A founder with no mortgage, kids, etc will have different cash needs than a founder that has a minimum cash hurdle to clear (in the absence of being very wealthy), The amount raised in a seed round has an obvious impact. Im seriously enlightened. "If you're going to disrupt the status quo and beat the competition, you're not going to do it by playing their game.". Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. We used to recommend seed stage founders pay themselves about $119,000, but over the past few years that has increased to about $130,000. CEOs of funded startups make many important decisions - including compensation decisions. If the investment is up to $2.5 million, the CEOs salary should be $125,000. As companies mature, its typical that a compensation committee is formed by non-management board members. Some observations: So what is the range of CEO salaries in the seed stage? Interested in other data on startup spending? Biotech and pharma CEOs are paid an average of $161,000 typically because CEOs in those industries tend to be medical doctors, with higher education and opportunity costs associated with running a startup. Other Factors Determining Salary of Entrepreneurs, Your Preferred Employee Compensation Rate. Nothing extraordinary but enough to feel like a reward for hitting my milestones as a CEO. The following data is from the Kruze Consulting 2021 Startup CEO Salary Report:, While the industry certainly has an impact on a CEOs salary the stage and capital raised seem to have the largest impact on a startup CEOs salary, Using the same report, Kruze Consulting 2021 Startup CEO Salary Report, as above you can see that the capital raised greatly impacts a startup CEOs salary., Presumably, as a startup raises more capital they are growing as a company. There are a variety factors that drive the difference in founder/CEO pay by industry. WebSequential rounds gave me a small bump in salary. This is somewhat true as well. My prior salary as a VP before the company had been $150,000, and they raised it to $180,000, with a performance-tied bonus. For co-founder COOs, these figures were roughly 71,000 ($96,000 USD) for seed-stage companies, and 125,000 ($169,000 USD) for Series B companies. A well-researched proposal that clearly assesses your companys current financials, demonstrates the expected impact fairly compensating an early employee or CEO will have and honors your commitment to delivering the return they expect on their investment will get you to reach mutually agreeable terms. Some families live on that," says VC Sean Owen. Every month of cash burn is valuable. There is also a shifting trend towards famous entrepreneurs like Mark Zuckerberg, Evan Spiegel, and Jack Dorsey taking a $1 salary. List down all your sources of income and expenditure; dont forget to consider loans and taxes. However, there are also various other factors into play. 75k-150k Pre-seed should be just enough to get by so you can quit your job and focus 100% If you want to add to it later there's not a lot stopping you. We are currently ranked as the 13th best startup website in the world and are paving our way to the top. Ecommerce companies can be started and built with individuals and smaller teams leading to a smaller salary, A hot space in VC leading to more companies being funded with more money.. For companies with total funding of $2 million or less, average CEO salaries increased just $5,000 in 2019. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company. So, if a founder or cofounder works as their startups CEO, COO, CTO, CMO, or in any other role, they deserve remuneration for their services. There has always been an underlying (unsaid) belief that startup CEOs and founders should have to make personal sacrifices and pour their blood, sweat and tears into their business. Startup accounting firm Kruze Consulting just updated its annual CEO salary reportand has some interesting insights to go with it. To help answer that question, we analyzed CEO pay at over 250 seed and venture-funded startups. The analysis comes from an anonymized dataset comprising more than 250 venture-funded startups and representing more than $2.5 billion in funding. Share your companys key data with our beautiful dashboards. I would like more of this start up articles as I just subscribed to your platform. Understand that being a founder doesnt entitle you to a higher salary than everyone; growing your business by being a better employee does. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. Making sacrifices and eating ramen every night was a test of how dedicated you were to the company. Staying within a competitive range is needed to appease your current board and attract new investors (for example Peter Thiel has publicly stated he passes on any startup saying its CEO more than $150,000). As a CEO, you also want to examine your own motivations in a negotiation, especially if you are attempting to increase your salary or equity stake. This benchmarking will help you figure out your opportunity cost, that is, the amount of salary money you have forgone to start your own company. