TECHNOLOGY SECTOR TREND REPORT

Transcription

1 We are pleased to present the 2013 VC Executive Compensation Survey Trend Report for Technology Companies. The 2013 VC Executive Compensation Survey was sponsored by the following Venture Firms: Accel Partners Element Six Ventures Lightspeed Venture Partners Shasta Ventures Andreessen Horowitz Emergence Capital Partners Matrix Partners Sigma Partners August Capital Fontinalis Partners Mayfield Fund Stripes Group LLC Balderton Capital Foundation Capital Menlo Ventures Third Rock Ventures Battery Ventures Foundry Group Morado Ventures Trident Capital Bay Partners Greylock Partners Morgenthaler Ventures Trinity Ventures Canaan Partners Hearst Ventures New Enterprise Associates True Ventures Carmel Ventures Highland Capital Partners Norwest Venture Partners Union Square Ventures Charles River Ventures Hummer Winblad Venture Partners OpenView Venture Partners US Venture Partners Costanoa Venture Capital Index Ventures Opus Capital Partners VantagePoint Capital Partners Crosslink Capital InterWest Partners Polaris Partners Venrock Delphi Ventures Jafco Ventures Redpoint Ventures Versant Ventures Draper Fisher Jurvetson Khosla Ventures Scale Venture Partners 212 Ltd. Earlybird Venture Capital Kleiner Perkins Caufield & Byers Sequoia Capital Through the efforts of sponsoring venture firms and Advanced-HR, Inc., survey data was collected from 797 private, venture backed technology companies between early August 2013 and mid-september Survey participation in 2013 increased 24% from the 645 companies in the 2012 technology sector survey. This trend report was a collaborative undertaking between Advanced-HR, Inc. and PwC. It is intended to provide an overview of company metrics, company practices and changes in executive compensation from 2012 to We wish to thank those whose efforts went into producing the 2013 VC Executive Compensation Survey Trend Report by providing data analysis, trend evaluation, and assessment of company practices. This report utilizes data from Advanced-HR s Option Impact system. The information contained in this report may not be distributed, either in part or in whole, to any company or person not involved with efforts undertaken through the 2013 sponsoring venture firms or their participating portfolio companies. All data contained in this report is subject to copyright and may not be distributed to unauthorized users without written consent from Advanced-HR, Inc. or PwC.

2 Survey Demographics The survey of executive compensation in private, venture backed technology companies recorded data in effect at the time of reporting between early August 2013 and mid-september The survey was completed by 797 companies that submitted company metrics and compensation information for 5461 executives globally, an increase of 28.7% in surveyed executives compared with The 2013 report provides compensation data for executives based on their founding status with categorization included for company, industry, region, stage, capital raised, funding round, revenue and number of employees. In addition, companies provided information about their total employee ownership as a percentage of the fully diluted shares. Regions The 2013 regional breakdown for the United States shifted only slightly as a percentage of the survey population compared to survey data from The table below shows the regional distribution for the 2013 survey and the graph shows a comparative distribution between 2013 and Region Breakdown Count % Total United States SF Bay Area % North East % So. California % South West % Pacific NW % Central/Midwest % South East % Mountain % Mid-Atlantic % No. California (Not SFBA) 2 0.3% Outside the US United Kingdom % Europe % Israel % Other Countries % REGION: % of Survey Population The map below shows the states comprising each US geographic area in the 2013 survey. Page 1

3 Industries The distribution of companies by industry shifted slightly in 2013 as compared to 2012 when looking at industry as a percentage of the survey population. The table below shows the industry distribution for the 2013 survey and the graph shows a comparative distribution between 2013 and The largest change from 2012 to 2013 was an increase of +4.5% in the Enterprise SW or Services sector Industry Breakdown Count % Total Internet / E-commerce SW or Svcs % Enterprise SW or Services % Clean Tech % Communication SW or Services % Semiconductor % Digital Content % Consumer Services % Computer & Peripheral % Other Technology % Financial Services % Communication Equipment % Consulting 5 0.6% INDUSTRY: % of Survey Population Stage of Development The distribution of companies by stage of development was relatively constant from 2012 to The table below shows developmental distribution for the 2013 survey and the graph shows a comparative distribution between 2013 and Stage of Development Breakdown Count % Total Early/ Product Definition % Product Development % Product in Beta % Shipping Product % Profitable % STAGE OF DEVELOPMENT: % of Survey Population In 2013, Shipping Product as the largest developmental group remains relatively consistent from the 2012 data in its division into two groups: 52.6% of the companies have revenues of $10M or less; and 47.4% of the companies have revenues of greater than $10M. Funding The distribution of companies by Funding Round was relatively unchanged in 2013 as compared to There was an increase of +1.6% in Seed Funding through Post Series B companies and a corresponding decrease of -2.0% in the Post Series C through 5+ Funding Rounds companies. The distribution of companies by Cumulative Capital Raised in 2013 shifted to show a general increase in amount raised when compared to 2012 data. In the 2013 data distribution, there was an increase of +9.9% in companies raising capital of >$50M - $75M and increase of +6.4% in companies raising capital of >$75M - $100M. There was a corresponding drop of -15.2% in survey distribution for companies raising capital of >$10M - $25M. Page 2

