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2016 VC Executive Compensation Trend Report

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2016 Vc Executive Compensation Trend Report

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2016 VC Executive Compensation Trend Report

  1. 1. We are pleased to present the 2016 Executive Compensation Trend Report based on data collected from our 2016 VC Executive Compensation Survey. With the help of sponsoring venture firms, data was collected from 1568 private, venture-backed companies between mid- August and mid-September 2016. Thank you to those whose efforts went into in the survey, helping to assure the data is of the highest quality in the industry. The 2016 VC Executive Compensation Survey was sponsored by the following venture firms:
  2. 2. 2016 Executive Compensation Trends In 2016, 1568 private company participants reported 8787 executive jobs, representing an increase of +19% in companies and +18% in jobs when compared to the 2015 survey. PARTICIPANTS 2015 2016 COMPANIES 1320 1568 +19% JOBS 7426 8787 +18% Participants provided data on cash and equity compensation as well as metrics including total capital raised, most recent funding round, estimated current annual revenue, estimated company value, stage of development and number of employees. Survey Demographics 2016 Geographic Distribution The SF Bay Area remained the largest region represented in the survey. The SF Bay Area represented 44.8% of the 2016 survey, a slight increase compared to the 42.8% representation in the 2015 survey. UNITED STATES REGIONS COUNT % TOTAL INTERNATIONAL COUNTRIES & REGIONS COUNT % TOTAL SF BAY AREA 702 44.8% UNITED KINGDOM 69 4.4% NORTH EAST 297 18.9% CANADA 32 2.0% PACIFIC NW 86 5.5% ISRAEL 24 1.5% SO. CALIFORNIA 70 4.5% INDIA 10 0.6% CENTRAL/MIDWEST 69 4.4% GERMANY 10 0.6% MID-ATLANTIC 49 3.1% FRANCE 9 0.6% MOUNTAIN 45 2.9% OTHER EUROPE 18 1.2% SOUTH WEST 37 2.4% APAC 5 0.3% SOUTH EAST 31 2.0% OTHER 5 0.3% NORTH EAST 18.9% of total 297 Companies SF BAY AREA 44.8% of total 702 Companies TECHNOLOGY 85.7% of total 1344 Companies LIFE SCIENCES 14.3% of total 224 Companies COPYRIGHT 2016, ADVANCED-HR. INC. 1
  3. 3. Industry Sector Distribution The 2016 industry distribution within the Technology and Life Science sectors was similar to the 2015 distribution. As shown in the table below, Enterprise continued to have the largest representation at 53.1%. TECHNOLOGY SECTOR COUNT % TOTAL LIFE SCIENCES SECTOR COUNT % TOTAL ENTERPRISE 833 53.1% BIOTECH & PHARMACEUTICAL 72 4.6% CONSUMER 387 24.7% HEALTHCARE INFO TECH 67 4.3% HARDWARE / DEVICE 101 6.4% MED. DEVICE & DIAGNOSTIC 60 3.8% CLEAN TECH 22 1.4% HEALTHCARE SERVICES 21 1.3% OTHER TECHNOLOGY 1 0.1% OTHER LIFE SCIENCE 4 0.3% Funding Round 2016 survey participation by Funding Round was comparable to the survey distribution in 2015. There was a slight increase in post series A, B and C companies while companies with seed funding only decreased by 2.8 percentage points. FUNDING ROUND COUNT % TOTAL SEED FUNDING ONLY 267 17.1% POST SERIES A 397 25.3% POST SERIES B 337 21.5% POST SERIES C 245 15.6% POST SERIESD 140 8.9% 5+ ROUNDS OF FUNDING 163 10.4% GROWTH CAPITAL ONLY 19 1.2% Cumulative Capital Raised ENTERPRISE 53.1% of total 833 Companies CONSUMER 24.7% of total 387 Companies POST SERIES A 25.3% of total 397 Companies POST SERIES B 21.5% of total 337 Companies COPYRIGHT 2016, ADVANCED-HR. INC. 2
