The tech taboo: Why we need to talk about startup salaries

A few weeks ago I was speaking with the co-founder of an 18-month-old startup. Their business has 40 staff, amazing revenue, and the foundations for being a significant global business. As we were discussing hiring, the topic of compensation came up and the co-founder made a comment I have heard all too often: “My co-founders and I all took huge pay cuts when starting the business, we expect any new employee to do the same.”

There is a long-held belief that to work in a startup you must earn less money than in a corporate role. KPMG’s recent Venture Pulse Q3 2018 report clearly illustrates funding conditions in Australia are improving with a record $US630 million ($866 million) being invested in startups in the 20117-18 financial year.

The recent StartupAUS Startup Talent Gap report identified a potential future shortage in key tech roles, including data science, product, UX, engineering, and business development — roles that are crucial for startup growth and success.

Like it or not, remaining competitive on salaries is key to attracting talented employees.

With funding conditions improving and talent difficult to recruit, what does fair compensation mean?

While salary surveys are routine across industries, a comprehensive guide specifically for Australian startups does not exist. That is, until now.

Think & Grow have carried out research into salary and compensation levels in partnership with StartupAUS. In July 2018, more than 350 founders and employees of startups answered questions which included the size of their company, whether or not there had been a capital raising, their department and job title, and their base salary, benefits, and incentives such as stock options and equity. This data was combined with anonymised compensation data from 47 of Australia’s leading
venture capital backed businesses.

We set out to answer two fundamental questions: does access to capital mean a startup can pay more? And secondly, does access to capital have an impact on the types of roles that are prioritised at certain stages?

The full report can be found online, with a complete breakdown in salary, but a few interesting trends were observed in answer to the two questions above.

• A correlation does exist between access to capital and salary; the higher the amount of capital raised, the higher the salary of employees.
• Post $5 million raise, equity was more often than not provided to staff as part of salary packages. It was less common at the earlier stages but still not standard to all employees.
• Very few HR positions (including recruiters) were hired in startups that had raised less than $10 million. As product and engineering teams became larger (post $5m raise), more often than not a professional ‘executive’ was recruited to run this function.

Please take some time to read over the guide. If you are looking to work for a startup please use it as a starting point when thinking about fair compensation. If you are a founder please use it to ensure you are rewarding your staff correctly.

Let’s not allow fair compensation to become taboo but use the data available to make your decision.

This article was originally published as part of the StartupAus Crossroads report 2018. Download the full report here.

NOW READ: What are you worth? Startup salary guide sheds light on how much startup founders are paying their staff — and themselves

NOW READ: Why this startup lets its employees choose their own pay