Executive Compensation & Team Composition:

Attracting and Retaining the Best and Brightest to Your Team

TECHNOLOGY EDITION
 Today’s Aaron Lapat
Moderator/Panelist
Managing Partner
Park Square Executive Search

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 Today’s
Presenters

Ciara Baker David Gammell Aaron Lapat

WilmerHale WilmerHale Park Square
Counsel Emerging Company Practice Co‐ Managing Partner
Chair and Partner

Steve Murray Stephanie Newby Noam Wasserman

Revolution Growth Crimson Hexagon USC Marshall
Partner Chief Executive Officer School of Business
Professor of Clinical
Entrepreneurship and Founding
Director, Founder Central

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Today’s Intro/CompStudy Overview
Agenda
Current Founder’s Dilemmas Research

Team Composition

Key Roles
• Chief Executive Officer
• Vice President, Sales
• Vice President, Engineering
• Chief Financial Officer
• Outside Director

Attraction & Retention Tools

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CompStudy Each year, CompStudy collects and reports data on equity and salary
compensation for Technology and Life Sciences executives at private,
Overview venture‐backed companies. Participants in the annual survey receive
free, year‐long access to the reports.

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CompStudy Data collected in
Technology Survey
Overview every survey includes: Annual Responses
 Cash compensation & equity
 Founding team 2000 2016
900 1,370
 Financing history
 Company size
All Time Responses
 Products/revenue 25,000+ executives

 Equity programs
 Executive backgrounds Life Sciences Survey
Annual Responses
 Board of directors

2002 2016 All Time Responses

500 575 10,000+ executives

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2016 Survey – Company Profiles
Institutional Rounds Raised
Fewer companies with 0 rounds of funding
this year. Slightly more with 4+.
Headcount Business Segments
Companies cut by headcount are
distributed approximately the same
as they were in the 2014 survey.

% respondents in this range % respondents in this range

Revenue Geography

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 CORE DILEMMAS

Founding

When to Building New‐Venture Beyond Exit

Found the Team Hiring the Team Dilemmas
Y
Y
Y
Y
Y
CORE CO‐ HIRES INVESTORS, ALL OF THE
FOUNDER FOUNDERS PARTNERS ABOVE
THE RESEARCH

6,300 startups

16,000 founders

31,000 executives
FOUNDING TEAM DILEMMAS
 RELATIONSHIPS

TEAM
TENSIONS

ROLES REWARDS
SPLIT EQUITY
WITHIN A
MONTH
of founding
 EQUITY SPLITS
AMONG FOUNDERS
Huge gap
(>40% diff.)
21% Equal
split
33%

Large gap
(21‐40% diff.)
19%
Near‐equal
split
(1‐10% diff.)
Moderate gap
12%
(11‐20% diff.)
15%
Figure 6.4 from Wasserman,
The Founder’s Dilemmas (2012)
THE QUICK HANDSHAKE: FAST+EQUAL
THE QUICK HANDSHAKE: FAST+EQUAL
Lower pre‐$ valuation in first financing round
Split quickly  split equally
80% of equal splitters spent <1 hour negotiating
No effect if long dialogue and still end up equal
Signal of…
Immaturity?
Inability to negotiate effectively?
Conflict avoidance?
Carelessness?
Hellmann and Wasserman (2016), “The First Deal,” Management Science.
Key Roles
CEO Chief Executive
Officer

VP S Vice President,
Sales

VP E Vice President,
Engineering

CFO Chief Financial

Officer

DIR Outside
Director

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 CEO Primary charter of the CEO role is to be
responsible for all strategic and tactical aspects
Chief Executive of the management of the company
Officer

• How does role evolve as company matures

• When to hire

• First timer vs. experienced

• Founder transition

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 Non‐Founder CEO Pay – by Headcount

CEO
Chief Executive
Officer

Non‐Founder CEO Pay – by Revenue

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 VP S Primary charter of the VP, Sales role
emphasizes aggressive growth of the top
Vice President, line of the company
Sales

• When to hire

• How role evolves over time

• Considerations in a combined Sales/

Marketing role

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 Non‐Founder VP|S Pay – by Headcount

VP S
Vice President,
Sales

Non‐Founder VP|S Pay – by Revenue

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 VP E Primary charter of the VP, Engineering role
emphasizes hiring and retaining top engineering
Vice President, talent, delivering quality solutions, and ensuring
Engineering that business and technical product goals are met
predictably, efficiently, and reliably

• Vice President, Engineering vs.

Chief Technology Officer

• Strategic/technical vision – road map vs.

product development

• How role evolves as product suite becomes

more complex

• How to attract and retain

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 Non‐Founder VP|E Pay – by Headcount

VP E
Vice President,
Engineering

Non‐Founder VP|E Pay – by Revenue

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 Primary charter of the CFO role is to provide
CFO fund‐raising support, financial leadership,
administrative, and operational discipline and
Chief Financial
Officer structure for the company in support of scaling
operations

• When to hire

• First time vs. experienced

• Functional strength in accounting vs.

transactional vs. operational

• Public company/IPO experience

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 Non‐Founder CFO Pay – by Headcount

CFO
Chief Financial
Officer

Non‐Founder CFO Pay – by Revenue

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 • When to bring in outsiders
DIR • Transition from private to public
Outside
Directors • Domain expertise vs. functional expertise vs.
industry contacts

• Sitting executive vs. professional board member

• How to pay (equity vs. cash)

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 Equity granted to outside directors to join board
DIR
Outside
Directors

% respondents in this range

Equity ranges

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CompStudy Overview
Compensation inflation rate ‐ non‐founder total cash

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 Building a Sources of Talent:
Winning Team • Putting the band together
• Team referrals/board referrals
• Strangers

Key Considerations:
• What are the top 4 senior roles on your team; how
does that list evolve over time
• Domain expertise vs. general purpose, best athlete
• First time vs. been in role before
• Small vs. large company experience

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 Attraction &
BASE
Retention Tools
SALARY

Equity, Bonus,
Severance

Non‐
Financial
Career Factors

Focus
PERFORM.
SEVERANCE INCENTIVES
BENEFIT (AIP, Equity)

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 Attraction & • Equity vehicles used
Retention Tools • Dilution

Equity • Vesting (time based vs. performance)

• Annual/episodic equity grants

• Offsetting existing equity holdings

at time of hire

• Accelerated vesting/change of control

• Realizing value of equity in mature private

companies

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 Attraction & • When, if, and how to pay
Retention Tools • How to structure

Bonus • Guaranteed?

Considerations • Individual vs. company performance

• Annual increases

• Sign‐on bonus

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 Severance Grant (Months)
Attraction &
Retention Tools

Severance

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Recap • 1-minute recap from each panelist

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