  4. 4. In 2016, the >$0 - $10M category was broken into two separate categories: >$0 - $3M to assist with understanding seed funding and >$3M - $10M. Cumulative Capital Raised categories were comparable to the survey distribution in 2015. CAPITAL RAISED COUNT % TOTAL >$0-$3M 231 14.7% >$3-$10M 242 15.4% >$10M-$25M 315 20.1% >$25M-$50M 312 19.9% >$50M-$75M 167 10.7% >$75M-$100M 110 7.0% >$100M 191 12.2% Estimated Annual Revenue for Current Fiscal Year In 2016, the distribution increased for all categories except Pre-Revenue, which decreased by 16% and the >$25M - $50M category, which decreased by 13%. Other categories increased roughly proportional to one another. ANNUAL REVENUE COUNT % TOTAL PRE-REVENUE 376 24.0% >$0 - $10M 649 41.4% >$10M-$25M 220 14.0% >$25M-$50M 148 9.4% >$50M-$100M 108 6.9% >$100M 67 4.3% Number of Employees All categories increased roughly proportional to survey growth over 2015 participation. >$10M - $25M 20.1% of total 315 Companies >$25M - $50M 19.9% of total 312 Companies PRE-REVENUE 24.0% of total 376 Companies >$0M - $10M 41.4% of total 649 Companies COPYRIGHT 2016, ADVANCED-HR. INC. 3
  5. 5. # OF EMPLOYEES COUNT % TOTAL <10 238 15.2% 10-25 287 18.3% 26-50 293 18.7% 51-100 281 17.9% 101-200 242 15.4% >200 227 14.5% Revenue Rate per Employee The data provided below is for median revenue per employee by revenue grouping. In 2016, the median revenue per employee increased from $340K per employee to $360K per employee for companies with estimated annual revenues of more than $100M. EST. ANNUAL REVENUE GROUP COUNT MEDIAN REVENUE PER EMPLOYEE ($M) >$0-$10M 649 $ 0.08 >$10M-$25M 220 $ 0.16 >$25M-$50M 148 $ 0.19 >$50M-$100M 108 $ 0.25 >$100M 67 $ 0.36 10-25 18.3% of total 287 Companies 26-50 18.7% of total 293 Companies 51-100 17.9% of total 281 Companies COPYRIGHT 2016, ADVANCED-HR. INC. 4
  6. 6. Stage of Development Survey distribution by stage of development in 2016 was comparable to the 2015 distribution with shipping product having the largest number of participants. STAGE OF DEVELOPMENT COUNT % TOTAL EARLY / PRODUCT DEFINITION 218 13.9% PRODUCT DEVELOPMENT 72 4.6% CLINICAL TRIALS 47 3.0% PRODUCT IN BETA 97 6.2% SHIPPING PRODUCT 979 62.4% PROFITABLE 155 9.9% Estimated Company Value Company value categories are structured to produce relatively even distribution between groupings in order to provide all customers with strong data sets. The largest category was split to show a greater than $500M category that will be used for further analysis in this report. COMPANY VALUE COUNT % TOTAL <$20M 374 23.9% $20M-$50M 363 23.2% >$50M-$100M 293 18.7% >$100M-$200M 242 15.4% >$200M-$500M 203 12.9% >$500M 93 5.9% SHIPPING PRODUCT 62.4% of total 979 Companies <$20M 23.9% of total 374 Companies $20M - $50M 23.2% of total 363 Companies >$50M - $100M 18.7% of total 293 Companies COPYRIGHT 2016, ADVANCED-HR. INC. 5
  7. 7. Survey Population Overview In 2016, companies reported 29% of the 8787 executive jobs as founders. As seen in previous years, founders varied dramatically by position with heavier populations in the C-level positions. C-LEVEL COUNT % FOUNDER % NON- FOUNDER CHIEF EXECUTIVE OFFICER 1540 75% 25% VP-LEVEL COUNT % FOUNDER % NON- FOUNDERPRESIDENT (SEPARATE CEO) 122 66% 34% CHIEF BUSINESS OFFICER 27 26% 74% VP MANUFACTURING 48 6% 94% CHIEF OPERATING OFFICER 364 36% 64% VP OPERATIONS 244 7% 93% CHIEF TECHNOLOGY OFFICER 860 63% 37% VP ENGINEERING 722 13% 87% CHIEF MED. OFFICER, DIRECTOR 55 18% 82% VP CLINICAL/REGULATORY 52 8% 92% CHIEF SCIENTIFIC OFFICER 