We are pleased to present the 2014 VC Executive Compensation Survey Trend Report for Technology Companies. The 2014 VC Executive Compensation Survey was sponsored by the following Venture Firms: Accel Partners Delphi Ventures Kleiner Perkins Caufield & Byers Sequoia Capital Andreessen Horowitz Draper Fisher Jurvetson Lightspeed Venture Partners Shasta Ventures August Capital Emergence Capital Partners Mayfield Fund Sigma Partners Azure Capital Partners Fontinalis Partners Menlo Ventures Stripes Group LLC Balderton Capital Foundation Capital Morado Ventures Third Rock Ventures Battery Ventures Foundry Group Morgenthaler Ventures Thomvest Ventures Bay Partners Greylock Partners New Enterprise Associates Trident Capital Bessemer Venture Partners Highland Capital Partners Norwest Venture Partners Trinity Ventures Braemar Energy Ventures Hummer Winblad Notion Capital True Ventures Canaan Partners Ignition Partners OpenView Venture Partners US Venture Partners Carmel Ventures Index Ventures Opus Capital Partners VantagePoint Capital Partners Charles River Ventures InterWest Partners Polaris Partners Venrock Costanoa Venture Capital Jafco Ventures Redpoint Ventures Versant Ventures Crosslink Capital Khosla Ventures Scale Venture Partners Through the efforts of sponsoring venture firms and Advanced-HR, Inc., survey data was collected from 899 private, venture backed technology companies between mid-august 2014 and mid-september 2014. Survey participation in 2014 increased 13% from the 797 companies in the 2013 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 2013 to 2014. We wish to thank those whose efforts went into producing the 2014 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 2014 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.
Survey Demographics The survey of executive compensation in private, venture backed technology companies recorded data in effect at the time of reporting between mid-august 2014 and mid-september 2014. The survey was completed by 899 companies that submitted company metrics and compensation information for 5490 executives globally, an increase of +0.5% in surveyed executives compared with 2013. The 2014 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 2014 regional breakdown for the United States shifted only slightly as a percentage of the survey population compared to survey data from 2013. The table below shows the regional distribution for the 2014 survey and the graph shows a comparative distribution between 2014 and 2013. 2014 Region Breakdown United States SF Bay Area 466 51.8% North East 130 14.5% So. California 47 5.2% Pacific NW 30 3.3% Mountain 30 3.3% Central/Midwest 28 3.1% Mid-Atlantic 22 2.4% South West 20 2.2% South East 17 1.9% No. Calif (Not SFBA) 3 0.3% Outside the US United Kingdom 45 5.0% Europe 27 3.0% Israel 14 1.6% Other Countries 20 2.2% The map below shows the states comprising each US geographic area in the 2014 survey. Page 1
Industries With guidance from our Advisory Board comprised of six of the participating venture firms, the 2014 survey industries were updated to reflect a more contemporary view of technology. The table and graph below show the distribution of the 2014 industry sectors. Comparison to the 2013 survey is omitted due to the industry changes. 2014 Industry Breakdown Enterprise 494 54.9% Consumer 280 31.1% Hardware / Device 74 8.2% Clean Tech 45 5.0% Other Technology 6 0.7% Stage of Development The distribution of companies by stage of development was relatively constant from 2013 to 2014. The table below shows developmental distribution for the 2014 survey and the graph shows a comparative distribution between 2014 and 2013. 2014 Stage of Development Breakdown Early/Product Definition 85 9.5% Product Development 45 5.0% Product in Beta 56 6.2% Shipping Product 589 65.5% Profitable 124 13.8% In 2014, Shipping Product as the largest developmental group has changed somewhat from the 2013 data in its division into two groups: 42% of the companies have revenues of $10M or less; and 58% of the companies have revenues of greater than $10M. In 2013, 52% of the companies had revenues of $10M or less. Funding The survey distribution of companies by Funding Round in 2014 showed an overall increase of funding to earlier stage companies. In 2014 there was an increase of +66% in data submitted by Seed Funding Only through Post Series A companies when compared to the 2013 survey population. The 2014 distribution of companies by Cumulative Capital Raised shifted in the amount of capital raised when compared to 2013 data. There was an increase of +15% in companies raising capital of >$0 - $10M with a corresponding drop in the companies with capital raised of between >$10M - $25M and >$25M - $50M. Page 2