4 The tables below show funding round and capital raised distribution for the 2013 survey and graphs show comparative distribution between 2013 and Funding Round Count % Total 2013 Capital Raised ($M) Count % Total Seed Funding % >$0M - $10M % Post Series A % >$10M - $25M % Post Series B % >$25M - $50M % Post Series C % >$50M - $75M % Post Series D % >$75M - $100M % 5+ Rounds of Funding % >$100M % Growth Capital Only % FUNDING ROUND: % of Survey Population $M CAPITAL RAISED: % of Survey Population Revenue and Employees Survey distribution for revenue in 2013 was relatively unchanged from Similarly, the distribution for headcount groupings was relatively unchanged as well. The tables below show revenue and headcount distribution for the 2013 survey and graphs show comparative distribution between 2013 and Revenue ($M) Count % Total 2013 Headcount Count % Total Pre-Revenue % < % >$0M - $10M % % >$10M - $25M % % >$25M - $50M % % >$50M - $100M % % >$100M % > % $M REVENUE: % of Survey Population EMPLOYEES: % of Survey Population Page 3

5 Employee Ownership The table below shows 2013 median (50 th percentile) ownership as a percentage of company fully diluted shares by founder, investor and employee groups for five developmental cuts of survey data. OWNERSHIP All Technology Industries Both Founding and Non-founding CEOs Pre-Revenue Companies # Cos Median # Employees % Cos w/ Founding CEOs or No CEO Median % Founder Median % Investor Median % Employee* Post Series A % 36.3% 43.9% 16.8% Post Series B % 23.3% 60.8% 17.6% Companies with Revenue Shipping Product, Revenue <$10M % 34.4% 50.0% 14.8% Shipping Product, Revenue $10M % 8.3% 67.3% 20.7% Profitable % 9.6% 62.2% 21.6% * Employee ownership includes unissued options In 2013, overall employee ownership as a % of company fully diluted shares was comparable to 2012 as shown on the graph Employee Ownership by Stage. Companies that were Post B and Pre-Revenue reported an increase of +1.4% in employee ownership while companies that were Shipping with < $10M Revenue reported a decrease of - 1.9% in employee ownership compared to EMPLOYEE OWNERSHIP BY STAGE % Fully Diluted Shares As shown in the second graph, Founding CEOs on Staff by Stage, in 2013 there was an overall increase of +26% in founding CEO population compared to As such, overall employee ownership from 2012 to 2013 may have increased slightly more than illustrated. FOUNDING CEOs ON STAFF BY STAGE When looking at employee ownership in conjunction with founding status by development stage, it is estimated that groups higher founder populations consistently have about 4% less in the median employee ownership than those with fewer founders. Page 4

6 Compensation Trends Survey Population A subset of the more common survey positions was reviewed for changes in the 2013 survey population as compared to the 2012 survey population. In 2013, the Chief Product/Strategy position was added to the survey and this position was combined with the VP of Product/Strategy for trend purposes in comparing to 2012 data. The 2013 survey data was comprised of 78% non-founders and 22% founders with no shift in the total non-founder population compared to the 2012 survey data. The table below shows the total count and percent of non-founding positions for the 2013 survey and the graph shows a comparative distribution between 2013 and The largest change from founder to non-founder status was an increase of +11.9% in VP Product/Strategy population. Select Non-Founder Jobs as a Percent of Total Count SELECT NON-FOUNDER POSITIONS: % of Survey Population Survey Title Total Count % NF Chief Executive Officer % Chief Operations Officer % VP Operations % Chief Technology Officer % VP Engineering % Chief Financial Officer % VP Finance % Chief Marketing Officer % VP Marketing % Chief Revenue Officer 70 94% VP Sales % VP Business Development % VP Product/Strategy % In 2013, the population of non-founder positions (adjusted for survey growth) was fairly comparable to 2012 with the noted exception of an increase of +41% in the Chief Revenue Officer position. There was also a shift of +27% to the Chief Operations Officer title with a corresponding decrease of -23% in the VP Operations title. SELECT NON-FOUNDER POSITIONS AS A % OF SURVEY POPULATION: Page 5

