Hiring & Talent

Naval Ravikant, the founder of AngelList, recently began a new project called Spearhead. The program gives founders $1M to start angel investing, and seeks to educate those who wish to enter the space. The Spearhead podcast, meant to scale these efforts, is a treasure trove of insights not just for those who wish to be angels, but for entrepreneurs looking to raise a Seed round. You can find the full podcast & transcribed episodes at spearhead.co. Here are 7 insights for founders from the podcast: Angels build brands. Be aware of who you’re associating yourself with. Investors in early stage companies need not just deal flow, but access to the best deals. To get access, angels build brands. They do this in many different ways – Jason Lemkin built the SaaStr conference, Naval built AngelList, and Fred Wilson blogs. You should be mindful that the brands you associate yourself with in the early days can have an impact on the future of your company. Angels with great brands can get you access to key hires, new customers, & helpful mentorship. Future investors may also use the brand of your angels as a signal as to whether or not they should invest. If your early stage investors have have a track record of success, securing later funding gets easier. Avoid angels who put too much on the line. It can lead to bad behavior. If an angel invests so much into your company that they stand to lose a large portion of their net worth if you fail, this could lead to tense situations. This applies to family member & friend investments as well. Angel investing is a high risk sport, you should only play with people who understand this. Don’t use FOMO as a fundraising tactic. The best angels refuse to be pressured into a deal. Telling a high level angel investor that they ‘only have 24 hours to get into the round!’ can backfire. There is a fine line with this, as social proof and scarcity are tools that you need to leverage when fundraising. However, being overly aggressive or pushy makes people hesitant about working with you – especially investors with experience and strong brands. Social proof is key. Angels are often wary about getting involved in deals where they have no network connections to the founders or fellow investors. Naval & Nivi explain this by saying that good angels should be cautious about deals that are made up of complete strangers. If a founder is raising money and none of their direct connections or past investors are involved, that may be a bad sign. Similarly, if an angel with excellent judgement writes a huge check to a company, it sends a message to other investors that they’re a strong bet. Cold emailing is part of the fundraising process, but you’ll have far more success with people you already know. Your network is critical. Build it before you have to. Get your psychology right. Great founders often toe the line between visionary & madness. To build a massive company, you need to attempt something that most people don’t think will work. It takes a special mindset to do this. Naval explains that great angels don’t expect founders to be ‘coachable’ or have perfect records, as they sometimes have to operate as an outsider at first to be successful. Instead, founders should be aggressive and seek to build traction. However, you should avoid the perils of over-aggressiveness. If you prioritize hyper growth at the expense of traction, you can end up ‘blitzfailing’ as David Sacks explains on a guest episode of Spearhead. You need to keep your genius in check, and ensure that you’re prioritizing the right things in your business. Build a technical network. Angels are looking for huge returns in exchange for taking a chance on you. This is an all or nothing game, and you’ll need to be very right when others are wrong. It’s often the only way to generate massive returns. This is why you should solve technical challenges where you have what Naval calls ‘specific knowledge.’ Many of the most valuable startup opportunities are in technology. Build relationships with scientists & technologists at the source of new developments. These people can give you access to angels who seek to invest in tech companies, in addition to talent and insight that comes from the source of innovation. Get your team right. Angel investors are betting on founding teams more than their initial ideas. Pivots are common in startups, and savvy early stage investors understand this. When a company pivots, the common denominator ends up being the team the angels invested in. Naval explains that you should seek to create a company of world class builders, salespeople, & community creators. These are vague categories that take on different meanings in different industries. A builder could be a software engineer or a logistics expert, while a seller could be a fundraiser or a marketer. The key is to have both. An amazing product with no distribution won’t win, and Naval calls the outsourcing of product development a “red flag.” Team up with skilled people who have the 3 traits Naval & Nivi look for in partners – intelligence, energy, and integrity. If you do this, you’ll attract investment, and be more likely to whether the inevitable storms that come with starting a company. When marketing any product, you start by understanding your customer. Why wouldn’t you do the same when selling investment opportunities in your company? We think that Spearhead is a great entry point into understanding the psychology of an angel investor, and hope that you can use these insights when raising funding for your early stage startup. Want more advice delivered to your inbox every Thursday? Subscribe to our Founders Forward Newsletter. We search the web for the best tips to attract, engage and close investors, then deliver them to thousands of inboxes every week.