The tables below show funding round and capital raised distribution for the 2014 survey and graphs show comparative distribution between 2014 and 2013. 2014 Funding Round Seed Funding Only 76 8.5% Post Series A 201 22.4% Post Series B 215 23.9% Post Series C 173 19.2% Post Series D 110 12.2% 5+ Rounds of Funding 101 11.2% Growth Capital Only 23 2.6% 2014 Capital Raised ($M) >$0-$10M 230 25.6% >$10M-$25M 204 22.7% >$25M-$50M 206 22.9% >$50M-$75M 120 13.3% >$75M-$100M 49 5.5% >$100M 90 10.0% Revenue and Employees Survey distribution for revenue in 2014 was relatively unchanged from 2013. Similarly, the distribution for headcount groupings was relatively unchanged as well. The tables below show revenue and headcount distribution for the 2014 survey and graphs show comparative distribution between 2014 and 2013. 2014 Revenue Pre-Revenue 152 16.9% >$0-$10M 381 42.4% >$10M-$25M 152 16.9% >$25M-$50M 104 11.6% >$50M-$100M 69 7.7% >$100M 41 4.6% 2014 Headcount <10 61 6.8% 10-25 161 17.9% 26-50 193 21.5% 51-100 198 22.0% 101-200 153 17.0% >200 133 14.8% Page 3
Employee Ownership The table below shows 2014 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 CEO's or No CEO Median % Founder Median % Investor Median % Employee* Post Series A 48 16.5 87% 35.6% 44.4% 18.3% Post Series B 23 35 76% 23.2% 52.2% 20.0% Companies with Revenue Shipping Product, Revenue <$10M 323 40 66% 21.7% 59.3% 17.1% Shipping Product, Revenue $10M+ 266 135.5 45% 11.3% 65.4% 19.5% Profitable 124 147.5 47% 11.5% 67.3% 20.1% * Employee ownership includes unissued options In 2014, overall employee ownership as a % of company fully diluted shares varied from 2013 as shown on the graph Employee Ownership by Stage. Pre-Revenue, Post A and Post B, along companies that were Shipping with <$10M Revenue reported increases of between 1.5% and 2.4% in employee ownership. Later stage companies reported a decrease in employee ownership of between 1.2% and 1.5% compared with survey participants in 2013. As shown in the second graph, Founding CEOs on Staff by Stage, in 2014 there was an overall decrease of -10% in founding CEO population compared to 2013. With the exception of the Post A, Pre-Revenue group, every segment showed a decrease in the founding CEO population. When looking at employee ownership in conjunction with founding status by revenue grouping, the earlier stage companies are trending towards increased option pools when hiring non-founding CEOs. This trend, however, was not reported in the 2014 later stage companies. Page 4
Compensation Trends Survey Population A subset of the more common survey positions was reviewed for changes in the 2014 survey population as compared to the 2013 survey population. The 2014 survey data was comprised of 77% non-founders and 23% founders, representing almost no shift in the total non-founder population compared to the 2013 survey data. The table below shows the total count and percent of nonfounding positions for the 2014 survey and the graph shows a comparative distribution between 2014 and 2013. The largest change from founder to non-founder status was an increase of +10% in the Chief Technology Officer population. 2014 Select Non-Founder Jobs as a Percent of Count Count % Non-Founder Chief Executive Officer 891 37% Chief Operations Officer 205 72% VP Operations 166 92% Chief Technology Officer 559 52% VP Engineering 520 89% Chief Financial Officer 346 97% VP Finance 156 97% Chief Marketing Officer 140 92% VP Marketing 320 96% Chief Revenue Officer 79 92% VP Sales 492 98% VP Business Development 212 95% VP Product / Strategy 369 90% In 2014, the population of non-founder positions was fairly comparable to 2013 with the noted exception of an increase of +10% in the Chief Technology Officer position and a +6% increase in the VP of Business Development position. Page 5