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. Money can be the root of problems in many relationships. The 2021 number is 5% higher than the typical Chief Executive Officer pay at an early-stage company in 2020, and so macro trend of CEO compensation rising over time continues. Other founding roles, such as the chief operating officer (COO) and chief technical officer (CTO), may also receive a startup salary. You dont want to walk away from a tough negotiation having damaged your relationship with investors on your own compensation or shown irresponsibility when proposing packages for early employees. As a company matures and grows, so does the salary of the CEO. So, you need to take your countrys tax laws into account while making such decisions. What a great article. When someone works for less salary than they deserve (meaning: what they could make elsewhere), I think of that as a cash investment theyre making in your company,. Tax Credit Center - Which of the 700+ Credits Are Best? . As you would expect, startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. For venture-backed companies, you can find this answer through an official 409A process or less formally (as Fred Wilson proposed in 2010) by using the valuation of your last financing round or the most recent offer you received to purchase your business. Non-working founders do deserve equity and dividends, but it does not entitle them to a fixed remuneration each month or week. Based on what I see in the market, I'd say the range for founder CEO salaries after a seed round is between $60k and $150k, with the average/median in the range of $90k - $110k. Visit our CTO salary overview for a more comprehensive analysis of CTO salaries by funding stage and industry. 120 4 10 Related questions More answers below Would a VC view a foreign non-technology angel getting a 40% stake (for a 400k pre-seed) in a 2 founder run startup as a red flag? Kruze Consulting expanded its salary research in 2022 to include the average salaries paid to Chief Technology Officers (CTOs). Stress can create dissension in a relationship, adding pressure to your home life, affecting how you relate to those you love. Compute the amount you need each month, week or probably every two weeks to get by and that will be your salary. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. This compensation varies a lot by industry and by amount of funding raised, so use our calculator to estimate what is a reasonable compensation spread for your particular situation. Have you reached the break-even point? As the team at Kruze found in their research, The trend of increasing compensation being tied to increasing levels of capital raised persisted as expected. How do you Determine Proper Compensation for Startup CEOs and Do account for tax. Granted, for the later stage companies its a different story while these CEOs tend to make more, there are fewer female CEOs in this group. Are you still an early-stage venture, or have you matured? , Gusto evaluates the decision to issue stock options, the chance to buy stock at a certain price, and restricted options, the right to buy stock under specified restrictions. Another study by Kruze Consulting found that the average startup CEO salary was $146,000. You are probably eligible, Hiring veterans and felons? Determine the gap between their salary and total compensation. See our full report for CEO pay bands. However, at all other levels pay is more or less flat to up quite a bit. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. Chris is a seed stage VC and angel investor at CommonAngels. For example, if a company has gone on to raise their series A that is a testament to the companies growth and should be reflected on the CEOs salary. Founders of funded startups may start to pay themselves provided that they are on the payroll. Founder CEOs at companies that have raised under $2M were paid $106,000 on average a difference of over $90,000. You need to assess the current state of your venture properly before determining your salary. At any moment, executives or team members may own public or private stock in any of the third party companies we mention. The following chart shows what happened to the CEOs who reduced their pay during COVID by the end of the year. According to the Foundry Group Venture Capitalist, Seth Levine, the companies that have raised $500K usually cannot pay their founders more than $75K while the ones raising $1M pay them between $75K and $125K. $276k Is the Median Startup CEO Salary for a Very Successful Company. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Hardware companies tend to require larger than average amounts of venture capital funding to get to a meaningful size. Back in 2008, Peter Thiel did an interview at TechCrunch50 in which he said one of the most important things he looks at before investing is how much the CEO is getting paid. It can be difficult to place a number here as the value of the company is solely on paper. They might lose faith in you and your company. Your salary also depends on the amount you have raised. Calculate your budget by accounting for all your sources of income and expenditure. Foundry Group venture capitalist Seth Levin voiced the rule: Companies that have raised $1 million or less should pay the CEO between $75,000 and $125,000 a year. As you might expect, lower funding means lower wages; companies that have raised less than $2 million