A VC’s Guide to Startup Hiring: Compensation & Benefits

A VC’s Guide to Startup Hiring: Compensation & Benefits

By Marcus Fields on 05/02/23

Though the venture capital industry is known for handing out the big bucks to — hopefully — promising startups, the industry is less known for their other responsibilities: advocating, strategy development, accounting support, financial modeling, hiring/recruiting, and everything else it takes to move an innovative company out of the fledgling stage. 

As VCs, we almost always see these other “auxiliary” duties as more vital and important to the success and wellbeing of our portfolio companies than a check. Central to the wellbeing of our portfolio companies is a quality founding team working to achieve key milestones.

While many hiring has slowed down, many startups are still looking to grow and find people to join their teams — and stay on their teams. 

No matter the climate, attracting quality candidates to a startup has become increasingly hard, and demand for super flexibility and high salaries has skyrocketed. 

But compensation data for startups is often difficult to find and hard to understand as it varies across the board of what companies offer. Salary, equity, insurance, no insurance? These are major factors candidates consider before jumping on board. 

So how should you think about compensation for future employees who will lead your company to success?

A guide to startup compensation and incentives for top performers

Salary

Salary remains top of mind for candidates. In a 2021 survey conducted by Purpose Jobs, over 68% of talent are highly interested in learning more about salaries. Yet that data is often hard to find. 

More and more companies are prioritizing salary transparency to attract top talent, and many states are enacting laws that require employers to disclose salary information. Even if it’s not required in your state to disclose the pay scale, doing so could greatly benefit your hiring process. Embracing salary transparency can build trust, help uncover and address pay inequity, and find top candidates. 

According to an Indeed survey of 1,500 U.S.-based professionals in 2022, about 75% of them are “more likely to apply for a job if the salary range is listed in the posting.”

Always be looking at as much salary data you can find to determine competitive salary ranges — and be prepared to negotiate with candidates, especially the good ones! 

Here’s a sample of salary data we’ve collected for CEOs: 

Bonus

Bonuses are a common occurrence and even expected by members of the upper management executive team. In order to attract top-tier talent, a competitive bonus plan needs to be in place. 

There are sorts of bonuses you can offer: singing, holiday, annual, referral, on-the-spot bonuses… if you make bonuses a large part of your compensation package, be sure to communicate that to prospective employees so that they can better understand the full picture. Also be sure to explain the qualifications needed to get a bonus. You don’t want a shiny bonus package to fall flat and disappoint employees. Again, transparency is key. 

Equity Ownership

In venture, a main way to motivate your employees may be through equity incentive packages. While large tech companies like Amazon and Meta use this method to attract top talent, it’s been a staple of venture firms who may not have the cash to pay high $500k salaries to employees. Using a competitive equity package can be a great way to thank (and retain) your employees when cash is constrained. 

Additionally, equity compensation is a great way to align goals between you and your employees, and reward people financially who are already emotionally invested in the business.

Health Insurance

Offering things like health insurance not only attracts high quality talent, it also attracts diverse talent. Not offering health insurance deters people with medical conditions, non-married people who could otherwise hop onto a partner’s insurance, people who can’t afford to foot the bill themselves, and other circumstances which are too numerous to detail here. 

It’s great to offer plans that are completely covered by the company (no-cost to the employee), but if that’s not feasible, at the very least offer plans that are little cost to employees. 

If you really can’t offer health insurance (though we highly suggest you do), then make sure the salary offer is over market price, as candidates will have to factor in the cost of their own healthcare.

Flexibility 

It’s hard to put a number to it, but flexibility is a top incentive for high-quality candidates. And it all comes down to the culture. 

Saying your company is flexible while scoffing when your employee leaves at 3pm to pick up their kids isn’t flexibility, and employees will know it. 

Communicate to candidates what flexibility means and looks like to the company. For some, it’s totally asynchronous while there’s some overlap for others. Some companies have flexibility in location, but not hours. 

In an ideal scenario, most candidates are looking for hyper flexibility:

• Schedule flexibility (each person determines their schedule —  if possible make sure the team overlaps at least 2-4 hours each day and then the rest of the day is up to them)

• Geographic flexibility (can choose to work from home or the office)

It all comes down to how the company treats its employees. Candidates want to know that they put employee wellness first, especially when it comes to flexibility.

Days Off

A great perk that many candidates are looking for now are extra days off. These are days outside of a regular PTO plan: Summer Fridays, Summer Mondays, company-wide Wellness Days, etc. If you can’t offer a fully paid health plan, or the highest salaries possible, these are great ways to still support employees and show candidates you care.  

Vacation

One positive trend storming the U.S. is unlimited PTO. 

The problem is that employees often take less vacation in companies with unlimited PTO (~13 days) than companies with traditional PTO (~15 days). Employees often feel guilty taking a vacation day and worry about catching up once their vacation is over or being passed up on a promotion. 

Again, it all comes down to the culture: the best candidates are looking for a culture that supports people taking vacation. 

A common solution to the unlimited PTO controversy is to also incorporate a minimum PTO policy that may subvert the guilt and anxiety of stellar employees. 

In Office / Virtual

Most tech talent is looking for remote roles, but that doesn’t mean everyone is. It’s important to set expectations with candidates and understand how they feel about office/hybrid/remote settings. If they are someone who needs to be in an office but you’re a remote company, offer a co-working stipend as a benefit. If you have an office and expect people to come in occasionally, be sure to make those expectations clear. 

Culture 

Culture may be hard to define, but it’s so very important to the success of a business and how the company attracts — and retains — talent. 

There’s the “what you do” and then there’s the “how you do it” — that’s culture; how business is done. Revenue above all is a way of doing business that creates a certain kind of culture. If the team goes about their day communicating, being understanding, helpful, energetic, open-minded, responsive to feedback… those are elements of a company’s culture. 

The things that will attract top candidates in today’s market are those very same things: empathy, understanding, flexibility, openness, caring. Top candidates are looking for those cultural markers in their next company. 

About the Author

Marcus Fields is an Associate at RC Capital. He primarily works in his firm’s medtech practice which invests capital into growing medical device companies looking to expand its commercial footprint. Marcus has been pivotal in investing capital into several high-growth, high-tech companies to-date including Q’Apel Medical, Checkpoint Surgical, Standard Bariatrics, and SPR Therapeutics.