Cash Compensation Non-Founders When comparing 2014 to 2013 data for the subset of most common non-founding executives, overall base salary generally increased on an average +2.0% and total target pay (defined as base salary + target incentive pay) increased on an average +0.3%. A smaller overall increase is in the survey population is understandable given the increase in earlier stage companies. The table below shows median (50 th percentile) cash compensation for select non-founder positions in the 2014 survey and the graph shows comparative data between 2014 and 2013. All currency was converted to USD for analysis purposes. Select Non-Founder Jobs 2014 Median Cash Compensation Base Salary Target Pay Chief Executive Officer $275,000 $380,550 Chief Operations Officer $229,754 $287,000 VP Operations $185,000 $200,125 Chief Technology Officer $202,500 $235,796 VP Engineering $200,000 $230,000 Chief Financial Officer $225,000 $280,000 VP Finance $182,500 $214,057 Chief Marketing Officer $235,000 $297,000 VP Marketing $200,000 $230,000 Chief Revenue Officer $242,000 $400,000 VP Sales $200,000 $350,000 VP Business Development $192,000 $245,000 VP Product / Strategy $194,875 $220,000 Data is combined for all stages of development and does not necessarily reflect a trend of increasing or decreasing compensation. The 2014 aggregate non-founding CEO median (50 th percentile) for cash compensation for the data subset shown below had an overall decrease of -3.4% in base salary and a decrease of -4.9% in total target pay compared to 2013 data. Analysis of 2014 cash compensation broken out by select stages of company development is represented in the chart and the adjacent graph shows comparative data between 2014 and 2013. There are very few companies with non-founding CEOs in the Post Series A and Post Series B companies with no revenue. Analysis showed no change in base salary with a decrease of -3.8% in total target pay for the Shipping Product group. However, there is a significant +5.2% increase in base salary with a +5.1% increase in total target pay for non-founding CEOs in the Profitable companies. Non-Founder CEO 2014 Median Cash Compensation By Stage of Development # CEOs Base Salary Target Pay Companies in Analysis 326 $275,000 $380,550 Pre-Revenue: All Companies 17 $250,000 $275,000 Post Series A, No Revenue 6 $237,500 $237,500 Post Series B, No Revenue 5 $300,000 $330,000 Revenue: All Companies 309 $280,000 $400,000 Shipping Product 230 $275,000 $375,000 Profitable 66 $315,550 $473,170 Page 6
Founders When comparing 2014 to 2013 data for the subset of most common founding executive titles, overall changes base salary reflect an average decrease of -1.4% and an average decrease of -3.2% in total target pay (defined as base salary + target incentive pay). When considering the shift to earlier stage company demographics in the 2014 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 2014 survey and the graph shows comparative data between 2014 and 2013. All currency was converted to USD for analysis purposes. Select Founder Jobs 2014 Median Cash Compensation Base Salary Target Pay Chief Executive Officer $183,750 $200,000 Chief Technology Officer $175,000 $181,000 VP Engineering $164,918 $177,500 Chief Marketing Officer $150,000 $170,000 VP Marketing $160,000 $160,000 Chief Revenue Officer $230,000 $244,750 VP Sales $202,500 $285,000 VP Business Development $200,000 $200,000 VP Product / Strategy $160,000 $160,000 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 2014 showed an average decrease of -8.1% in base salary and an average decrease of -6.4% in total target pay compared to 2013 data. A detailed analysis of 2014 cash compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and 2013. Analysis showed founders in the 2014 survey data generally were paid comparable to or somewhat less than those in 2013. Due to the influx of Seed Funded companies in the 2014 survey, there was a significant decrease of -28.3% in base salary when looking at all Pre-Revenue companies as a group. However, there was almost no change in base salary for subgroups examined with an exception of a decrease of -5.0% in the Post Series B, No Revenue companies. Founder CEO 2014 Median Cash Compensation By Stage of Development # CEOs Base Salary Target Pay Companies in Analysis 565 $183,750 $200,000 Pre-Revenue: All Companies 134 $120,000 $120,000 Post Series A, No Revenue 41 $150,000 $150,000 Post Series B, No Revenue 16 $190,000 $190,000 Revenue: All Companies 431 $200,000 $221,311 Shipping Product 353 $200,000 $210,000 Profitable 58 $250,000 $350,000 Page 7
