We send out a weekly email to all of the founders in our portfolio, as well as the founders we have met in the ecosystem at our events. Every newsletter has a GIVE, an ASK, and a piece of NEWS.
We received this ASK from a founder outside of our portfolio:
“Do you have any tips on how early stage start-ups can improve employee retention when we can’t compete on salaries offered by bigger companies?”
We put the ask out to the community, and here’s what we heard back…
- Sell the vision (and the interesting problem you are solving) and hire the true believers.
- Those who would get pulled by the bigger companies wouldn’t necessarily be a fit anyways.
- Build the culture and the internal connection amongst the team.
- Sell the upside.
- Listen to your employees and keep an ongoing, genuine conversation with them. Softly manage out those that don’t fit.
Here’s the full version of the responses:
CEO, Series B Company, SF:
“Make sure you are only hiring those who are true believers. Sounds easier said than done. But challenge people before they join. Are they joining for the right reasons? (hard work, the chance to make a difference, change the world… wrong reasons: title, salary, awesome article on Tech Crunch, because your company is cool).
Also, assume people will leave, just make sure the good people stay. If you don’t move quickly on people who are simply not contributing to the level of your good Type A, then you have to learn to manage people out (managing out means letting someone go without any of the tension, you work it out in a professional way… “Hey I want to make sure you are happy, let’s discuss what that looks like here or anywhere else…” “what is your passion? is it still here? it’s ok if isn’t” “hey, I know what you are capable of and I Know it is a lot more than what you are putting into lately, how can I help you get back to your usual performance? anything I can help with? let’s track this closely”, “hey, I understand you want a salary and title increase, I fully understand if you need to look someplace else. Right now we just can’t afford it, but we can afford giving more equity and to be honest we highly recommend because the times when employees can get equity like we are able to give out today change once you grow into a post series B or C company..”
Keeping the wrong people creates churn of good people. So it is good to move on quickly. My 2 cents.
Founder, Series A Company, NYC:
“This is like saying “How does LIRR compete with the big airlines”. Different products for different people.
You need to self-select candidates who are motivated by your sense of mission, impact, a bs-free work environment, input and transparency into most major decisions, physical proximity to top leadership, etc. People can’t get that at a big tech company. Focus on recruiting the candidates that are more focused on that than they are comfort, perks, stability and cash comp. When I interview a candidate and ask how they are approaching their search (geo, industry, functional role, stage of company), if they mention that they are also interviewing at [Google or other big techs], I ask what they are looking for in a career that motivates them to interview there. Pretty often you can unpack that and figure out whether their genuine interests and your value prop are connected or not. Typically not. As we’ve gotten better at upfront screening on behavioral attributes, we have very few “low in the funnel” candidates that are seriously considering joining a big tech company so we don’t actually end up “competing” in any real way.”
Founder, Pre-Seed Company, SF:
- First and foremost, having a great culture that people want to be a part of is kind of obvious (and something you have to build intentionally).
2. The second is product: you pretty much have to be working on something intellectually stimulating. One of the biggest complaints I hear from other folks from big tech companies is that they sometimes end up working on really soul sucking projects for a huge portion of their career. Building something interesting, meaty, and stimulating is a very attractive draw.
3. Finally, upside. This is sort of a side effect of doing 1 and 2 well, but if you tick all the boxes ideally a strong engineer will want to maximize their upside by maximizing their equity comp. Because we’ve done #1 and #2 well, we typically see our engineers taking a ~50–60% pay cut in exchange for maximizing equity.
There isn’t any real magic to it. Good culture, good product, reasonable comp (covers cost of living, and has room for great upside).
Former Founder, NYC:
“I feel (and I’m certain many other founders that will respond to this will agree) that the only way to compete against the major tech companies aside from salary is by selling the vision. That’s the founder’s job, especially in the early days of the startup — to convince people (potential team members, advisors, investors, etc) to believe in the vision. I firmly believe that unless you’re the CTO (and even the CTO should be doing this), all of the founding members should be selling in the early days — and selling of the vision is probably at the top of the priority list. If employees believe in the company, the team, and the vision, you’ll have a better chance of retaining them. Obviously belief in the vision is directly tied to other forms of compensation like options.”
Founder, Pre-Seed Company, NYC:
“1. Sell the vision internally, all the time. If your people believe in the future, believe that it matters and want to be a part of creating it, they’re not going to leave for 20% or even 50% more cash. This is even more true if they have equity in the future you’re creating, which they should.
2. Encourage friendships within the team. Not like family — because you’re building a team that expects performance not love — but you can be friends with teammates. It’s hard to quit a job when your best friends work there.
Founder, Seed Company, NYC:
“If you treat the team members as your family with respect, they won’t leave. If they believe in your vision and are excited to be a part of it, why would they leave? Of course, as a CEO, you need to offer a reasonable salary so that they can live in NYC. If the team members can see that we are on the right track to grow and have a big upside with stock options and potential raise, they will be excited to a part of the journey.
Every person has different interests so it’s critical for any founders to listen closely to them and try to find what’s the best way to grow together. Transparent with your team and communicate well continuously are extremely important as well. Also, being humble and allowing them to make mistakes are critical. As a founder, I am learning everyday and no one’s perfect. If they have different opinions then I do, we should have a culture where they can share their ideas. If the team cares, they will do what’s best for the company. Hiring the people you can trust and make them feel ownership is extremely important.
Action is more powerful than words and Best ideas win.”
Founder, Pre-Seed Company, NYC:
“Salary is important to people, but not as much as most founders think. (See this HackerRank study.) All things being equal, I’d double down on fostering (and advertising) a culture of great work-life balance and professional growth. That said: all things are rarely equal. I’d be very curious to see transcripts of the exit interviews.”
Founder, Pre-Seed Company, NYC
“1.Hire people that are super qualified but will appreciate the opportunity (for example one of our employees living in a place that she would have a hard time to find tech position, and we allow her to work remote)
2. Allow flexibility as much as you can, employee appreciate that!
3. Give them small things that are not costing too much but show your appreciation (small bonus, birthday gift)
4. give them good titles
5. make sure they enjoy the work, make sure you talk to them and know how they feel”
Jenny Fielding, Techstars NYC
“We talk about this in our webinar: https://www.crowdcast.io/e/framework-for-hiring”
CEO, Series E Company, NYC
Provide a meaningful amount of stock options at a low enough strike price with a 4 year vesting program.