7 Cash Compensation Non-Founders When comparing 2013 to 2012 data for the subset of most common non-founding executives, overall base salary generally increased by +2.3% and total target pay (defined as base salary + target incentive pay) increased about +3.5%. The table below shows median (50 th percentile) cash compensation for select non-founder positions in the 2013 survey and the graph shows comparative data between 2013 and All currency was converted to USD for analysis purposes. Select Non-Founder Positions 2013 Median Cash Compensation NON-FOUNDER POSITIONS: MEDIAN CASH COMPENSATION ($K) Base Salary Total Target Pay Chief Executive Officer $284,813 $400,000 Chief Operations Officer $225,000 $286,349 VP Operations $189,063 $218,750 Chief Technology Officer $200,000 $237,250 VP Engineering $200,000 $232,000 Chief Financial Officer $221,500 $275,000 VP Finance $180,000 $208,000 Chief Marketing Officer $225,000 $282,375 VP Marketing $190,000 $225,000 Chief Revenue Officer $225,000 $400,000 VP Sales $192,332 $328,218 VP Business Development $189,500 $247,000 VP Product/Strategy $190,000 $220,000 Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The aggregate non-founding CEO median (50 th percentile) for cash compensation in 2013 showed an increase of +3.4% in base salary and an increase of +6.3% in total target pay compared to 2012 data. A detailed analysis of 2013 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2013 and Analysis showed the largest change occurred in Post Series A, No Revenue companies where there was a +7.8% increase in cash compensation. Non-Founder CEO 2013 Median Cash Compensation By Stage of Development NON-FOUNDER CEO: MEDIAN CASH COMPENSATION ($K) VARIANCE BY STAGE FROM 2012 TO 2013 # CEOs Base Salary Total Target Pay All Companies in Analysis 284 $ 284,813 $ 400,000 No Revenue All 40 $ 277,500 $ 339,250 Post Series A, no revenue 10 $ 275,000 $ 275,000 Post Series B, no revenue 7 $ 260,000 $ 260,000 Revenue All 244 $ 285,000 $ 400,000 Shipping Product 186 $ 275,000 $ 390,000 Profitable 58 $ 300,000 $ 450,000 Page 6

8 Founders When comparing 2013 to 2012 data for the subset of most common founding executives, overall base salary generally decreased by -0.6% and total target pay (defined as base salary + target incentive pay) decreased about - 0.7%. When considering the slight shift to early stage company demographics in the 2013 survey population, decreases in compensation by position without regard to company stage of development are not surprising. The table below shows median (50 th percentile) cash compensation for select founder positions in the 2013 survey and the graph shows comparative data between 2013 and All currency was converted to USD for analysis purposes. Select Founder Positions 2013 Median Cash Compensation FOUNDER POSITIONS: MEDIAN CASH COMPENSATION ($K) Base Salary Total Target Pay Chief Executive Officer $200,000 $213,592 Chief Technology Officer $180,000 $190,476 VP Engineering $160,000 $170,000 Chief Marketing Officer $195,000 $230,000 VP Marketing $165,000 $170,000 Chief Revenue Officer $237,500 $277,750 VP Sales $175,397 $219,000 VP Business Development $189,492 $208,000 VP Product/Strategy $155,000 $167,500 Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The aggregate founding CEO median (50 th percentile) for cash compensation in 2013 showed no change in base salary and a decrease of -5.9% in total target pay compared to 2012 data. A detailed analysis of 2013 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2013 and Analysis showed the largest change in cash compensation was an increase of +8.0% in total target pay occurring all Pre-Revenue companies. There was almost no change in base salary for subgroups examined with an exception of an increase of +6.7% in the Post Series B, No Revenue companies. Founder CEO 2013 Median Cash Compensation By Stage of Development FOUNDER CEO: MEDIAN CASH COMPENSATION ($K) VARIANCE BY STAGE FROM 2012 TO 2013 # CEOs Base Salary Total Target Pay All Companies in Analysis 495 $ 200,000 $ 213,592 No Revenue All 130 $ 167,356 $ 173,379 Post Series A, no revenue 48 $ 150,000 $ 150,000 Post Series B, no revenue 39 $ 200,000 $ 200,000 Revenue All 365 $ 210,000 $ 240,000 Shipping Product 298 $ 200,000 $ 225,000 Profitable 67 $ 260,000 $ 350,000 Page 7

