Between 2014 and 2023, the number of startups in India rose from 350 to over 90,000, of which over 100 have become unicorns. Today, they are regarded as vehicles of socioeconomic change and development in India, as they are a major force in fostering innovation and employment, particularly for knowledge workers. A key factor that plays a balancing act between startups and their workforce is compensation.
As a result, there is increasing focus on how startups hire, compensate, and retain their talent effectively. India’s leading early-stage VC firm Elevation Capital’s ‘Startup PayPulse Report 2023’ provides valuable insights into the macro hiring outlook, and trends in compensation across various roles, to enable early- and mid-stage startups to make better-informed decisions. This report includes data from diverse sources, including 200+ startups and 1000+ candidates, and was reaffirmed by the recruitment consulting partners FIDIUS Advisory and Transearch.
Also read: Freshers hiring intent improves marginally by 3% in July : Report
Key findings from the report:
ESOPs
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80% of companies employ an ESOP vesting cycle of 4 years, while the remaining 20% have a vesting period extending beyond 4 years.
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ESOP allocation typically constitutes 10-50% of the cash component offered to candidates for entry to mid-level roles in startups ranging from Seed to Series B stages.
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Those in leadership positions receive ESOPs ranging from 0.2% to 1.5% of a company’s equity. Additionally, they are increasingly considered a tool for increments for leadership roles in 2023.
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Given the muted cash increments observed in the last financial year, 50% of companies have explored offering additional equity grants to leaders.
Salary increments:
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For 2022-23, the average salary increments were between 8-12%, with the variation attributable to individual and company performance, the quality and level of talent, and location.
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Performance continued to hold 50% of the weightage on salary increments while taking on additional responsibilities and receiving a promotion factored in about 20%.
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Companies deferred salary increments or provided new stock grants in lieu of cash increments for leadership roles.
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For leadership roles, such as CXOs and function heads, exploring stock-based increments may be more appropriate while also planning to reassess the cash component in a few quarters.
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Performance payouts or variable bonuses were 50- 100% of an employee’s variable component. However, companies have not applied any multipliers to these payouts.
Hiring
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Bangalore and Hyderabad emerged as top cities for tech talent availability with a combined share of 72% but raised factors such as attrition, hiring cost and skill level as necessary considerations for startups.
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Some of the critical roles filled among the first few hires at early-stage companies are Chief of Staff/Founders’ Office, Growth, and Finance.
Commenting on the report, Kallan H, VP – Talent, Elevation Capital, said, “In the face of macro challenges, Indian startups are showcasing adaptability by offering inflation-led salary increments to attract and retain talent. However, the variation is significant, with technology professionals in small to mid-size startups seeing moderate increments. For leadership roles, we are seeing compensation correction and restructuring as well as new stock grants instead of cash increments. The prominence of equity compensation in the startup ecosystem has been growing due to increasing liquidity events. We are observing a cultural shift in how ESOPs are viewed by employees and startups, with higher buy-in at the leadership level. We anticipate demand for AI talent to stay elevated going forward, followed by product, engineering and other functions.”
Further, Dipesh Jain, AVP – Talent, Elevation Capital, who co-authored the report, said, “With a significant talent pool of mid to senior-level executives available in the market, companies are focusing their efforts on a select few roles, investing more time to ensure the perfect fit. The shift in the market situation has led to a correction in salaries, though largely at the leadership level. Interestingly, on the other hand, job seekers are willing to wait longer for the right job opportunity than settle for less-than-ideal pay.”
According to the report, the tech talent pool with moderate to strong prior functional expertise and adequate experience working on complex problems combined with experience working across startups and MNCs is in great demand today. Further analysis showcased how the tech function is among the first to bounce back post ob market volatility due to demand from multiple cohorts.
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