64 47% 53% VP RESEARCH 132 14% 86% CHIEF FINANCIAL OFFICER 515 5% 95% VP FINANCE 273 2% 98% CHIEF MARKETING OFFICER 249 10% 90% VP MARKETING 421 3% 97% CHIEF PRODUCT OFFICER 240 53% 48% VP PRODUCT 475 11% 89% CHIEF REVENUE OFFICER 177 10% 90% VP SALES 633 2% 98% CHIEF BUSINESS DEV. OFFICER 22 32% 68% VP BUSINESS DEV. 351 9% 91% CHIEF CUSTOMER OFFICER 38 24% 76% VP SERVICE AND SUPPORT 245 5% 95% CHIEF ADMINISTRATIVE OFFICER 7 14% 86% VP ADMINISTRATION 8 0% 100% CHIEF PEOPLE OFFICER 43 0% 100% VP HUMAN RESOURCES 194 0% 100% CHIEF LEGAL OFFICER 37 11% 89% VP LEGAL 174 1% 99% EXECUTIVE SCIENTIST/ARCHITECT 92 51% 49% VP QUALITY 15 7% 93% GENERAL MANAGER 130 12% 88% VP CONSULTING 40 5% 95% C-LEVEL OTHER 56 57% 43% OTHER VP 122 12% 88% Analysis of CEO Cash and Equity Compensation in 2016 The table below shows 2016 median cash and equity compensation for six developmental cuts of survey data. • In earlier stage, pre-revenue companies (includes Seed Funding Only, Post Series A and Post Series B), founding CEO base salary was an average of 48% less than non-founders, while equity holdings remained about 2.5 times higher. • In companies with revenue (includes Shipping Product and Profitable), founding CEO based salary was an average of 24% less than their non-founding counterparts while equity holdings increased to about 2.75 times their non- founding counterparts. FOUNDING CEO COMPENSATION NON-FOUNDING CEO COMPENSATION PRE-REVENUE COMPANIES COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD SEED FUNDING ONLY 206 $85,000 $90,000 32.1% 2 $182,500 $182,500 14.0% POST SERIES A 68 $150,000 $150,000 16.3% 21 $334,750 $400,000 4.5% POST SERIES B 25 $218,500 $250,000 12.2% 17 $346,839 $464,897 5.0% COMPANIES WITH REVENUE COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD SHIPPING PRODUCT, REVENUE <$10M 421 $175,000 $180,000 15.7% 107 $275,000 $350,000 5.2% SHIPPING PRODUCT, REVENUE $10M+ 251 $244,000 $282,500 10.0% 149 $310,500 $450,000 4.8% PROFITABLE 91 $275,000 $350,000 14.1% 60 $325,000 $484,830 4.4% With the possible exception of companies having only seed funding, hiring the CEO talent needed for growth appears as a consistent practice regardless of stage of development. COPYRIGHT 2016, ADVANCED-HR. INC. 6
  8. 8. Non-Founder CEO Comparison by Industry Presented below is detailed data to illustrate the differences in non-founding CEO compensation between industries. Using non-founder compensation reflects market practice more effectively due to skews present in founder data. Please note that often times the data sets get too small to make a meaningful comparison. SHIPPING PRODUCT, <$10M REVENUE CEO COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD CONSUMER 10 $275,000 $312,240 5.0% ENTERPRISE 66 $250,000 $350,000 5.5% HARDWARE / DEVICE 7 $280,000 $350,000 4.8% BIOTECH & PHARMA 1 $386,200 $507,853 4.0% HEALTHCARE INFO TECH 8 $250,000 $337,500 5.0% MED. DEVICE & DIAGNOSTIC 11 $350,000 $472,500 4.6% SHIPPING PRODUCT, $10M + REVENUE CEO COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD CONSUMER 26 $325,000 $428,750 4.6% ENTERPRISE 93 $300,000 $450,000 4.8% HARDWARE / DEVICE 10 $287,500 $385,000 4.4% BIOTECH & PHARMA 3 $365,000 $511,000 3.8% HEALTHCARE INFO TECH 5 $350,000 $490,000 5.0% MED. DEVICE & DIAGNOSTIC 8 $365,550 $460,000 4.6% PROFITABLE CEO COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD CONSUMER 20 $301,515 $443,831 3.2% ENTERPRISE 24 $322,500 $501,250 5.5% HARDWARE / DEVICE 5 $320,000 $416,667 4.6% HEALTHCARE INFO TECH 5 $325,000 $425,000 3.5% MED. DEVICE & DIAGNOSTIC 1 $375,000 $375,000 2.9% Generally, Life Sciences companies pay higher in cash compensation, but not always less in equity compensation. The same tends to be true when comparing Consumer companies to Enterprise companies. SHIPPING PRODUCT; <$10M REVENUE SHIPPING PRODUCT; +$10M REVENUE PROFITABLE COPYRIGHT 2016, ADVANCED-HR. INC. 7