Leading under the current circumstances is an audition to lead for the coming years. Being able to step up as a leader amid the COVID-19 pandemic is an opportunity to cement a strong future for your company and yourself. Last week, Scott Dorsey, Managing Director of High Alpha, joined us to chat about all things leadership and fundraising. Prior to High Alpha, Scott co-founded ExactTarget and led the company as CEO and Chairman from start-up to global marketing software leader. ExactTarget went public on the New York Stock Exchange in March of 2012 and was acquired by Salesforce in July of 2013 for $2.5 Billion. Post-acquisition, he led the Salesforce Marketing Cloud which encompassed 3,000 employees around the world. It is safe to say that Scott knows what it means to be a leader. Scott started ExactTarget during the Dot-com Bubble and successfully IPO’d shortly after the Great Recession. The webinar was full of stories and anecdotes from Scott’s time building ExactTarget. Check out our favorite takeaways below: Cash is King While cash has always been king, Scott mentions that it is even more important during a downturn. As a founder, you need to have a deep understanding of your cash flow and burn rate. It may be difficult to fundraise during a downturn but you need to be able to show your investors that you can (1) make it through a downturn and (2) thrive on the other side. If you can successfully display that you’re in a good cash position and ready to thrive after, you’ll improve your odds of raising capital. Closer than ever with Customers During uncertain times, it is more important than ever to be close to your customers. Your customers are going through the same things that you are going through. Establish and preserve your relationship so you can grow together on the other side of the downturn. In the early days, Scott suggests companies project confidence, show they’re stable, and are growing & innovative. One of the best ways to do this is by envisioning your 3, 5, and 10 year journey with potential customers. Where will you be in 10 years? What will the product and relationship look like? Clients want to lock-in on a long-term relationship. If you don’t have everything built in the immediate, that’s fine. Show that you can be all the way there in the future. The Friday Note During uncertain times most leaders communicate less. However, communication is one of the best ways to make it through a downturn. Scott has almost become synonymous with the “Friday Note.” Simply put, the Friday Note was an email Scott sent every Friday to everyone in the company letting them know what was happening with the business. During the Great Recession, Scott found himself communicating with employees less. From that point, Scott made it a point to send a note every Friday to the team so everyone always knew what was happening and there was a path to 1-on-1 communication. In fact, Scott turned all of his Friday Notes into a book when ExactTarget was acquired by Salesforce. Personal Board of Directors According to Jim Rohm, “You’re the average of the 5 people you spend the most time with.” With that being said, it is important to surround yourself with a diverse mix of people who are smart, friendly, and can grow with. Scott himself has a personal board of directors made up of about 5-6 people. These are people that Scott can lean on for guidance, faith, personal balance, etc. This is your inner circle — don’t be afraid to approach people you admire to ask for help. We hope this is helpful as you work through these uncertain times. Scott is the definition of a leader and a reminder that great leaders and businesses can be built during downturns. As a reminder, you can check out the full webinar recording here.

Our learnings and takeaways from 5 years of being a remote first startup. Remote work has been a core tenant of how Visible gets work done since 2015. It is crazy to believe that five years ago working remotely was not nearly as mainstream as it is today. In that time, we’ve learned a ton, mostly through experimentation and failure. The coronavirus and pandemic in 2020 accelerated the adaption of remote work as more companies are transitioning to a remote or hybrid workplace. Being a remote-first organization, we believe that team members do their best work when, how, and where they want. Below we share our guide to getting started with and implementing remote work at your organization. By no means are we perfect or do we know all of the answers. This guide is simply our learnings and takeaways from 5 years of being remote. Why We Became a Remote-First Startup Rewind to 2015 and Visible looks just like any early stage startup. We had some fresh capital, early team members, and were eager to get to market with a product. There was not necessarily a hard set reason for starting remote but naturally swayed that way as we added employees across the globe. Advantages of Remote Teams It was clear that everyone enjoyed the remote work setting. As the team at Buffer discovered in their State of Remote Work report, 97.6% of employees would like the option to work remotely for the rest of their careers. As we dove into remote work, the advantages were obvious: Team members do their best work when, how, and where they want. Working primarily asynchronously allows work to get done while communication becomes the lifeblood. Our hypothesis is that the #1 challenge for most in-person work environments is open communication whereas we believe this is the biggest strength of all remote-first organizations, Team members can prioritize their personal well-being to bring the best version of themselves to work (now one of our company values: inside out). The talent pool for hiring is worldwide. No physical office and being able to hire outside of major tech hubs means a lower burn rate (you don’t have to shell out for market SF salaries). Don’t forget the ruthless competition and recruiting dynamics. An opportunity to learn and be at the forefront of something which has the potential to be the future of work Since then, we have discovered many other pros and cons. Disadvantages of Remote Teams On the flip side, there were a few disadvantages spotted. Always on — When working from home, it can be difficult to shut down and feel like you are truly “off.” A routine and habits to start and end your day can help greatly when trying to manage your workday from home. Isolation — In an office you have countless interactions. When working from home, employees can feel isolated. A co-working spot or a visit to a local coffee shop can be a good way to combat this. Time Zones — Communicating across many time zones can be difficult. However, you can solve this when setting expectations and hiring within a given timezone range. You can check out a few of the struggles with remote work from the 2021 State of Remote Work below as well: Building a remote organization is certainly challenging, but the reward and pleasure of working remotely far outweigh the challenges (at least in our opinion). 