May 19, 2021

Salary & Equity Trends at Every Stage of the Startup Lifecycle

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Hiring people is hard. Hiring people when your company is in its early stages can seem impossible. Let’s face it – there is no playbook. Most people figure it out through trial and error. Or they lean on advisors for guidance. Worst case they read blogs and try to figure it out. 

Glad you kept reading – I swear this advice is different. I recently covered this topic on a Techstars panel. We talked about the challenges of hiring and building out teams. How to define roles and requirements. How to structure compensation and equity. And how to think about this throughout your organization’s evolution.

Focus on the most important aspects of the role 

When looking at leaders – focus on 3 things:

  1. Hands-on experience – Can they roll up their sleeves and get the job done? Have they done it recently?
  2. Strategy/Vision – Can they set the vision for how this function will allow your company to grow?
  3. People Management – Can they build and grow a team?

You aren’t going to find someone that is 10/10 in all three. Unicorns don’t exist. And the ones that do, are running their own Unicorn. Focus on what you need and be ready to forgo strength in one area for lack of experience in another.

Where your company is today will impact the type of person you need. The first person you hire for in sales or tech may not be the one running that team when your company has tripled. Maybe they can grow with the company, but not everyone can. That’s ok.

Worry less about title and more about actual experience

There are 3 options for hiring for key roles, no matter the function – Lead, Director, VP/C-Level. The experience will vary and so will the price.  As your company evolves, you need to look at your team and make sure you have the right talent. 

Here is a guide for hiring. Whether it is the first person in a department or your first leader within the department.

Lead 

When someone at this level makes sense:

Seed Funding Stage/Pre-revenue → Consider outsourcing roles that aren’t handled by the founding team. Sales is the least likely the outsource. Finance, Marketing, HR, and Tech (if you don’t have a Technical Founder)  make the most sense to outsource.

What they do well: 

  • Going to be hands-on.
  • Should be able to roll up their sleeves and execute, no matter the function.
  • Can they grow with the company? If so, this is a home run for both sides. This person can grow into leadership and help the company scale

Where they may struggle: 

  • Have they worked in a startup before?
  • Are they lacking leadership/strategy?
  • Can they scale with the company?
  • Do they have the executive/board presence your company needs?

Title(s) & What you might have to pay (base):

Tech → Sr. / Lead / Principal Engineer – $120k – $180k

Sales → Sr. Account Executive; Sales Manager – $75 – 120k+ commission (Base = ~50% of OTE)

Finance → Sr. Accountant, Finance/Accounting Manager – $85 – $125k

Marketing → Digital Marketing Lead, Marketing Manager – $75 – 125k

HR → HR Business Partner; Hr Manager – $80 – 110k

Director

When someone at this level makes sense:

  • Seed or Series A stage. Going from ~10 employees to 20+.  
    • Tech – you may be looking for someone to manage a couple of internal (or offshore) resources.  Or to insource the development and put some processes in place. 
    • Sales – You need to build a team or bring in someone to put processes in place. 
    • Finance, HR, or Marketing – you are hiring your first internal person for the function.
  • Make sure this person has the right mix between hands-on skills and leadership.

What they do well: 

  • Should still be hands-on.  Need to determine if they can/want to roll up their sleeves. 
  • They should have leadership but may be light on the strategy experience. Can they put the roadmap together that you need for this function? Do you need them to?

Where they might struggle: 

  • Do they WANT to be hands-on still?
  • Are they strong enough to build credibility with their team? Extra important when looking for technical leaders.
  • Can they scale your company?
  • Can they manage a team?
  • Do they have the executive presence to work with execs/board?

Title(s) & What you might have to pay (base): 

Tech → Technical Architect, Dev Manager, Director of Engineering/Tech – $140 – $180k

Sales → Sales Manager/ Director of Sales – $120 – $150k (base = ~50% of OTE)

Finance → Finance Manager; Accounting Manager or Sr. Manager; Controller, Director of Finance/Accounting – $110 – $150k+

Marketing → Digital Marketing Director, Director or Marketing – $115k – $140k

HR → HR Director – $110k – $150k

VP/C-Level

When someone at this level makes sense:

  • Series A or B.
  • Going from <50 employees to 100+.
  • Your company is growing. You need the right leader(s) to scale.

What they do well: 

  • Will be way more polished than a less experienced person. Will talk a great game.
  • Should be able to see the big picture. Has a nice mix of understanding their function and how it applies to the business. 
  • Communicate with Executives/Board/Business Leaders
  • SHOULD be strong people managers.

Where they might struggle: 

  • How long has it been since they’ve been in a hands-on role?
  • Have they worked in a similar-sized/stage company?
  • Have they worked with a small (non-existent) team?

