Salaries
Is he worth paying that much?
A question that always goes through the head’s of a business owner, whenever we are going to hire someone.
So what is the market’s norm to pay a salary in a startup? And if that is the justification to give to the new hire. However, my take is different when comes to paying in a Startup. It is not just a person that you are hiring for but someone who will be building the DNA together with you when you first started.
Determining the "norm" for startup salaries can be tricky, as it depends on a variety of factors.
General Trends — Lower base salary compared to established companies: Startups often operate with limited resources, leading to lower base salaries compared to similar roles in established companies. The average startup employee salary falls around $81,000-$101,000 USD per year and maybe without any shares of the Startup.
Equity as compensation — To attract talent despite lower salaries, startups often offer equity in the company. This gives employees a stake in the company’s success and potential future financial gains. The average equity grant for early-stage startups can range from 1-2%, with higher percentages for key hires or founders.
And this is the tricky part for new Startup founders who may not have the experience on working out the numbers to offer, or a deeper understanding of what if it doesn’t work out? Do you take it back? Do you leave it as it is if the employee is to leave before end of probation?
Funding stage — Startups at different stages (pre-seed, seed, Series A, etc.) have varying financial capabilities, impacting salary ranges. Generally, salaries increase with higher funding rounds. Questions arise when is the best time to offer a higher salary or lower if the next round of funding slows down?
Industries — Tech startups tend to offer higher salaries compared to other industries. Location also plays a role, with major tech hubs like San Francisco generally offering higher salaries than smaller cities.
Therefore, offers like Work From Home, hybrid model or Work in Office do have an impact in the amount to negotiate upon too. My suggestion will be if to hire the core team, start with everyone working in the same venue. It will make brainstorming, small talks and interactions easier as you formulate what works and what don’t in building the foundation of the business.
Working from home will work only when the direction of the business is very clear and a strong fundamental foundation is solidified, led by the leaders who knows what they are doing.
Role and experience — As with any company, specific roles and individual experience levels significantly impact salary. CEOs, CTOs, and other leadership positions will naturally command higher salaries than entry-level positions.
Make it clear to any of the C-Suite that you are bringing in that salaries will not be the priority, if it is not. Make sure that anyone coming in will accept that should the fitting don’t work, it is okay to resign and move on.
Never hire someone who cannot perform nor contribute to the business at all time. Never.
You are answerable to everyone who you hired in to perform and to the very people who entrusted you too.
Benefits — Startups may offer benefits packages that differ from established companies. They may prioritize flexible work arrangements, remote work options, or unique perks over traditional health insurance plans, for example.
For Startups that cannot afford to hire with top dollars, you may want to consider giving more flexible benefits to the employees to retain them. But make it clear during the interview stages so that there will not be any misunderstanding between all parties.
Career growth and learning — Startups often provide faster career growth opportunities and the chance to learn new skills quickly due to their dynamic nature. This can be valuable for individuals seeking professional development.
Most Startups do not have a Human Resource department and thus it always falls on the management to decide who to hire or fire. Work towards getting trained and having a deeper understanding of managing people. It will come in useful as more people are brought in.
Ultimately, the "norm" for startup salaries is not a fixed number but rather a range influenced by various factors. Carefully consider your priorities (salary, equity, benefits, career growth) and research specific companies and roles to make an informed decision when evaluating a startup job offer.
Lastly, have that conversation with the newly hired if things do not work out too. Easier to talk than to end up ugly on both ends.