- It often helps to obtain market benchmarks (in similar stage & geography) - check out some benchmarks on Angel.co, Glassdollar, or our analysis below.
- Internal consistency: Be aware that at some point (probably not at the very early stage) employees within the organization find out how much their teammates earn, increasing the importance of a justifiable compensation plan
- Employee background & resulting preferences: Keep in mind that risk appetite differs between employees based on their character but also their living situation. Take the example of a family mother that has to pay a mortgage vs. an independent graduate with no debt.
- The earlier the startup, the more pronounced employee's entrepreneurial tendencies need to be.
- Especially with early stages companies, salaries should be able to cover immediate and rather basic needs. Anything beyond that should be covered by stock options.
- It often helps to relate pay raises to funding rounds
- Founder salaries vary from zero (however, less likely nowadays) to EUR 200k (in case of scale-ups)
- Senior hires over time often earn significantly more than founders (we have seen compensation requests exceeding EUR 300k - ignoring any stock options)
Salary averages within b2venture’s portfolio (stage and location agnostic)*
- Head of Finance & Marketing: EUR 86k
- VP Growth/Sales/Ops: EUR 95k
- Head of Ops: EUR 60-80k
- Head of Product & Sales: slightly more (close to EUR 100k)
- Senior Develover: EUR 80k
- Junior Developer: EUR 55k
- SDR: EUR 51k
- Customer Success Manager: EUR 54k
- Founder's Associate: EUR 45-65k (very much dependent on stock options)
- Chief of Staff: EUR 70-85
ESOP programs are crucial to acquire and retain top talent. While they motivate employees and create a sense of unity and mission moreover, they should be treated as a precious currency. If not used wisely and thoroughly, they might evolve into a very expensive tool.
Compensation Philosophy: Stock option socialism vs. Capitalism
There are different schools of thought in the fields of ESOP distribution approaches. Some founders allocate stock options to every single employee and others do not allocate any at all. Looking at our portfolio, all our companies run some kind of employee incentivization program - for very good reasons. However, to varying extents.
It often helps converting the options into yearly attributed €-values, assuming different valuation scenarios.
- The stock option % designated to different positions very much depends on
- Seniority, uniqueness and relevance of the employee
- Phase and thus valuation of the company (the later the smaller the %)
- We urge founders to set the strike price (the employee option purchase price) as low as possible, as this maximizes the upside per stock option.
- Generally, we deem a 4 year vesting schedule, including a 1-year cliff, as suitable. This is very much in line with market standards.
- For senior (mostly C-level) hires, including founder vesting, we more often see a so-called loyalty cliff of two years. In this case, an employee-initiated leaver within two years after investment corresponds to a Bad Leaver.
It is thus difficult to attribute certain stock option packages to different roles. For specific advice you should get in touch with us and we can provide you with some more specific benchmarks. A first guiding rule is that the monetary yearly stock option value normally amounts to 40-80% of salary - again this depends on role and seniority and employee preferences.
Compensation in a more challenging market environment
- Competition has increased
- Salary development
- Founder salary waiver or deferral
- Manage expectations: especially in the fields of € value derivation of stock options. Often, the last post money valuation no longer reflects reality and thus option prices are inflated.
Helpful tools to calculate ESOP and compensation
HV ESOP Model
Overview THE HV ESOP MODEL How To - Make a copy of this Google Docs - Enter your parameters in the ESOP Setup sheet - Use Calculator for HR to determine individual allocations - Communicate to employee via the Sheet for ...
OptionPlan | Index Ventures
Entrepreneurs know how important stock options are for hiring and retaining the best talent. But to create an effective option plan you need to know how much to award to each team member. We compiled the largest ever set of benchmark data, comprising over 20,000 option grants from more than 1,650 startups across the US and Europe.
Employee Participation Plan Templates
These high quality templates are made in partnership with the best and most experienced law firms in Europe. The templates are here to guide you through all of the steps necessary to set up your employee participation plan. On top of that, they serve as an educational tool, helping you familiarize yourself with the terminology and provisions of participation plans.
Thoughts on cap tables, financing rounds, and legal issues around running and managing a startup.
Instantly compare your compensation policy with the competition With a tailored app, save time and effort by visualising, analysing and comparing your compensation data among all markets or just your own.
Ravio - Compensation benchmarking in real-time
Ravio allows you to understand compensation in your market in real-time. Make smarter salary, equity and benefits decisions without touching a spreadsheet.