GUEST MENTOR Langley Steinert, founder of CarGurus.com and co-founder of TripAdvisor: The nucleus of a promising startup will be made up of founders and great talent, a small team committed to the strategy and overall vision. This is the foundation for growth, and getting it right is your best chance of success.
That means attracting and paying smart people who will not just do their jobs well, but who will also take ownership of their roles in a way that will make them leaders for years to come. Locking in your superstars will likely take more than a decent salary, which means compensation is not as straightforward as many might think.
Sharing equity is critical to keeping your most valuable players. Especially at early stage technology companies, employees who put themselves on the line should find equity to be a real draw. Those with vision can supplement a competitive salary with equity. When folks don’t find equity compelling, you don’t want to hire them. You want employees who think and act like owners.
The difference will become clear once you get rolling, as ownership is as much in the attitude as it is in the compensation package. Employees who think and act like owners will fully embrace your vision. They will care about your company’s product and its effect on consumers. They will be locked into the customer’s mindset. And because they’ll be curious, active and always jumping on new ideas, they will provide the energy you need to keep the company engaged, especially as you grow.
Equity packages should be based on a person’s role and how early on he or she joins the company. Cash compensation levels might take a little digging. You can check out sites like salary.com to get a sense of the going cash compensation rates for different employee roles. In addition, I have found it helpful to get input on pay rates from members of my board who sit on other company boards.
When determining your own pay, I recommend going with a competitive salary. While paying yourself below-market wages may save the company some cash, if you do this only leads to your financial statements won’t reflect reality. Pay yourself the going rate.
As for bonuses, don’t pay anyone a cash bonus until such time as the company turns cash flow positive. This keeps everyone focused on the goal of reaching cash flow break-even.
Finally, keep in mind that while cash and equity compensation are important rewards for your employees, it is most likely the product and company vision that is going to attract folks to your company and make those you hire want to stay. Talented people look more than just a paycheck – they also want a job that inspires and motivates them each day.