Analysis: median CEO pay of US tech startups that went public in 2020 was $21.9M; seven of the 10 best-paid CEOs of US public companies were from such startups
Startup creators once tended to take little or no remuneration as CEOs. Now, some are getting giant stock awards … Tweets: @jason , @josheidelson , @baileycarlin , @wsjtech , @r_wall , @coryweinberg , @shiraovide , and @eliotwb Tweets: @jason : investors: if you don't like the CEOs comp, and/or the companies performance, don't buy the stock! It's really that simple... you get what you pay for. CEO know that if they overpay themselves and the stock doesn't perform that a) investors run for the hills & b) you get fired https://twitter.com/... Josh Eidelson / @josheidelson : “Archer Aviation...is years from producing its only planned product, a 4-passenger electric air taxi that the main US regulator hasn't yet certified... Still, the co-founders of this three-year-old company got...a $99 million special stock award” https://www.wsj.com/... @eliotwb B.W. Carlin / @baileycarlin : CEO of Bad Brain Digital Consulting: $50 million salary https://twitter.com/... @wsjtech : “It starts to catch on like wildfire.” Many big tech founders took little or no remuneration as CEOs. Now, some of today's startup CEOs are among America's best-compensated corporate chiefs. https://www.wsj.com/... Robert Wall / @r_wall : Archer Aviation is years from producing its eVTOL air taxi. It hasn't generated any revenue. Still, the co-founders got a huge payday last month, a $99 million special stock award that stands to quadruple if Archer hits other milestones https://www.wsj.com/... @eliotwb Cory Weinberg / @coryweinberg : Remember when startup CEOs didn't want to go public?? extra scrutiny, etc etc. The reticence worked! Now they get additional hundreds of millions of $$$ in stock grants to do so. @eliotwb has a ~~long read~~ on those fat pay packages at VC-backed firms. It's all the rage. https://twitter.com/... Shira Ovide / @shiraovide : Oh hey, look, more lack of guardrails on young companies, by @eliotwb https://www.wsj.com/... Eliot Brown / @eliotwb : CEOs of startups are now the best paid CEOs in America -4 startup CEOs since 2020 have been given pay packages more valuable than that of the CEO of Alphabet ($280 M) -5 startup founders were paid better than every CEO in the S&P 500 https://www.wsj.com/...
Context & Ripple Effects
The warning shot came in 2018, when the Journal reported that US tech founders were increasingly wresting control from their VC backers and extracting huge pay packages tied to going public. Three years on, the numbers confirm it became the norm rather than the exception: a $21.9M median for 2020 tech-IPO CEOs, seven of the ten best-paid public-company chiefs, and five founders out-earning every S&P 500 CEO.
What makes this more than a pay-discussion story is the quality of the underlying businesses. These packages landed while IPO valuations relative to revenue were at their highest levels since the dot-com era — Archer Aviation's founders took a $99M special award from a company years from producing its air taxi and generating no revenue — so the comp is being set against frothy marks rather than proven cash flows.
First-order effects
- Investors who bought these 2020 IPOs now hold stocks where founders hold pay packages worth more than Alphabet's CEO's $280M — dilution and misalignment risk priced in before any earnings exist to judge performance by.
Second-order effects
- Boards preparing the next wave of listings face a ratchet effect: with five founders paid above every S&P 500 chief, directors at upcoming tech IPOs are under pressure to match, while institutional investors and proxy advisers sharpen scrutiny of founder-controlled boards approving their own awards.
- The flood of non-traditional capital — non-VC funds were already in a record share of startup deals — gives late-stage backers leverage to demand governance terms that cap pre-IPO founder enrichment as a condition of funding.
Third-order effects
- If the 2021 funding surge ($93B raised by US seed and early-stage startups through mid-December) keeps feeding the IPO pipeline, founder-set pay decoupled from revenue could harden into a structural feature of tech listings — unless public-market investors start discounting valuations for it, which is precisely what Jason Calacanis argues they should do by simply not buying the stock.
The trend: With record capital inflating startup valuations and founders holding board control, IPO-timed mega stock awards are replacing the old founder norm of token CEO salaries — and the correction mechanism, if any, will be public-market buyers repricing the stock rather than boards restraining the package.