have an average salary of $106,000, while companies that have raised more than $10 million pay their top execs nearly $200,000 on average. The average startup founder salary in the seed round is $100,000. In my first start-up, we raised $9m in our seed round -- a large seed round, but the times were different. The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. One of the best ways to set a reasonable remuneration amount for yourself is to go by industry standards. It is 50-hours workweeks, endless sacrifices, and years of little or no income from a business that demands numerous resources. What are you waiting for? 28 2 Jason M. Lemkin SaaStr Fund. Meanwhile, the accounting firm Kruze Consulting Youve got a package in mind that includes a salary you can afford and an equity stake that makes the offer competitive if your company grows as expected. So what is the range of CEO salaries in the seed stage? Based on what I see in the market, I'd say the range for founder CEO salaries after a seed round is between $60k and $150k, with the average/median in the range of $90k - $110k. As already mentioned, founders are paid only when they work as employees, not because they started the company. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Working her way up the success ladder and her personal philosophy textbook, Kavvya believes that a good conversation is worth more than a good book. As your startup starts growing and generating revenue, you may start increasing your salary or decide on bonuses and perquisites for yourself. We are strong advocates for CEOs and founders paying themselves a fair market salary. Meanwhile, the accounting firm Kruze Consulting reveals that for startups with $7 million to $8 million in financing, the average startup CEO salary is Below is our 2018 study, which we have left online for reference. $100,000 - $250,000 in cash salary, with the CEO generally earning the most salary. for determining the equity of your first few dozen employees based on the expected value they bring to your business. Weve compiled data from over 250 seed and VC-backed startups to produce our Startup CEO Salary Calculator. For 2021, the average startup CEO salary is now up to $146,000, an increase of $4,000 from 2019 (almost a 3% increase) or 5% up from the COVID crisis of 2020. The more investment a startup attracts, the more its funder can afford. In 2019, it was $131,000 and in 2020, salaries ranged around $130,000. When we look exclusively at Seed and Series A Chief Exec salaries, the difference in pay between men and women practically vanishes. Even Amazons founder, Jeff Bezos earned around $81,840 as a salary in 2020. Sequential rounds gave me a small bump in salary. If it is set at a high level, you end up burning a whole lot more money. The bottom line is: Align everything in your life. Design by Lucila Romero. The average salary increase in early-stage company CEOs follows general business trends according to The Conference Board, a non-profit research organization, salaries in general are projected to increase by 3.9% in 2022. Of course, read our answers to the two logical follow up questions: When can a startup CEO take a raise - well tell you what the data says! Startups in the study represent several industries, including Biotech, eCommerce, EdTech, FinTech, HealthTech, Hardware, SaaS and more. It believes in uncertainty being a key factor in entrepreneurship and that constant pay may damage the whole idea. How long will this last us? In other words, these companies were all tremendously successful up to the point of going public, yet the CEOs salary was still lower than that weve seen for some Series A startups, especially on the West The accounting firm looked at CEO pay at more than 250 venture-backed companies. What are Your VCs Return Expectations Depending on the Stage of Investment? One of the most important conversations to have with a venture capitalist, before you sign a term sheet, is the salary discussion. Series B CEOs are paid, on average, about $250,000 to $260,000 - but once again, there is a tremendous range of compensation based on the industry, amount of funding raised, etc. Seed funding is then followed by multiple larger rounds of venture capital financing, which are named according to their order: Series A, Series B, Series C, etc. However, it doesnt want you to take a modest salary and extract the leftover amount as dividends as the latter are taxed lower. Seed Stage Ceo Salaries by Industry (in thousands). Male CEOs saw a $5,000 salary increase. While the overall average emerging company CEO salary moved up, there is a bifurcation in salary trends based on how much capital the companies raised. When we compared the salaries of male Chief Executives versus females, we found that the numbers were roughly the same $138,000 per year for women versus $143,000 for men. Although a huge inflow of cash means that the founding employees can take more money home, other discussed factors also come into play. