Salary at Venture-Backed Companies
perceptive.ly
perceptive.ly
IMO (and while I can't speak to the management side of it), this displays a horrifying misunderstanding of the mindset of the technical people you want to hire and pay well.
As an experienced and driven programmer, you hire me and pay me well so that my only concern regarding work is how awesome I can make the product I am working on. My name is attached to that code and that product, I need it to be as good as I can make it within the other constraints you've placed upon me. You can only fuck this up by paying me too little (because then I start to wonder how I am valued and whether or not I am wasting my time with a company that doesn't value me enough), not by paying me too much.
Granted, not every programmer is like this, but the ones you want to hire are.
worrying about money means less time working. Less time thinking about how to engineer things nicely / solve high value problems. If you want great work from good people, compensate them well so they can FOCUS on what you've hired them to do.
It's like hiring the best developers possible - obviously not everyone can hire the best devs, but it doesn't mean you shouldn't try to do it anyway.
Is it really worthwhile to choose to avoid hiring ~50% of the best people in the industry at the outset, on a vague fear that personal happiness will doom the startup? Is that a winning recruitment strategy?
Worrying about money means thinking about side jobs, etc.
Very true. The female is the real hunter and the one to get if you are after a mouser. The male likes to lie in the sun, much like its owner.
You should be paying your staff what they're worth and not short sell them because you're worried about them feeling "fat and happy." That's simply ridiculous.
If they themselves are not a shareholder then they should be working towards something. Is that a raise? Maybe that is equity? Whatever the incentive you can't just hire people and expect that they're going to live at the office without adequate compensation.
If you pay your CEO too much more than $260k, there might be a risk that he/she start worrying about keeping the job (and the high salary) more than growing the company.
> Salary is a measure of how much value one is adding to a company, and that information should not be a secret.
> If companies are consistently paying management teams 30% away from these averages in either direction, there is likely a problem at the company.
This runs the gamut from superstition (paying people more may make them less 'hungry') to untrue as a matter of fact (salary is an equilibrium of supply and demand, not a measure of value added), to playing to the middle ground fallacy (you should pay upper management within this range dictated by an average).
My statement that paying people excessively can make them less hungry is something that has been observed through experience. I'm not saying that this is always the case, just that it happens and is something to be aware of.
Sure, salary is a matter of supply and demand- which is why I'm advocating for more transparency so that all market participants can make decisions with more complete information of the market. But I'm saying that supply and demand SHOULD be dictated by value added.
I'm not necessarily saying that every company should pay within this range. Just that this is something to be aware of, and if there is significant deviation from these numbers, more thought should be put into the decision making process.
I am not sure why your employees would be less 'hungry' if you're paying them more unless they feel like they don't have ownership in the product. Or maybe they just didn't jive well with the team.
Either way they are staffing problems - hire the right people and pay them what they are worth.
What it teaches you is that: 1. Never use averages, always use medians 2. Sample sizes are critical, and anything below 5 samples you just can't trust (ideally 30, as the Central Limit Theorem suggests) 3. Garbage in, garbage out: if you don't know the population of the sample, then you can't trust the output (i.e., how many employees, what's the revenue run rate, what's the user growth look like, what's the valuation and how many funding rounds, etc).
I love the spirit of this data, but based on the core principles outlined above, you can't hang your hat on this data.
In software engineering land, not knowing these three principles is like not knowing the principles of MVC.
God forbid if your employees are happy.
In all seriousness, I don't even remotely understand this mindset. Why would paying your employees less than they deserve or less than is optimal encourage them to "stay hungry." If anything, this is going to deter them from working inordinately hard or may drive them from the company altogether. If a company pays well, the employees have more to lose and are likely have a greater appreciation for their employer.
I just can't fathom how they expect that, by paying less than they ought to or less than their employees deserve, the employees will be more inclined to work hard.
This speaks to a fundament misinterpretation of employee motivation and is incredibly disquieting.
Meanwhile I have no problem at all hiring the best and the brightest. It's super easy to find good people and hire them and how to do so is not a secret at all.
There is an old saying that "You should pay employees enough so that they don't have to worry about making more money, but not enough so that they won't have to continue working."
*edit: One thing to keep in mind is that everyone is not out to do the best job they can, and it is difficult to determine this until after you have worked with them for a while.