9 Equity Compensation Non-Founders Equity compensation for non-founding executives remained relatively consistent and a much smaller variance is typically seen from year to year. When looking at the entire population of executives instead of data by stage of development, data is neutralized and blended equity benchmarks are a reflection of overall survey demographics. The table below shows median (50 th percentile) equity compensation as a percentage of fully diluted shares for select non-founder positions in the 2013 survey and the graph shows comparative data between 2013 and Select Non-Founder Positions 2013 Median Equity Compensation (% Fully Diluted Shares) NON-FOUNDER POSITIONS: MEDIAN EQUITY COMPENSATION Total Equity Held as a % Fully diluted Shares Total Equity Held Chief Executive Officer 5.15% Chief Operations Officer 1.55% VP Operations 0.50% Chief Technology Officer 1.08% VP Engineering 0.73% Chief Financial Officer 0.96% VP Finance 0.35% Chief Marketing Officer 0.87% VP Marketing 0.56% Chief Revenue Officer 1.32% VP Sales 0.70% VP Business Dev 0.58% VP Product/Strategy 0.61% Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The aggregate non-founding CEO median (50 th percentile) for total equity compensation in 2013 showed an increase of +3.1% (about +0.15% of fully diluted shares) compared to 2012 data. A detailed analysis of 2013 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2013 and Analysis showed the largest change occurred in the Post Series B, No Revenue companies with a decrease of -15.7% in the amount of equity held (about 0.88% of fully diluted shares). Profitable companies showed an increase of +7.1% in the amount of equity held (about +0.33% of fully diluted shares), presumably from an increase in Refresh practices. Non-Founder CEO 2013 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) NON-FOUNDER CEO: MEDIAN EQUITY COMPENSATION Total Equity Held as a % Fully diluted Shares # CEOs Total Equity Held All Companies in Analysis % No Revenue - All % Post Series A, no revenue % Post Series B, no revenue % Revenue - All % Shipping Product % Profitable % Page 8

10 Founders Equity held by select founder positions showed a general decrease from 2013 to 2012 due to decreases in all positions except the CEO, CTO and VP Engineering functions. The table below shows median (50 th percentile) equity compensation as a percentage of fully diluted shares for select founder positions in the 2013 survey and the graph shows comparative data between 2013 and Select Founder Positions 2013 Median Equity Compensation (% Fully Diluted Shares) FOUNDER POSITIONS: MEDIAN EQUITY COMPENSATION Total Equity Held as a % Fully diluted Shares Total Equity Held Chief Executive Officer 14.16% Chief Technology Officer 7.27% VP Engineering 3.88% Chief Marketing Officer 4.20% VP Marketing 2.34% Chief Revenue Officer 10.17% VP Sales 3.57% VP Business Dev 4.76% VP Product/Strategy 3.75% Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The aggregate founding CEO median (50 th percentile) for total equity compensation in 2013 showed an increase of +8.4% (about +1.10% of fully diluted shares) compared to 2012 data. A detailed analysis of 2013 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2013 and Based on the trends shown, founding CEOs were generally more successful in maintaining their equity positions in 2013 compared to Analysis showed the largest change occurred in Pre-Revenue Companies where there was an overall increase of +34.1% in the amount of equity held (about +4.5% of fully diluted shares). Profitable companies showed an increase of +17.7% in the amount of equity held (about 1.98% of fully diluted shares), presumably from an increase in Refresh or Follow-On grant practices. Founder CEO 2013 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) FOUNDER CEO: MEDIAN EQUITY COMPENSATION Total Equity Held as a % Fully diluted Shares Total Equity # CEOs Held All Companies in Analysis % No Revenue - All % Post Series A, no revenue % Post Series B, no revenue % Revenue - All % Shipping Product % Profitable % Page 9

11 Performance Stock Performance stock represents the shares or options granted or promised that will be either earned or vested in the future based upon either company or individual performance. It is a subset of the total shares and options held by the executive. The use of performance stock continues its minimal occurrence as a form of incentive compensation for the Technology sector. In 2013, performance stock was utilized by roughly 6.5% of the companies surveyed, which is a decrease from the 6.9% of companies using performance stock reported in The 50 th percentile of performance stock as shown below is approximately equivalent to 20% - 25% of the total equity held by the executive level. Performance Stock Held % of Fully Diluted Shares 2013 Companies Using Performance Stock % Jobs with Performance Stock 25th Percentile 50th Percentile 75th Percentile CEO 6.4% 0.48% 1.12% 2.23% VP Level 6.0% 0.07% 0.17% 0.35% Page 10