How To Compensate Startup Employees Without Money

How to compensate startup employees without money during the early stages of a venture is an art. Cash for salaries is one thing you may not have a surplus of as a young startup. Even if you are funded, you need to be very careful about how you spend it.

Yet, you know that the survival and ability of your venture to survive relies almost 100% on recruiting and retaining the best talent in your space. So, how do you do it?

Perks For Startup Employees

When thinking about how to compensate startup employees without money, perks can help make up for what you can’t promise in cash salaries. Sometimes they can be more valuable and attractive than the paycheck.

So, what are the best and most common perks expected and offered by startups?

1. Food

Free food in the office seems to be a very common type of startup compensation. Inc. reports that 60% of startup employees say that it makes them feel valued. There may even be ways you can provide this at little to no cost for small teams. Just make sure you are feeding them good fuel to get their best work done. 

2. Gym Memberships

You need healthy employees. You need highly productive employees and team members. Providing a gym membership is an inexpensive way to give something useful and help the company.

As a company, you can also work out lower-cost deals for your whole team versus them signing up individually.

3. Remote Working

This is not only the number one perk in most cases today, but it has also become standard. 60% of the population in many areas are already working remotely. That will likely hit 80% or higher in tech startups in the very near future.

Requiring staff to come to an office on a regular basis adds a lot of risk and overhead. It can take away from your other perks and advantages. It may require far higher salaries to compensate for it. For example, relocating teams to high-cost areas like NYC or San Francisco.

4. Flexible Schedules

Not everyone does their best work at the same time of day. We try to squeeze them into an outdated box and have your productivity and profitability suffer.

As long as communication is good, things are flowing and the work is getting done, it doesn’t matter what times or days your team works. 

5. Paid Vacation Time

It has become trendy for startups to offer unlimited vacation time as part of startup compensation. Some workers will use this to take a couple of months of the year off.

This may be extreme, though fewer might use it than abuse it. The bottom line is that you do want to encourage your team members to take enough time out. If they don’t they’ll burn out, become unhappy and clog up the whole system. Some need a push. Some will be afraid of the cost of time off, even if they are making high six-figure salaries. You might even make it mandatory.

When thinking about how to compensate startup employees without money in terms of paid vacation time, just pay them for the amount of time you consider to be the essential minimum for their mental health and optimal productivity. If you’re proactive about scheduling this, the whole company will run more smoothly.

6. Company Trips & Events

I believe that company culture is really forged in the trenches doing the work. Especially on the hard days. Yet, many startup workers find huge appeal in this.

For some, it is the best reward. You can host a global all-hands event every year, do annual events at your HQ, go on team bonding trips, or if on a tight budget, host monthly nights out together.

7. Stipends To Cover The Basics

Companies may also offer regular stipends to cover bases like ongoing education, grocery bills, parking and commuting, childcare and housing. This can help by directing some of your startup compensation to the most important uses for the company and mission as a whole.

Just be wary of committing to too much overhead. It is easier to add perks later than to take them away when your financial runway gets very short.

Part-Time & Contract Workers

Workers have grown very savvy since 2008. New news about GE slashing or freezing pension benefits has also reopened this wound and danger of workers putting all of their eggs in one basket. It is safer for them to work for multiple organizations and spread their income eggs among multiple baskets.

This also works for you as a startup compensation. Hiring on-demand contract workers can reduce financial liabilities and static overhead. Their work and pay can be scaled up and down as needed, without the frightening consequences of layoffs or the threat of slashing paychecks. 

Performance-Based Pay

At least 50% of startup compensation may be based on performance. Especially for marketing and sales reps and departments. Provide some salary, daily or weekly base so they are comfortable enough to focus on the work and make good decisions.

Provide performance-based incentives to extract their best work. This can be made up of commissions, bonuses, deferred payments, milestone-based incentives and profit-sharing without stock options.

Non-Financial Compensation

There are some things which are far more value in attracting and retaining the best startup teams than cash salaries. 

Being a part of something bigger than themselves is the main one. Mission, vision, and purpose are all extremely important and will keep your team sticking together during the tougher and leaner moments.

Showing them they are valued, are having an impact, and providing a fast feedback loop on the value they are providing can make a huge difference. Make sure they know they are making a difference.

Equity

Giving up equity and stock options has become a very popular way to add appeal and other startup compensation. It may work for some startup tech workers who do not have significant financial needs right now. Keep in mind that top talent gets offered equity all the time. They may have better offers. It can have zero real value in early-stage startups.

When it comes down to figuring out how to compensate startup employees without money, giving up too much equity too fast can be problematic for startups. It may seem like a cheap and easy way to buy your way into many things. Yet, it can make your cap table far more complicated and can make future fundraising more complex, glitchy and challenging. Be sure to educate yourself on this. Also check out the Inner Circle, where we help founders from A to Z with everything related to fundraising.

I recommend carefully structuring vesting and cliffs so that equity is well earned, and you don’t have a lot of people taking a free ride, while you work even harder. This is especially something investors will ask you when you are out there fundraising.

Remember that in fundraising storytelling is everything which is something that you will need to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, also take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.