I've partnered on recruitment campaigns with tech startups and scaleups for the last 10 years, across multiple verticals including cyber security, process technology, to energy storage and grid. Over the years, I've seen so many different ways of structuring compensation packages for new employees - there is no one size fits all approach. 

Company size and stage, fundraising maturity, and business goals will all impact the makeup of the package you can offer to a prospective new hire, with differing levels of upside (i.e. equity, stock options etc). However, it isn't always just the conditions of the company that should be considered - you should also think about the specific role you are hiring for and the target candidate profile you most want to attract. This is often overlooked!

For example, let's say you are early-stage (Seed / Series A phase) and want to bring in a critical senior / executive hire who will play an instrumental role in the long-term success of your startup. You're going to want someone with a higher than average risk appetite, who is sold on a long-term vision, and then tailor a compensation package that rewards this long-term commitment and hard work. In this case, you may consider a higher equity component to attract them (this could be as high as 5% for example) -  of course there will need to be a competitive salary but it might not be the wow factor, whereas the upside potential is where the real value lies. This will typically meet the long-term interests of the candidate profile you're targeting so both sides should be aligned.

However, let's say you're a little further along your journey and you are now looking for someone who can have immediate impact in the next 18 - 24 months. Take a Sales role for example - the incentive here is for them to bust a gut to help you to generate revenue and build your client logos fast.  It might well be that you need a more experienced "hunter" with a significant sale track record, who can hit the ground running and deliver results quickly and staying with you for 5, 6, 7 years is not necessarily that important. Guess what - the compensation breakdown from earlier may no longer be suitable. 

A target candidate profile for this role is more than likely going to have a very different life to someone in their early career or a veteran who is already financially “secure”. They will likely have mortgages and families to consider and therefore the appetite for “risk” may not be what it once was. They will want to know that if they do a good job in the short term, the reward will be fair. Therefore, a high upside but low fixed and variable salary components will not attract these individuals. You will need to be creative and think carefully about the balance between what you want and what you can realistically afford. I'd advise here you look at an uncapped variable component because this way, if the candidate really delivers revenue as you hope then you win but they can also win (a recent client said “I don't mind paying them more variable than their fixed as long as they're delivering the results” which is a sensible way to look at it.)

I'd recommend spending some time on a compensation plan before you start to hire. Figure out the goals and measures of success for this particular role and then how you might best compensate the individual accordingly (having options up your sleeve will not be a bad thing either!) Seek advice from industry professionals hiring similar roles (like us here at Hyperion who will manage the full process for you) and be prepared to be agile when it comes to negotiation stages because not all plans work for everyone!

For some more insights on how equity plans might be considered, check out this great video.

If you're a cleantech startup / scaleup planning a new recruitment campaign and you are looking for an expert search firm to partner with, then Hyperion Executive Search  can help you. Contact me at david.beeston@hyperionsearch.com