder compensation typically stabilizes with smaller percentage increases, as companies focus on scaling operations and extending runway to reach profitability.

When considering your own compensation as a co-founder, remember to factor in your company's current runway, burn rate, and fundraising timeline. Many investors use founder salary as a signal of commitment and financial discipline. Taking too high a salary at an early stage might raise concerns about priorities, while severely underpaying yourself could lead to burnout and divided attention. The goal is finding the balance that allows you to focus entirely on your company while demonstrating responsible stewardship of investor capital.

Founder Role and Its Effect on Compensation

Not all co-founders are compensated equally, even within the same company. Kruze Consulting's data reveals interesting patterns in how founder salaries vary by role. In 2024, at the seed stage, the average salaries were: CEOs at $132,000, CTOs at $134,000, COO/Operations roles at $135,000, Presidents at $92,000, and CPO/Product leaders at $149,000.

These variations reflect the market dynamics of technical talent, with technical and product-focused founders often commanding higher salaries than their CEO counterparts at early stages. This premium exists because experienced engineers and product leaders are in high demand in the broader job market, creating a higher opportunity cost for these individuals to commit full-time to a startup. As companies mature, this dynamic often shifts, with CEO compensation eventually outpacing other founder roles.

In approximately half of startups with multiple co-founders, the founders are not paid identical amounts. This differentiation typically accounts for variations in experience, domain expertise, and market value of skills. For example, a founder with a specialized PhD or MD in biotech might reasonably expect higher compensation than a general business co-founder in the same early-stage company.

When determining salary differences among co-founders, transparency and open communication are crucial. Clearly articulate the rationale behind any compensation differences to prevent resentment or misunderstanding. Many successful founding teams agree on a compensation philosophy that acknowledges differences in role, experience, and opportunity cost while ensuring all founders feel valued and fairly treated.

Geographic Location and Industry Impact on Founder Pay

Founder compensation varies significantly based on both geographic location and industry sector. Companies in high-cost regions like Silicon Valley and New York typically pay founders 30-40% more than those in less expensive areas. This regional variation reflects different costs of living and competitive market rates for talent.

Looking at industry-specific data, fintech founders consistently earn among the highest salaries across all stages, though 2023-2024 saw some downward pressure on compensation in this sector amid broader tech industry challenges. Biotech founders also command premium salaries, often because they bring specialized advanced degrees (PhDs, MDs) and industry experience that would be highly compensated in traditional employment settings.

B2B SaaS founders tend to earn moderately high salaries compared to consumer-focused startups, with the gap widening at later funding stages. This reflects the typically faster revenue generation and clearer path to profitability in B2B business models, which often allows for more generous founder compensation.

When benchmarking your own compensation, consider both your geographic market and industry sector. A reasonable salary for a seed-stage founder in San Francisco might appear excessive for the same stage company in Austin or Berlin. Similarly, what's appropriate for a fintech or biotech founder with specialized expertise may not apply to e-commerce or consumer app founders.

Most investors recognize these variations and will evaluate founder compensation within the appropriate geographic and industry context. That said, demonstrating cost discipline relative to your specific market and sector remains important regardless of location or industry.

Gender Disparities in Co-Founder Compensation

Despite progress in addressing pay equity, gender disparities in founder compensation persist. According to Kruze Consulting's 2025 data, female CEOs earn on average $11,000 less than their male counterparts. This represents a slight improvement from 2024, when the gap was $14,000. Female CEO salaries increased by 17.8% compared to male CEO salaries which rose by 13.9%, indicating a slow but positive trend toward greater equity.

The gender pay gap has been shrinking over time, having peaked at $45,000 in 2020 before decreasing to the current level. This improvement underscores the importance of transparency in compensation data, which helps all founders benchmark their salaries against industry standards regardless of gender. However, the persistent gap reflects broader challenges women entrepreneurs face in the startup ecosystem.

Beyond direct compensation, female founders also confront disparities in fundraising success. Research consistently shows that women-led startups receive significantly less venture capital funding than male-led companies. This funding gap indirectly affects compensation, as companies with less capital typically pay lower founder salaries to extend runway.

Addressing these disparities requires action from both investors and founding teams. For investors, this means examining potential unconscious biases in both investment decisions and advice on founder compensation. For founding teams, especially those with mixed-gender co-founders, it's crucial to ensure compensation reflects contributions and responsibilities rather than reflecting or reinforcing broader societal biases. Setting objective, transparent criteria for determining founder salaries can help mitigate these issues and create more equitable compensation structures.

Balancing Salary with Equity Considerations

Founder compensation extends beyond just salary; equity ownership represents the primary financial upside for most founders. The relationship between cash compensation and equity retention requires thoughtful consideration. Generally, founders who take lower salaries can justify retaining more equity during funding rounds, while those drawing higher salaries may face pressure to accept greater dilution.

Equity dilution naturally occurs as startups progress through funding stages. Data shows that founders' equity share typically decreases from 100% at bootstrapped stages to around 15-20% collectively by Series B. This dilution accelerates with each funding round, making early salary-versus-equity decisions particularly consequential.

The number of co-founders also significantly impacts equity distribution. Two or three co-founders appear optimal from an equity perspective; startups with more co-founders face exponential dilution effects before even reaching Series A. This dilution ultimately affects the potential wealth creation for each founder upon a successful exit.

When determining the right balance between salary and equity, consider your personal financial situation, the company's cash position, and investor expectations. If you have personal financial resources that allow you to take minimal salary, this approach can extend runway and potentially preserve more equity. However, if financial stress would impair your ability to perform, a reasonable salary that allows full focus on the business may better serve both you and the company long-term, even if it means slightly greater equity dilution.