You want to start off as a very high level candidate.
- You want the relationship with your employees not to be based solely on money. If the only reason they work for you is the salary then you have a problem already.
- It has been shown experimentally that larger incentives can negatively impact performance. This is more important for bonuses but salary probably shows some similar behaviour. In general when you worry about the money and the stakes you become less effective.
- What people are paid relative to their peers is important. People feel better when they're paid better relative to their peers. The actual amount is less important. This supports the "pay fairly" approach.
EDIT: An interesting observation that has been made is that requiring public companies to publish their CEOs salaries has not caused those salaries to decline. If anything it caused them to keep going up. A similar effect should be expected in VC backed companies if they publish similar data as prospective CEOs would always want to be paid better than said data.
I've never seen it anywhere else. It would take real guts to do it in Silicon Valley.
But I'm going to assume this article references companies where the Technology department is more of a cost center than primary operations.
For example a SaaS company that basically just has sales/marketing and technology/operations, the CTO is also acting as the COO, so I think you could attribute the COO salary to that of the CTO in a SaaS or high-tech startup.
(Then they broke and go insane from the perceived injustice, see that other article recently...)
Certainly no one should be paying themselves this much after a $2MM series A.
I imagine there's also a huge disparity between the salaries of executives at companies across the seed->A round->B round->...->IPO spectrum as well.
Just ask.
big co salary = startup salary + #shares * (stock price - option strike price).
EDIT: diving one level deeper, perhaps a company needs two valuations: one for investors buying the stock (market driven), and an internal one that employees are likely to accept. The two numbers should be the same, but during bubbles there might need to be a gap between them.
-may hold for upper level management, but VERY unlikely this holds for rank and file employees.
Then again, I don't have a family.
It's risk management.
It's not about the amount you raise, it's about what stage your company is in. That's my real point there.
I think using salaries as incentive systems is mostly hokum except for situations where performance can be very easily quantified (e.g. sales people). I think transparency combined with lockstep (pay is strictly by seniority) is a great model, at least for organizations where everyone is mostly doing the same kind of job.
It depends on their circumstances. There are smart people who'll work for low salaries if there are genuine reasons to do so, but not many of them. Most of us can't afford to work for free anymore.
But if you offer too much compensation, management and employees may begin to feel fat and happy and lose the motivation to maximize long-term value for shareholders.
Ahem. :cough: BULLSHIT.
That said, most startup executives I've known were worth nothing near $175,000 base. Most of them could justify $175,000/year not to work anywhere in technology again. Then again, I've never worked for a good startup.
Alright... now, this is a fun topic. I worked for a startup with outright evil management where there were 5:1 salary disparities over the same job. One person was making $30,000 per year (in NYC) in a non-tech role, then busted his ass to move over to engineering and did so, but was told that the promotion to engineer "should be enough". People were being hired into the same role at 4-5 times his pay. He eventually negotiated more, but he was underpaid for years. That was the startup that inspired my most famous blog post.
The good news is that most startups pay market. Salary may be about 15% less than you'd get in another company, but equity (at valuation) fills the gap. The bad news is that most startups are awful places to work and you learn very little and so you tend to "job hop"; it may not even be your choice because "fail fast" is often used as an excuse for impulsive firing. After a while in that game, you have more jobs than years in your history and startups are the only market left for you.
There's the income/profit metric (if a company is paying its CEO $200k+ and has several $150k+ engineers, they're obviously selling a significant amount of something)
Or there's the acquisition metric (our goal is to be bought, and we haven't been bought, so we're a startup)
When a tech startup runs well, it's constrained open allocation. People can't just go off and "do whatever" but if the work is important to the business, anyone gets to step up and do it. There's no fighting over "headcount" or jockeying for plum projects. There is the work that needs to be done and as long as (a) people work on things that are relevant to the business, (b) people take enough of an ownership mentality to do the difficult or unpleasant stuff that's comes along with the good, they remain in good standing.
Once you have closed allocation, you're definitely not a startup.
VP: 220k base (H-1B filing)
Director (of what I forgot): 180k base (H-1B filing)
Programming monkey:
15 year exp: 185k base
10 year: 150-160k base
3(?) year: 130k base (in demand specialty)