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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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