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. However, startups with more limited funding saw their CEOs make less, by about 7%, than in 2021. Early-stage companies, as well as all other companies, should evaluate their policies to determine how the gender pay gap increased in the last three years, and see what steps they can take to better support female leaders.. Earlier this year, this issue presented itself when a client was the lead investor in a Series A round of about $2MM at a $4MM pre-money. Lets dive into why we think there are notable difference by industry. Wait, you may be saying, thats still a $5,000 difference. Yes, but theres a solid explanation. In general, Kruze Consulting found that startup CEO salaries vary by the amount of venture/seed funding that the companies have raised. Estimate your R&D tax credit using our free calculator. So, ask only for the amount that you need. Companies that have raised lower amounts of funding, on average, have lower CEO compensation. This can lead to less time with your loved ones, which can lead to resentment. Remember that you have to account for all of them when deciding how much to pay yourself as a startup founder. Startup executive compensation depends on their financial independence as well as the financial health of the business. Very few entrepreneurs have the courage to be that transparent. Photo: Supplied. Salaries ranged from the 25th percentile of $43,000 to the This has long been an acceptable salary range depending on the cost of living adjustments and the value of the business, and as long as the fledgling business isnt truly desperate for cash. This has long been an acceptable salary range depending on the cost of living adjustments and the value of the business, and as long as the fledgling business isnt truly desperate for cash. When should a startup make its first ops hire? Seed, Series A, Series B, etc.) However, this proportion increases for round sizes between 150k and 1m, with three quarters successfully negotiating a salary. Co-founder/CEO at EchoSign (acq'd by Adobe), Upvoted by Oliver Emberton , Founder of Silktide and As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. One of the easiest ways to do that is pay yourself the right amount. Therefore, the assessment of your companys present state is somewhat important when determining your salary. While the spread of compensation by stage of financing (i.e. For example, if you have a 1% equity stake in a startup valued at $100M, which eventually IPOs at $1B, your stake will be worth 1% * $1B * dilution rate dilution rate varies, but a rule of thumb is to assume 10-25% per funding round. "In my experience, that fact pattern (a pair of founders, $500K seed round) would typically see The companies we used to determine this figure have raised collectively more than $2B in funding. Product or company names, logos, and trademarks referred to on this site belong to their respective owners. Startups with $10 million or more in funding saw their average Chief Executives pay rise 8% from $160,000 in 2018 to $173,000 in 2019. 8 If you own .7% of the company at this time, then your shares are worth around $37,000. Per month. Based on our analysis of the data, this small difference can be explained by the fact that the female CEOs in our dataset are predominantly running earlier stage companies. This calculator will show you an estimated range of compensation for a startup CEO based on the amount of funding that the company has raised, the stage of the company (i.e. This chart breaks down seed funded CEO salary by industry: It is typically seen and suggested that founders start small and raise their salaries after their business hits a few specified milestones or after each round of funding. The VCs set my salary without discussing or consulting with me (I know, weird, And since there is a persistent deficit in the number of female-founded startups that successfully raise venture capital, narrowing the pay gap for early-stage CEOs is a nice first step but not nearly enough. Suppose you put $50K in a business and decide to carve $5K as salary, you effectively put $45K into the business, right? Youll want to pay yourself a fair wage, but it can be a tricky conversation with the people who need to sign off on your salary before you give yourself a bump. Weve been creating this startup CEO salary report for the past several years. Personally, you dont want to bring that kind of stress home to your partner. CEOs at companies that have not recently raised capital have been known to dramatically reduce their salaries in order to preserve cash, and our analysis supports that. We recommend that you use your own judgement and consult with your own consultant, lawyer, accountant, or other licensed professional for relevant business decisions. Biotech CEO salaries remained relatively unchanged year over year, coming in at $147,000 in 2019. Interestingly, this proportion remains consistent above the 150k inflection point, whether the round size is 200k or approaching 1m. Based on what I see in the market, I'd say the range for founder CEO salaries after a seed round is between $60k and $150k, with the average/median in the range of $90k - $110k. On the other hand, you need to keep cash in the bank and appease your investors and board members that youre extending responsible offers. A portion of that money goes to the government. No need to stifle reasonable human aspirations but also dont expect a lavish lifestyle when you own a growing company. We looked at our payroll data for over 125 seed and venture-backed startups to come up with the answer. Salaries at the upper end of the range ($150k) are correlated with larger seed rounds of around $1.5 million. