Question: I am writing my business plan now and I want to do some analysis on what other startups in Silicon Valley or other cities in the USA offer. Thanks! (see orig,. post on Quora)
Answer by Dan Walter
I work with a ton of early-stage companies. This is a “Top 5 Question” for nearly all of them but the answer can be a bit murky
Industry is a huge driver. Since this is Quora I am going to assume you looking for info on Tech start-ups, but even that may be too broad.
Location is likely to be just as big a driver. A tech firm in the Midwest, will generally not effectively pay in the same way (or the same amounts) as a tech firm in the Silicon Valley.
Funding is also a big player. Bootstrapped? Looking for Angel / VC in the short term? Your source of initial funding will likely drive the type and levels of pay far more than you would expect. For example. Many VC firms have a basic “formula” they use for nearly all of their clients. They have preferred types of equity, preferred sources for compensation data and preferred percentages to be set aside for equity, bonuses, etc.
Most importantly, if you can navigate that other stuff, is to determine who you will be competing with for talent, and how you can clearly communicate what makes you better (not just different.)
To answer your actual question: “What are the salaries and benefits for the first ten hires”. Salaries, will be as little as possible while still brining in the best talent.
“Best” is a relative term. Your first ten hires are likely to be the foundation of any success your company will EVER have. They will establish levels of excellence, work habits, general work culture and far more. In today’s tight labor market these people will likely need to get paid close to the same amounts as public companies. Any salary will be augmented, or replaced by equity compensation. This is most likely to be in the form of stock options, is always not be the best choice for every company.
If you are hiring tech veterans who have already earned a few (or more) million, you may be able to get away with far less up front cash, in return for offering better equity compensation packages. This is a cheap way to get moving, but can be a very expensive method if you take the average 7-10 years to real liquidity.
If you are hiring recent college grads/drop outs you may be able to get away with paying less, but you take several big risks. 1. Not a proven work force in many cases. 2. May be striving for somewhere else from the day they start. May require far more management and guidance, which can cost far more than money. BUT, you may also get potential upsides. 1. May be the “next great [insert name here] and what you get from them will exceed anything you will ever pay them. 2. You can “build” the work environment, culture etc. you want, rather than import it from veteran employees’ past experiences. 3. They usually require less in living expenses as they are less likely to have kids, houses etc. That being said, great talent will get hired away if you can’t or won’t pay them what they need or want.
DON’T give too much credence to Salary dot com or GlassDoor compensation levels. When comparing these against more robust industry survey data it is clear that many “self-reporters” provide “aspirational” numbers to these services. Compensation survey data exists, from many sources, but is still not perfect for the first 10 people.
Using a PEO (like Trinet or Accretive Solutions) can give you better benefits at lower costs. They often have customer groups will may be willing to share information about compensation levels.
Lastly, be economical, but don’t be cheap. You do not employees who are the equivalent of a Black Friday $59 TV. They will seem great for a few weeks, but the missing functionality and lack of quality will become apparent, then annoying, then frustrating, then simply terrible in short order.