Title(s) & What you might have to pay (base):  

Tech →VP of Tech, Engineering, CTO, CIO, Head of Technology – $180-250k+

Sales → VP of Sales, CRO, CSO, Head of Sales, Head of Growth – $150 – 300k (Base = ~50% of OTE)

Finance → VP of Finance/Accounting, CFO – $170 – 250k

Marketing → VP of Marketing, CMO – $140 – 250k

HR → VPHR, CHRO – $130 – 200k

Iknow – it is a lot of information. We encourage companies to take a step back and prioritize needs. Sometimes, interviewing a slate of candidates with a diverse set of experiences helps. It gives founders an idea of what they can afford. But it can also be a giant timesuck, so be thoughtful about the process.

Success is a lot easier to come by when you have someone experienced to run the search. Whether it is Hirewell, or someone else, don’t leave it to chance. Missing on key hires can be devastating to early-stage companies. Unfortunately, happens more than anyone would care to admit.

Good luck and remember, when you need to hire – call Hirewell!

Episode Transcript

Hi, I’m Matt Massucci, I’m, the founder and CEO of Hirewell, a Chicago based talent acquisition solutions provider. We do a lot of work in the high growth, kinda early stage tech world. So I’m excited to join the group from Techstars and talk a little bit about hiring and specifically salaries for executive level people within kind of early stage companies.

So, I’ll preface sort of what prompted this, you know, I’ve spoken with the folks from Techstars a few times over the years, but you know, did a quick presentation on hiring a few weeks ago and then a follow up question came regarding salaries for people at early stage companies.

And so there are four kind of main functional areas that there are questions on. Technology, operations, sales, and marketing, which again, are obviously four key parts to any early stage company. And so I always preface hiring is hard period. Hiring when you’re an early stage company is really hard and the stakes are higher.

It’s also tricky to know what you want. And you know, it’s not apples to apples when it comes to titles. So I really, I focus less on the actual title. I mean, sure. You can call it a CTO or you can call it a director of technology, it could be a lead engineer. What I really try to understand for every organization is what they’re looking to solve from a hiring perspective.

Like what is the skillset? What are the current skills they have? What are the founders of their current team doing? And then where do you need to add additional skills or experience? So again, focus less on title because if you make it a CTO when you start integrating CTOs, odds are like, they’re not going to be the right fit for you because if they haven’t come out of a similar size company or organization, it’s going to just, they’re not going to be comfortable doing as many jobs or wearing as many hats as that someone has to do it in an early stage company.

You can call somebody whatever you want, right. And that helps you attract the right person and you can get the right talent on board. Great use title to your advantage. But I think the title is sort of third on the list of priorities. Compensation and equity is first or second, depending on kind of how you want to rank it.

It’s obviously important. And you want whoever you bring on to believe in yourself, as well as your company and what you’re doing and then hopefully the compensation will work itself out. But let’s face it, we’re all somewhat limited by what our budgets are, how much cash we have in the bank, as well as how much equity we can offer.

The equity is a key piece because that’s a nice variable that you can play with it and incentivize. If the person truly believes in you and the company, then hopefully you can get them to consider a little bit less cash than equity.But let’s face it, like it’s really really hard to hire people without a solid base salary just because there’s too many other people that, you know, too many other firms you’re competing with that we’ll pay salary, we’ll pay equity.

So if you’re trying to do it all in equity, like you’re going to struggle. And I think the number one thing to really pay attention to is the skill set and responsibilities and sort of what you’re looking for out of that person. And I think every key, functional role, it’s sort of like there’s three main things to focus on.

Like how hands-on you want that person to be? So if it’s someone within technology, do you want them actually writing code or not? So is how hands-on are they, how strong from a strategic point of view, like, do you want them driving the business? Do you want them setting the direction of the product or kind of the major function or is that already set and you need someone to execute?

And then the third part is the people management components. Is there a team right now? Will there be a team in the future and kind of what are your plans for that? I think what gets tough and I think what companies struggle with is, you know, we’ve seen companies go, you know, a startup is let’s say – call it point A where they may have raised a little bit of funding.

They may be in the process of growing but they may not have revenue, they may have some revenue, but you’re going from point A to point B, which is you know that series A, raising a bit of money to hitting say 5 million or 10 million in revenue, whatever your metrics are.

And then hopefully you’re fortunate to reach that phase and then you go from point B to point C and there’s a pretty good chance, the higher the leader you hire for these different functions may or may not be the right person for it. And now in a perfect world he or she is and they’re able to grow and scale with your organization but that’s not always the case.