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 2014 survey and the graph shows comparative data between 2014 and 2013. Select Non-Founder Jobs 2014 Median Equity Compensation (% of Fully Diluted Shares) Equity Held Chief Executive Officer 5.05% Chief Operations Officer 1.50% VP Operations 0.54% Chief Technology Officer 1.16% VP Engineering 0.73% Chief Financial Officer 1.00% VP Finance 0.28% Chief Marketing Officer 0.88% VP Marketing 0.59% Chief Revenue Officer 1.24% VP Sales 0.62% VP Business Development 0.54% VP Product / Strategy 0.57% 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 2014 showed a slight decrease of -2% (representing -0.10% of fully diluted shares) compared to 2013 data. A detailed analysis of 2014 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and 2013. There are very few companies with non-founding CEOs in the Post Series A and Post Series B companies with no revenue so a large data variance may be negligible. Analysis showed almost no change in equity allocated to non-founding CEOs in Profitable companies and a slight decrease of -4% (representing 0.2% of the fully diluted shares) in the Shipping Product group. Non-Founder CEO 2014 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) # CEOs Equity Held Companies in Analysis 326 5.05% Pre-Revenue: All Companies 17 7.59% Post Series A, No Revenue 6 8.75% Post Series B, No Revenue 5 7.51% Revenue: All Companies 309 5.05% Shipping Product 230 5.05% Profitable 66 4.98% Page 8
Founders Equity held by select founder positions showed an increase from 2014 to 2013 due to increases in all positions except the Chief Revenuer Office and VP Sales functions. The table below shows median (50 th percentile) equity compensation as a percentage of fully diluted shares for select founder positions in the 2014 survey and the graph shows comparative data between 2014 and 2013. Select Founder Jobs 2014 Median Equity Compensation (% of Fully Diluted Shares) Equity Held Chief Executive Officer 16.91% Chief Technology Officer 9.09% VP Engineering 6.30% Chief Marketing Officer 8.66% VP Marketing 3.82% Chief Revenue Officer 4.80% VP Sales 2.77% VP Business Development 4.96% VP Product / Strategy 6.99% 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 2014 showed an increase of +19% in overall holdings (representing +2.75% of fully diluted shares) compared to 2013 data. A detailed analysis of 2014 equity compensation broken out by select stages of company development is represented in the chart below and the adjacent graph shows comparative data between 2014 and 2013. Based on the trends shown, founding CEOs were generally more successful in maintaining their equity positions in 2014 compared to 2013. Analysis showed the largest change occurred in Pre-Revenue Companies where there was an overall increase of +36% in the amount of equity held (representing +6.34% of fully diluted shares). Companies that were shipping Product showed an increase of +20% in the amount of equity held (representing 2.58% of fully diluted shares); presumably from an increase in Refresh or Follow-On grant practices. Founder CEO 2014 Median Equity Compensation By Stage of Development (% Fully Diluted Shares) # CEOs Equity Held Companies in Analysis 565 16.91% Pre-Revenue: All Companies 134 24.17% Post Series A, No Revenue 41 20.73% Post Series B, No Revenue 16 12.15% Revenue: All Companies 431 15.18% Shipping Product 353 15.42% Profitable 58 12.33% Page 9
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 2014, performance stock was utilized by roughly 3.5% of the companies surveyed, which is a large decrease from the 6.5% of companies using performance stock reported in 2013. The 50 th percentile of performance stock as shown below is approximately equivalent to 15% - 20% of the total equity held by the executive level. Companies Using Performance Stock Performance Stock Held (% of Fully Diluted Shares) Level % Jobs with Performance Stock 25th Percentile 50th Percentile 75th Percentile CEO 2.5% 0.43% 0.67% 1.48% C - Level 2.7% 0.09% 0.18% 0.49% VP Level 3.1% 0.03% 0.07% 0.20% Page 10