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Compensation On The Rise For Health-Care
And IT CEOs
By Clancy Nolan
Tuesday, October 17, 2006
It's a good time to be chief executive of a venture-backed
start-up.
After holding steady for the past two years, total compensation
for CEOs at both information technology start-ups and health-care
companies is on the rise. Total compensation includes salary
and bonuses or commissions.
CEOs at venture-backed health-care companies fetched a median
compensation of $284,000 during the past year, an 8.4% increase
from $262,000 a year ago, according to data from industry
tracker VentureOne, a unit of this newsletter's publisher
Dow Jones & Co. CEOs at IT start-ups saw a similar 8.3% increase
to $275,000, up from $254,000 a year ago. The data are annualized
to Oct. 1 of each year.
"Generally we are seeing an increase," said Jim Jones, managing
director at BA Venture Partners.
Jones, who invests largely in hardware and IT infrastructure,
attributes the up-tick to increased competition from the public
sector. A weak market for venture-backed initial public offerings
has also led incoming CEOs to place an emphasis on the cash
portions of their compensation packages, he said.
"[At a board level] we are resetting our expectations of
what we should pay to bring in the right executive."
Median salaries for CEOs of IT start-ups rose 4.2% in the
last year to $225,000, compared with $216,000 a year ago.
Median bonuses for the executives held steady at $50,000,
as did equity stakes at about 5%. At health-care companies,
CEOs saw a 6.4% increase in median salary, reaching $250,000
from $235,000 in 2005. Median bonuses at health-care companies
increased 9.4% to $35,000 from $32,000 a year ago; and median
ownership in health-care companies increased to 5%, from 4%
in 2005.
Overall, median compensation for the top post at venture-backed
start-ups grew to $275,000, a 5.8% increase from the $260,000
reported in 2005. "I would say we are seeing stability...in
the zone between $250,000 and $300,000," said Pascal Levensohn,
founder and managing director of Levensohn Venture Partners.
Indeed, compensation is not rising across the board. Compensation
for the top spots at retail and consumer products and services
start-ups has held steady since 2004, at $260,000, according
to VentureOne.
And the sectors that are seeing the greatest boost in CEO
compensation -- health care and IT -- are the same sectors
that have propelled venture investments this year to its highest
point since 2001.
Venture firms poured $12.97 billion into start-ups during
the first half of 2006, a 13% increase from the same period
last year, according to data from Ernst & Young LLP and VentureOne,
thanks largely to a growing interest in health-care companies
and steady deal flow in information technology.
Broken down by geography, Northern California continues to
lead with the nation's highest paid start-up CEOs, with median
compensation hitting $290,000, a 9.4% increase from the $265,000
reported last year. The northeastern U.S. and the Potomac
region fall a close second, with a median compensation package
of $280,000, increasing 3.7% from $270,000 and 1.8% from $275,000,
respectively.
VentureOne compiled data on more than 700 venture-backed
companies, representing roughly 8,100 people, for its compensation
survey.

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