Remember that equity only has value upon a liquidity event. The most successful founders focus on building significant company value rather than optimizing short-term personal compensation.

Investor Perspectives on Founder Compensation

Venture capitalists and angel investors have strong opinions about founder compensation, often using salary levels as a signal about founder priorities and financial discipline. While these perspectives have evolved over time, understanding investor viewpoints remains crucial when setting co-founder salaries.

Historically, many investors adhered to Peter Thiel's philosophy that "the lower the CEO salary, the more likely it is to succeed," viewing minimal founder compensation as evidence of commitment to long-term equity value over short-term personal gain. While some traditional investors still hold this view, most modern VCs recognize that founder burnout and financial stress can significantly harm company performance.

Today's investors typically expect founders to take reasonable salaries that allow them to focus entirely on building the business without financial distractions. They understand that founders need to cover basic living expenses, particularly in high-cost startup hubs. However, they still scrutinize compensation that appears excessive relative to company stage, funding level, and runway considerations.

The most effective approach with investors is transparency and open communication. When raising capital, include founder compensation in your financial models and discuss it directly during due diligence. Frame your salary decisions in terms of optimizing company performance and explain your rationale based on personal circumstances, local cost of living, and industry benchmarks.

Remember that different investors may have varying perspectives on appropriate compensation. Seed-stage investors tend to be more sensitive to founder salary levels than growth-stage investors, reflecting the different risk profiles and cash constraints at each company stage. Ultimately, reasonable investors want founders who are financially stable enough to perform at their best while maintaining appropriate financial discipline.

Practical Tips for Setting Co-Founder Salaries

When determining co-founder compensation, begin with transparent discussions among all founders about financial needs, expectations, and compensation philosophy. Document these discussions to prevent future misunderstandings. Consider creating a formal compensation committee within your board once established to provide objective oversight of founder salaries.

Use reliable benchmarking data to inform your decisions. Kruze Consulting's annual reports provide current, data-driven insights based on anonymized payroll data from hundreds of venture-backed startups across various stages and industries. Other resources include AngelList's salary data, Carta's compensation studies, and stage-specific guidance from venture capital firms.

Implement regular salary reviews tied to company milestones rather than arbitrary timelines. For example, you might agree to reassess compensation after closing each funding round or reaching specific revenue targets. This approach aligns founder compensation with company performance and available resources.

Consider a graduated approach where salaries increase incrementally as the company achieves predefined milestones. This might include minimum viable salaries at the pre-seed stage, modest increases upon seed funding, and more substantial adjustments after Series A. Document these plans in advance to set clear expectations.

For early-stage companies facing cash constraints, explore creative alternatives to immediate cash compensation. Options include deferred salary (recorded as company debt to be paid upon reaching specific cash milestones), partial compensation through loans from the company, or planned secondary sales of small equity portions after Series A or B rounds to provide founders some liquidity while maintaining their primary equity position and incentive alignment.

Legal and Tax Considerations for Founder Compensation

Founder compensation involves significant legal and tax implications that require careful navigation. Consult with qualified legal and tax professionals to ensure compliance with applicable laws and optimize your compensation structure. Several key considerations deserve attention when structuring founder pay.

For C-corporations (the standard structure for venture-backed startups), founder salaries must qualify as "reasonable compensation" under IRS guidelines. Compensation significantly below or above market rates can trigger scrutiny. Unreasonably low salaries might be viewed as an attempt to avoid payroll taxes, while excessively high salaries could be reclassified as disguised dividends, affecting both personal and corporate tax treatment.

Document all compensation decisions through formal board approvals and resolutions. These records prove essential if your compensation faces later regulatory review. Proper documentation is particularly important when founder salaries change significantly or when implementing deferred compensation arrangements.

Consider the implications of different compensation components. Beyond base salary, founders may receive bonuses, benefits, expense allowances, and equity incentives, each with distinct tax treatment. Equity compensation, including stock options or restricted stock, involves complex tax elections (like 83(b) elections) that can significantly impact future tax liabilities.

For international co-founding teams, additional complexities arise from cross-border compensation. Different countries' employment laws, tax treaties, and social security requirements may affect how you structure founder pay. In these cases, jurisdiction-specific legal counsel becomes particularly valuable to ensure compliance with all applicable regulations while optimizing the tax position of both founders and the company.

Planning for Compensation Evolution as Your Startup Grows

Founder compensation should evolve systematically as your startup progresses through different growth stages. Establishing a clear compensation philosophy early creates a framework for these adjustments, preventing ad hoc decisions that might create inequities or conflicts among co-founders.

At the earliest stages, focus on survival salaries—just enough to cover basic living expenses while maximizing runway. As you achieve product-market fit and secure additional funding, gradually increase compensation toward market rates. By Series B, founder salaries typically reach 70-80% of market compensation for comparable executive roles, with the remaining value gap justified by the potential equity upside.

Consider implementing formal salary bands for the entire organization, including founder positions. These bands should reflect your compensation philosophy while providing structured guidance for adjustments as the company grows. Revisit and revise these bands annually to reflect changing market conditions, company performance, and funding status.

Plan for succession and role evolution. As startups mature, founding teams often evolve, with some co-founders transitioning to different roles that better leverage their strengths or occasionally departing the company. Your compensation framework should accommodate these transitions while recognizing the unique contributions and historical context of founding team members.

Finally, establish clear processes for handling compensation discussions. As your board evolves to include outside investors, compensation decisions become more formalized. Consider creating a compensation committee within your board to provide objective oversight of executive compensation, including founder salaries. This committee typically includes outside directors who can provide market perspective while balancing the interests of all stakeholders.

By thoughtfully planning for compensation evolution, you create stability and transparency that benefits both individual founders and the company as you navigate the complex journey from startup to established business.