How Much Do Startup Founders Earn Per Year?

Not all startup founders are alike, and their earnings can vary widely. Some may receive substantial salaries, while others may not draw any salary at all. This variability is influenced by the nature of the startup, the industry, and the individual's position within the company.

Industry Influence on Startup Founder Earnings

The industry in which a startup operates plays a significant role in the earnings of its founders. For example, those in the film industry may make well enough, whereas those in the steel industry may face different financial circumstances. This variability underscores the importance of understanding the specific demands and opportunities within each sector.

Passion and Purpose: Beyond Salaries

While financial gains are important, the primary motivation for many entrepreneurs is often driven by passion and a desire to make a meaningful impact. This is different from traditional job roles, where the primary objective is often financial remuneration. In my recent book, "Straddling the Abyss," passion is highlighted as one of the key drivers for entrepreneurs. Some startups succeed, while others face challenges. It's important to weigh the risks and potential rewards before embarking on a entrepreneurial journey.

Statistical Insights and Expectations

Let's dive into some statistical insights and expectations. According to research, the average VC-backed founder has approximately $5.8 million in equity. However, many startups do not receive venture capital funding. The probability of a tech startup securing VC backing can range from 1.875% to 2.5%. Here's a deeper look at the numbers:

Probability of VC Funding

Y Combinator Method: Y Combinator's data suggests that about 37 out of 511 startups get backed by venture capital, leading to an estimated probability of 2.5%. VC Deals vs. VC-eligible Startups Method: Given that 1350 companies get their first venture capital deal each year and there are approximately 72,000 startups that eventually want VC funding, the probability is around 1.875%. VC Acceptance Rate Method: Assuming a typical acceptance rate of 0.5–1%, and factoring in multiple applications, the probability is estimated to be around 2%.

Based on these probabilities, we can estimate the average annual profit for a tech startup. If a startup fails to get VC funding, it may take 2 years and cost $5,000 in investment per founder. However, if it successfully secures funding, it can expect to take 5 years and yield $5.8 million in equity for each founder. These factors lead to an estimated annual income of around $53,932 for an average tech startup founder.

It's important to note that exceptional talent or connections can significantly boost these numbers. Founders with these advantages can expect to earn 2–3 times more, putting them in the range of $100,000 to $150,000 per year. Conversely, those without these advantages may earn less, potentially as low as $40,000 per year or less.

Though the road to financial success can be challenging, it's a venture driven by passion and a belief in the potential of the product or service. Whether pursuing a startup venture is right for you ultimately depends on weighing the risks and rewards, and whether your personal goals align with the realities of the startup world.