  9. 9. Comparative Benchmarks in High Value Companies The chart below shows founder and non-founder titles reported for the 38 companies with >$1B value. As expected, founding executives have less cash and greater equity when compared with their non-founding counterparts. FOUNDERS COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD CHIEF EXECUTIVE OFFICER 25 $250,000 $252,033 11.5% CHIEF TECHNICAL OFFICER 10 $218,132 $292,304 5.2% NON-FOUNDERS COUNT MEDIAN BASE SALARY MEDIAN TOTAL TARGET PAY MEDIAN TOTAL % EQUITY HELD CHIEF EXECUTIVE OFFICER 11 $350,000 $600,000 3.7% CHIEF TECHNICAL OFFICER 16 $286,625 $362,500 0.5% CHIEF FINANCIAL OFFICER 27 $310,000 $400,000 0.8% CHIEF MARKETING OFFICER 14 $300,000 $380,000 0.4% VP ENGINEERING 36 $270,000 $325,000 0.4% VP PRODUCT 22 $247,500 $276,000 0.3% CEO Refresh Equity and Performance Equity Since 2000, when the timeframe for company development to IPO increased to 8 – 10 years, companies have struggled with equity refresh and retention strategies. To date, there does not seem to be a consistent approach for use of granting additional equity for executive retention. The table below shows the number of CEOs by stage, the number receiving a grant subsequent to their founding shares or hire-on grant, and the median amount of the grant as a percentage of the fully diluted shares (FDS). Refresh was reported for 13% of Founding CEOs and 32% of non-founding CEOs. Data indicates that refresh practices seem somewhat similar between the founding and non-founding CEOs in later stage companies. PRE-REVENUE COMPANIES FOUNDING CEO COUNT FOUNDERS W ADD’L GRANT MEDIAN % FDS OF GRANT NON- FOUNDING CEO COUNT NON- FOUNDERS W ADD’L GRANT MEDIAN % FDS OF GRANT SEED FUNDING ONLY 206 0 0.0% 2 0 0.0% POST SERIES A 68 0 0.0% 21 6 1.5% POST SERIES B 25 6 2.3% 17 7 1.6% COMPANIES WITH REVENUE FOUNDING CEO COUNT FOUNDERS WITH ADD’L GRANT MEDIAN % FDS OF GRANT NON- FOUNDING CEO COUNT NON- FOUNDERS WITH ADD’L GRANT MEDIAN % FDS OF GRANT SHIPPING PRODUCT, REVENUE < $10M 421 52 1.3% 107 23 1.7% SHIPPING PRODUCT, REVENUE $10M+ 251 64 0.8% 149 57 0.7% PROFITABLE 91 19 0.7% 60 22 0.9% COPYRIGHT 2016, ADVANCED-HR. INC. 8
  10. 10. The following table shows the number of CEOs by stage, the percent receiving performance equity, and the median amount of the performance grants as a percentage of the fully diluted shares (FDS). Performance equity was reported for 3% of the CEO population, which represents a significant decrease from the 9% reported in 2015. PRE-REVENUE COMPANIES FOUNDING CEO COUNT FOUNDERS W PERFORMANCE EQUITY MEDIAN % FDS OF GRANT NON- FOUNDING CEO COUNT NON- FOUNDERS W PERFORMANCE EQUITY MEDIAN % FDS OF GRANT SEED FUNDING ONLY 206 0 0.0% 2 0 0.0% POST SERIES A 68 0 0.0% 21 0 0.0% POST SERIES B 25 0 0.0% 17 1 0.3% COMPANIES WITH REVENUE FOUNDING CEO COUNT FOUNDERS WITH ADD’L GRANT MEDIAN % FDS OF GRANT NON- FOUNDING CEO COUNT NON- FOUNDERS WITH ADD’L GRANT MEDIAN % FDS OF GRANT SHIPPING PRODUCT, REVENUE < $10M 421 3 1.3% 107 0 0.0% SHIPPING PRODUCT, REVENUE $10M+ 251 7 0.7% 149 5 0.3% PROFITABLE 91 0 0.0% 60 