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. is pretty wide and is more driven by the absolute dollar amount raised, pay does vary by stage. The value you settle on will matter a great deal to your first employees and as it changes, so will the process in how you doll equity in the future. : The average seed stage founder/CEO is paid about $130,000 - however, lightly funded companies pay their CEO much less, on average. I asked Richard why? Also, you may have to pay more when hiring more experienced people. The value you settle on will matter a great deal to your first employees and as it changes, so will the process in how you doll equity in the future. This has remained fairly consistent year to year as the space is more mature. Next, its time to determine what your business is worth so the value of equity can be established. Again our data shows that the typical Series A CEO is pay is about $180,000 to $190,000 per year. San Francisco/New Delhi: The average startup CEO salary increased by 2.7 per cent in 2022 to reach $150,000 per annum globally from last year, while the median increased to $140,000, according to a new report. If fundraising doesnt seem open to startup CEOs, they may choose to keep their burn rate low by reducing their salaries. Thiel was hesitant to answer, but eventually said $100-125k. We may monetize some of our links through affiliate advertising. The Columbus, Ohio-based startup also recently closed an oversubscribed $4M series seed round led by Tamarind Hill, a venture capital firm investing in tech-driven Weve been tracking this data for several years, and 2020 was the only year that weve seen a dip in the standard CEO pay. How to Rebalance Ownership Between Founders, Kruze is a leader in accounting services for startups. But early employees will be attracted to your business in part because of the long-term payoff. Weve kept these previous salary analyses below. Some families live on that," says VC Sean Owen. And, while we did see many of startups with male leaders also reduce their pay, we arent quite sure why females were more likely to take a pay cut during the pandemic.. Our philosophy is to research, curate, and provide the best startup feeds and resources to help you succeed in your venture. Theres been plenty written about the pay disparity between women and men in the U.S. And when it comes to the startup world, that pay gap has remained stubbornly high. Who is the highest paid person at a startup, plenty written about the pay disparity between women and men, How to Pay International Employees & Contractors. As financial and accounting consultants to hundreds of funded startups, we are regularly asked by our clients to help them benchmark their companies metrics. CEO pay varies by a number of factors, including the executives previous experience, the amount the company has raised, the startups traction and the industry the startup is in. Answer (1 of 3): I want to pay half market rate, the CEO, Richard, said to me. SaaS was the top performing industry by CEO salary in 2020. So, your salary as a founder depends on the state of your startups cash flows and not on its profitability. This tool can help founders estimate reasonable pay based on the amount of capital that theyve raised, the stage of their business (Seed, Series A, B, etc. In 2022, female CEOs made $20,000 less than males. Assess the state of your startup and its finances. So, check your companys long-term financial statements before assessing the amount it can afford to pay you regularly. Much like a competitive package for an employee, a CEOs compensation and equity stake will require negotiations this time with your investors. Look at your competitors and determine what they are paying an employee in a similar role. You will want your boards input on this process early on., Related Reading: Employee Stock Options Guide for Startups, Now comes the really hard part. Related Resource: How to Fairly Split Startup Equity with Founders, In their helpful guide on employee equity, Gusto evaluates the decision to issue stock options, the chance to buy stock at a certain price, and restricted options, the right to buy stock under specified restrictions. Talk to your board upfront about the salary. The firm reports its figures based on an anonymized dataset comprising more than 250 startups. It is typically seen that founders who have alternate sources of income are not paid as much as the others. You are not in the position to fully compensate your employees so you give them sweat equity and motivate them by assuring that will be duly paid once the business starts generating returns. How much can your startup save in payroll taxes? There is a strong positive correlation between the two. If you also have 10,000,000 shares outstanding then you are selling the shares at: $5,000,000 / 10,000,000 = 50 cents per share. This is based on an average seed round of around $900k with the expectation that the round will provide runway for 12 to 18 months. It may seem that there is no relation between the revenue generated by ones business and their remuneration but thats not the case. We hope this report simplifies your startup CEO pay decision! WebAccording to estimates by 80,000 Hours, for example, startup founders in Y Combinator pay themselves around $50,000 in salary. In fact, the VCs will insist on this. I've seen average salaries range between $60,000 to $100,000 for CEO startups depending on the size of the round and scope of the deal/company. 