So I see a lot of times, again speaking about that tech functioning in general, that first tech hire is oftentimes really a lead engineer. And so in a perfect world, he or she can drive the strategy and the product vision for the organization and then grow and build a team and manage

10 20, 30, 40 person department. But let’s face it, that’s usually not the case. And I think tech is the hardest because of that because you know what makes a great engineer oftentimes you know, at best they’re kind of good at really two of those things. They’re really good from the technical side and the visionary side or they’re really good at the product side and the people management side, but they’re not as strong in the hands-on tech.

So I will say, I mentioned before, like the concept of someone taking a hundred percent equity, like I’ve never heard of anybody that worthwhile doing it. There are of course there clearly are but I think anybody who’s doing it, it’s a known entity or meaning they know the founder, they worked together in a previous life.

So to find a random stranger who’s open to doingthat, it’s just a pretty tall proposition. Where you find them in general, it’s especially hard right now. I mean, I know in normal times you’d all be at 1871 part of the time and it’s areas like that where you’re just able to network and get in front of people and go to events and just talk to people about what you’re doing and potentially find someone who’s passionate about it and that’s how you can make it happen. But truthfully, one thing I tell all founders, I mean recruiting is part of your job, right?

I mean sales and recruiting, you may not be a salesperson, you may not be a recruiter, but unfortunately you have to be the best of both of those for a period of time in your organization because if you can’t sell your organization better than anybody else that’s to prospective customers or prospective employees, like you’re in trouble.

And again, that may be outside of your sweet spot. So just to get better at it. I mean, again, this is something you’re obviously passionate about what you believe in, you need to figure out how to kind of translate that passion to others and get them excited about working for you. Would you be able to talk a little bit about how compensation evolves through the various stages of a company?

Yeah. And that was kind of the next piece I wanted to talk about. So I think, so compensation and title and responsibility, as I said, those are kind of the three key factors. But the range for each and in terms of like those different roles, we’ll start with tech because tech is, you know, the tech hiring market has been red hot for a really long time. There was about a six week window in 2020 where you could actually hire a good tech talent and it was a buyer’s market for hiring tech talent. Unfortunately only buyers I think were Google, Facebook and Amazon. And so I feel like they scooped up anybody that was available and kind of actively looking in April, which was like the one time where there was just a mismatch in the market. So tech salaries are a lot. If a software engineer or director or VP or C-level person is looking, they are going to have a lot of options.

So there’s not a lot you can do on the low end. I mean, again, so like when we look at kind of like a director level person, that’s sort of like kind of the low end, what we call executive. So it may be someone who’s still pretty hands-on. It may be someone who’s pure management.

You obviously want to dig into what the skill set is and what the person’s done more of. But, where we see the data we pulled, like directors of technology that base salary starts around 175. That’s also kind of comparable to like a principal engineer will make. Now this doesn’t mean you can’t find less, but like that is really kind of the market that we’ve seen has kind of been in that say 150 to 175 on the low end for kind of that senior level technical talents.

Is that across all stages or is that a company of a given size? Yes. So it’s kind of all, sort of all stages right? Because that director at a big company is kind of equal to a VP or a C-level person at a small company. So I’d say that 160 to 175 is kind of just the entry point for kind of a very senior level technologist.

Now equity can be a factor and like I said, getting people to believe in your business and what you’re doing can offset that. I mean, really there’s kind of two variables when it comes to paying people and especially the early stage company is going to be base compensation is going to be equity.

So, you know, you may be able to get somebody to take 20 to 30% less of one with the promise of more of the other. But again, that’s not a super sustainable long-term thing. Like it really needs to be a bridge until you raise more funding and you can kind of pay that person appropriately because eventually it becomes kind of a raise for you to build the company you want to be where like that person can make what they want to make and see the upside and kind of see the potential because the problem with the technologists is that they don’t –

if they don’t feel the company is going the right direction and they’re not being rewarded or kind of challenged, they’re always going to have a lot of other options. So you can’t be too under market for too long, I guess is my point.

And what about outside of the technologists? So again, there are four areas to talk about with tech, operations, sales, and marketing. So operations is probably the least common role that we see because you don’t see a lot of early stage companies hiring a COO or like a head of operations.

I think that role is usually just done by other people. I think it kind of just falls under the founder’s job or whatever. But like for a head of operations, the median salary we saw was right around 170. But again, like that’s a huge range because I mean that one, you could see people as low as 100k, but again, the reason there’s not that much of a range is because frankly that role just doesn’t exist in companies too small. I mean like operations is kind of a catchall, it could be human resources, it could be someone who’s doing some recruiting. It’s so dependent on the nature of the business that it’s not necessarily, it’s a hard one to pull a lot of data on. But the next two roles that currently we get asked about are sales and marketing.

And so I’ll talk about marketing first because that’s a little bit like the operations role. Marketing doesn’t – like not every company will have a marketing person, right? I mean, marketing is sometimes outsourced. People will use like an advertising or PR firm for some of that.