2 1.5% Company Ownership The tables below show 2016 median (50th percentile) ownership as a percentage of company fully diluted shares by founder, investor and employee groups by CEO founder status. PRE-REVENUE COMPANIES FOUNDING CEOS COMPANY COUNT MEDIAN # EMPLOYEES MEDIAN % FOUNDER MEDIAN % INVESTOR MEDIAN % EMPLOYEE SEED FUNDING ONLY 206 6 61.8% 24.1% 11.0% POST SERIES A 68 18 33.2% 45.6% 15.2% POST SERIES B 25 30 24.2% 60.3% 18.0% COMPANIES WITH REVENUE FOUNDING CEOS COMPANY COUNT MEDIAN # EMPLOYEES MEDIAN % FOUNDER MEDIAN % INVESTOR MEDIAN % EMPLOYEE SHIPPING PRODUCT, REVENUE <$10M 421 37 28.9% 55.1% 15.8.% SHIPPING PRODUCT, REVENUE $10M+ 251 150 17.1% 61.6% 19.7% PROFITABLE 91 140 26.8% 52.1% 18.0% Founder influence on company data does not show a consistent outcome for either investor or employee ownership when compared to companies with non-founding CEOs. PRE-REVENUE COMPANIES NON-FOUNDING CEOS COMPANY COUNT MEDIAN # EMPLOYEES MEDIAN % FOUNDER MEDIAN % INVESTOR MEDIAN % EMPLOYEE SEED FUNDING ONLY 2 14 50.1% 19.1% 30.8% POST SERIES A 21 17 10.5% 66.9% 22.1% POST SERIES B 17 25 4.7% 72.9% 17.2% COMPANIES WITH REVENUE NON-FOUNDING CEOS COMPANY COUNT MEDIAN # EMPLOYEES MEDIAN % FOUNDER MEDIAN % INVESTOR MEDIAN % EMPLOYEE SHIPPING PRODUCT, REVENUE <$10M 107 46 9.2% 65.3% 21.9% SHIPPING PRODUCT, REVENUE $10M+ 149 160 5.3% 69.3% 23.1% PROFITABLE 60 179 3.8% 67.1% 21.6% COPYRIGHT 2016, ADVANCED-HR. INC. 9
  11. 11. About Advanced-HR Advanced-HR is the leading innovator in private company compensation. The data and services we provide have helped determine many of the compensation trends over the last two decades. Advanced-HR delivers essential compensation planning and competitive data services to private, venture backed companies. Cost-Effective Compensation Planning: Option Driver is a revolutionary platform that takes the pain out of compensation planning at a fraction of the cost. It integrates top shelf market data with analytics to walk you through each step of a compensation consulting project and eliminates the need to participate in salary surveys. Why pay hourly consulting rates for services that can be solved in an automated cloud-based platform? Key Benefits: • Automated employee levelling – No more mapping! • Analyze your current market position • Model infinite cash and equity scenarios • Build salary bands for every department and level without the spreadsheets • Customized retention, bonus and merit plans 100% Free Compensation Data for All Job Levels: Charging for data is an old model. We live in a world of instant and free information. Why should your company’s access to compensation data be any different? We agree. It shouldn’t. With Option Impact, ALL of the results are FREE to participants. Key Benefits: • The largest Pre-IPO survey specific to venture-backed companies with 1700+ participants • Benchmarks for base salary, bonus, and % total equity on executives, staff and the board of directors • Company equity by investor, founder, management and staff holdings • Data for refresh equity grants and practices • Statistics on vesting schedules, merit budgets and other business practices • Data cuts available: Capital raised, Revenue, Headcount, Development Phase and Company Value To learn more about services provided or to request a demo, please visit: https://www.advanced-hr.com (P) 415-362-2200 (E) info@advanced-hr.com COPYRIGHT 2016, ADVANCED-HR. INC. 10

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