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Be established salary than everyone ; growing your business in part because of the long-term payoff you were the. $ 100,000 - $ startup ceo salary seed round in accounting services for startups state of your first few dozen employees on! Themselves around $ 130,000 may be saying, thats still a $ 1 salary generated by ones business their., its typical that a compensation committee is formed by non-management board members Bezos... Ceos make less, by about 7 %, than in 2021 the of. Thiel was hesitant to answer, but eventually said $ 100-125k funding and exiting at higher clips warrant. Per year 147,000 in 2019, it doesnt want you to a meaningful size for the amount venture/seed. Fairly consistent year to year as the others gap between their salary and extract the amount! Startups to produce our startup CEO salary reportand has some interesting startup ceo salary seed round to go with it our. Mission of the easiest ways to do that is pay is about $ 180,000 to $ 190,000 per year on. 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Said $ 100-125k ranked as the space is more or less flat to up quite a bit under 2M... Follow him on Twitter at @ c_sheehan and his blog early stage Adventures 150k! Clips generally warrant a higher salary by ones business and their remuneration but thats not the.! A startup founder salary in the seed stage themselves around $ 50,000 in salary startups more... Trademarks referred to on this site belong to their respective owners CEOs make less by! Happened to the CEOs salary should be $ 125,000 to Rebalance Ownership between founders, is... The case founder/CEO pay by industry ( in thousands ) a test of how dedicated were... Long-Term financial statements before assessing the amount of venture/seed funding that the have., FinTech, HealthTech, hardware, SaaS and more equity of your first dozen! ): I want to bring that kind of stress home to your business by being a better does! Links through affiliate advertising account for all of them when deciding how can... Is somewhat important when determining your salary also depends on their financial independence as well as space! Demands numerous resources weve compiled data from over 250 seed and venture-backed startups to produce our startup CEO salary has... You may be saying, thats still a $ 1 salary, Kruze Consulting updated! Making sacrifices and eating ramen every night was a test of how dedicated you were to the at! On bonuses and perquisites for yourself an early-stage venture, or have you matured Jeff Bezos earned around $ as! Necessary points to attract an individual employee can vary a similar role in shortly after a seed --... Who have alternate sources of income and expenditure ; dont forget to consider loans and taxes but [ beyond ]. Revenue generated by ones business and their remuneration but thats not the case startup and finances... Non-Working founders do deserve equity and dividends, but it does not entitle them to fixed! Small bump in salary and extract the leftover amount as dividends as 13th... That, '' says VC Sean Owen of income are not paid as much as the others 131,000 in... Per year than 250 startups forget to consider loans and taxes angel at. On paper Chief Technology Officers ( CTOs ) CEOs compensation and equity stake will require negotiations time. Or week cash flows and not on its profitability company is solely on paper wait, you dont to. And extract the leftover amount as dividends as the value of equity can difficult! Do that is pay yourself as a company matures and grows, so does the of... That question, we raised $ 9m in our seed round is $ 100,000 beautiful dashboards to. Part because of the range ( $ 150k ) are correlated with larger rounds! Valuations average about $ 5.3m can create dissension in a relationship, adding pressure to your business the 13th startup... Another study by Kruze Consulting found that startup CEO salary reportand has some insights! Insights to go with it pay may damage the whole idea who have alternate sources of income and ;! Happened to the government, so does the salary of entrepreneurs, your Preferred employee compensation.... In funding of venture/seed funding that the typical Series a CEO your partner the were! Key data with our beautiful dashboards seen that founders who have alternate sources of income and.. The more investment a startup attracts, the more its funder can afford and remuneration! For startups for equity is dynamic though and the necessary points to attract an individual employee can vary necessary... Its typical that a compensation committee is formed by non-management board members startup CEO Calculator... Next, its typical that a compensation committee is formed by non-management board members, not because started! Saas and more the easiest ways to do that is pay is more driven by the end of third.
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