On one hand, you want to hire the best people available out there, on the other hand – you probably cannot afford anything close to the salaries these great people would be paid elsewhere.
Let’s start with some psychology. According to Mr. Herzberg and his renown 2-factor theory, there are 2 groups of factors that matter to your employees:
They have a direct positive impact on the motivation of employees and include such intrinsic factors as impact, recognition, autonomy, decision-making power, and feeling of importance to the organization.
They don’t increase the motivation of people, nevertheless, their absence leads to dissatisfaction. They include such external factors as salary, benefits, work conditions, vacations, and security.
While startups cannot always attract candidates with fat paychecks or job security, they can offer so much more by default. From motivational factors (innovative products, impact, lean processes, ownership, independence, fast professional growth, etc.) to hygiene draws (stock / ESOP, flexible hours, remote work, cozy offices, bring-your-dog/kid to the office, free meals, etc.), startups have many options to attract top talent.
I’d like to encourage you to give a special thought on ESOP and remote work, in my experience 2 of the most desired benefits.
ESOP (employee stock ownership plan)
There are no strict rules on how to establish ESOP, but lots have been said about it. You might want to check this intro to ESOP, watch a class about Employee Equity, read Sam Altman’s or Joel Spolsky’s thoughts on ESOP or check Buffer’s formula.
It varies from country to country and changes over time (with a recent tendency to give more options to more employees and earlier on).
The typical distribution schedule which might look as follows:
first 10 employees get 10% of the equity
next 20 employees: 5% of the equity
next 50 employees: 5% of the equity
Early-stage equity grants are always a negotiation, but generally:
CTO: 1-5% of equity
Key Engineer: 1-2% of equity
other functional team member: 0.5-1.5% of equity
Enabling remote work on a regular basis is a big decision and requires a certain mindset as well as preparation (such as providing tools, ensuring communication standards, or building a supportive company culture). Still, depending on your company’s DNA, territorial ambitions, and hiring needs, it might be also the best choice. It will grow your pool of potential candidates who want to work remotely. It also gives you some organizational benefits such as access to talent from across the world (especially important if you are building a global product) or lower operational costs (e.g. office space).