Startup CXO Salaries

This is a tricky one which I have been grappling with recently. With the tremendous growth in startups the demand for senior folks has increased significantly. In this context, the CXO salary is a critical factor in attracting the right person. However, with startups, we need to address this fundamental contradiction:

"How does a startup which cannot afford to pay market salaries attract the best folks?"

While there maybe several dimensions and view points, the key is finding the right balance between stock and cash - i.e.Risk vs Security. The risk levels of an individual would depend on how financially secure he/she already is, apart from the attitude of course!

Another factor to consider is the current stage of the company:

• Is the company a complete startup with just an idea?
• Has the startup already received some angel funding?
• Has the startup received VC investment?
• Is the company in the first round of funding is it moving to further rounds of funding?

As these questions, suggest, the risk levels decrease progressively as the organization evolves from pure startup to a firm looking for additional rounds of VC funding. So the principle would be to offer higher stock (risk-reward) in the early stages and progressively shift the stock to cash ratio - in favour of more cash (more secure). The key is finding the balance between long term gains and interim rewards for achieving various milestones along the way.

How much stock is another debatable point. Some pointers would be the valuation of the company (If it has been valued) or possibly a small equity stake, if the stage is very early and value still needs to be built. Also the projected valuation of the company as a result of the transformative impact of the incumbent CXO must be considered.

Such negotiations are going to increase in time to come as founders will have to increasingly attract seasoned CXO's into their startup ventures if they need to succeed!