Some of it’s just kind of done by the sales team. As kind of the world’s evolved, obviously marketing is taking a bigger role and a bigger function because your ability to reach customers through non sales channels has become obviously a huge component of early stage companies.

But, you know, marketing is one where again, we probably see the biggest range from like that first person you hire for an early stage company, like you may call them a director but that’s a role that can be 100 to 120,000 annually. And then, a VP could be someone who’s, you know, the median salary we saw for that was like around 150.

And then for that CMO or kind of like that true marketing leader, that’s like 200 to 250 in base comp. Again, marketing is one where you really want to dig into what the expectations are for the person. Like, do you want them just rolling up their sleeves and executing on campaigns and like email marketing or like SEO, different things like that.

Like, you run the risk of anybody who’s too senior and just hasn’t really done that stuff in a while. And so, what we see with marketing more often as someone higher, like a specialist in kind of one particular area or a generalist who can do a variety of different things but ideally kind of grow with your organization.

And then lastly sales. So I mean, sales and technology, the two most common roles we see at early stage companies because right? Like if you’re in a tech enabled company, obviously your technology, your platform is vital and then you need customers. So sales is kind of the key thing.

But sales is another one, it’s sort of like the technology role where you really want to understand what are you looking for. If it’s your first person, odds are, it’s going to be someone who has a quota and is going to be your top sales person. So again, you can call that whatever you want.

It can be a director of sales, it can be a VP of sales, it can be a chief revenue officer. I’d avoid that title cause just sort of unnecessary title inflation and you really want someone who can just sell. And, I mean it’s tricky because if you’ve never had sales before, like you need someone who’s strategic enough to define what your target customer is, be able to kind of come up with your go-to market strategy, execute on it, prospect and then close.

And so you think about it, like at a big company that’s effectively like six different teams that are involved in this stuff, I mean that’s where like some marketing, some sales operations, some BDR or kind of just executing it. And then usually like that head of sales or kind of seeing a person to close on things.

So that’s really the most challenging and that’s probably the one where we see tech and sales or roles where we see really evolve with the company over time. Where that first person you hire is most likely really like a lead for lack of a better way to put it. Someone who’s very comfortable being hands-on, someone who can execute.

So again, if it’s technology, someone who can roll up their sleeves and code. If it’s sales, it’s someone who can roll up their sleeves and sell. You’re typically going to pour gold a little bit of the strategy for that. Whereas they may not be as great on like implementing processes and really growing a team and again, taking a company from zero to $5 million, But like, they’ll help you get customers and they’ll help you sell things and they’ll help you kind of deliver that proof of concept.

Got it. And I guess as founders are trying to basically build out their models so they can raise their round in order, they have to project a given cash burn rate and, you know, anticipate what it’s going to take in order to get the company to that next stage. And so, as they’re looking at making these kind of carving out these both equity and salary positions and what that’s going to take, how should they be thinking about this?

Like how much money should they be bringing out for X number, the first sales hire, the second sales hire, the first ops hire, second marketing kind of each one of those positions? Yeah, it’s a good question. I mean again, it depends on what you’re looking for. I mean, for sales, the numbers that I’d come up with for like a true heads of sales can be anywhere from like 150 to 250 in base and then they’re often times making double that in OTD.

But again, that may not be what you need. Like you may just want to hire, I mean, the range for salespeople, it starts at 50K for a BDR. It can be 90K for an account executive and it can be 120K for someone who’s kind of a good senior AE that who could grow into these things.

So you have a lot of wiggle room on the sales side. Like I said, I mean, tech is probably the hardest because there’s just less wiggle room. Entry level software engineers basically make 85K now and like the issue you have is are they going to really be able to help you?

You know what I mean? I think that’s like the struggle companies deal with when they’re trying to figure out what they – you get what you pay for. It’s unfortunately a cliche but it’s true. And it applies to a lot of these different roles. So, you can do one of two things. You can use kind of the numbers and I’m happy to share them over and we’ll create a quick presentation.

I’m happy to share those. And like there’s always wiggle room, you can always go lower, but you’re going to be sacrificing something. That’s just the nature of it. It’s like buying anything else. And I hate to equate hiring people to buy but that’s what it is, right. Like when you go to – if you’re going to a nice restaurant and you have $25 but the filet costs $50, like they’re not going to sell it to you.

They’re going to say, why don’t you look at this part of the menu? I mean, it’s just no different when hiring. So you have to figure out what you can afford and then what you can get with that and then how to make it work. And so, it’s tough like for that first, you know, until you kind of build that critical mass and you have something more to offer, whether it’s more compensation or like a truly viable product that is selling itself. Like it just, it’s a bit of a battle to bringing up those key people.

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