16 Proven Strategies To Manage a Remote Team Over our 5 years building a remote-first organization, we have stumbled upon a few strategies that we have found to be beneficial. Our 16 strategies can be broken down into a few buckets — culture tips, communication, team-building activities, hiring, and more. Remote Work Culture Tips Inherently, building a company culture when all team members are dispersed is more difficult than when everyone is in the same building. For organizations exploring remote-first work, the ability and ideas behind remote work need to be rooted in the organization’s culture. At Visible, starting as a remote-first organization and having a team comfortable with remote work, our culture has naturally formed around these ideas. In the past, people have associated startup culture with ping pong tables and a fridge full of beer. However, startup culture is not built in an office; it is built on how individuals work, collaborate, and communicate. 1. Create a Remote Work Mission Statement If you Google “remote work culture” (or anything related) you’ll notice that most blogs mention the difficulties of building a strong culture as a remote organization. Our mission and values have naturally evolved over the course of time but our culture has always been rooted with remote work and a deep focus on each team member’s own well-being. We have a number of core values at Visible but the two that have stood the test of time and have enabled a strong remote culture are: “Inside Out” — We believe that team members should take care of themselves and their family first. Remote work enables this because they can focus on their own health then bring their entire self to work. “Harmony” — There is no such thing as “work/life balance”. There is just life. We strive to bring harmony to all aspects of our life. As it relates to work, this means some days may require staying on to 8pm as we work through a customer issue and some days you may cut out at 2pm to get on your longboard. Regardless of how your company culture takes form there is no denying the importance of communication, especially at a remote organization. 2. Set Clear Expectations Just because you are not in an office, it does not mean you should have working hours and expectations. It is important to have expectations well defined and documented. A couple of questions we suggest that you think about and answer when setting your work expectations and policies: What are work hours/time zone expectations? Can people work from anywhere? Which communication channels (email, Slack, Asana message, video) are used for what purpose? What work-from-home office equipment do employees have to buy? 3. Ensure Everyone Has the Tools They Need Tools and software are at the core of a productive remote-work environment. We’ll dig into the software tools and apps we use below but always suggest you have great internet, a comfortable desk and chair, and a quiet room to take calls and virtual meetings from. 4. Build Trust and Watch for Stress or Burnout As we mentioned previously, it can be difficult to shut off from work when working remotely. Leaders need to understand and keep an eye for stress and burnout from the team. In order to spot stress and burnout, there needs to be a level and trust and comfort between the team. Check out some of our tips for building trust and collaboration below: Remote Work Communication and Collaboration Tips If communicating as a remote team was easy, every organization would be remote. There are definitely challenges when communicating when you are a virtual team. Most people believe that communication is easier when you are all in the same building. However, with a set of expectations and a communication system in place, remote communication can easily be heightened to match the level of being a physical office. Trust, transparency and open communication is at the core of communication; remote or not. Trust is vital, especially to remote work, when it comes to hiring, team building, and individual growth. Many individuals may think that trust can only be built when sitting at a desk next to someone. We believe that trust is something that is built through communication, regardless of your location. Trust is just built differently when working remotely. 5. Don’t Just Mimic In-Person Meetings Communication will naturally force different methods. Do not try to mimic an office when working remotely/from home. As Jason Fried, CEO of Basecamp, writes, “This also isn’t a time to try to simulate the office. Working from home is not working from the office. Working remotely is not working locally. Don’t try to make one the other. If you have meetings all day at the office, don’t simply simulate those meetings via video. This is an opportunity not to have those meetings. Write it up instead, disseminate the information that way. Let people absorb it on their own time. Protect their time and attention.” Written communication has become one of the most important things that we do at Visible. Remote or note, written communication is vital to just about every company. Jeff Bezos often relies on his 1997 letter to shareholders to portray company values and vision. We are constantly tweaking our methods and finding ways to communicate using our suite of tools. At Visible, that has meant using Slack, Zoom, Notion, Jell, written notes, and our own product to facilitate communication and build trust (more on the tools we use in a later section). 6. Share Video Meeting Guidelines As we shared in our blog post, “How We Work: Zoom Calls,” we try our best to communicate in Slack but have a series of set meetings and one-off meetings that place over video. In order to make video meetings as productive as possible, we try to make sure everyone is in a quiet place without a distracting background. Depending on the type of call, we generally like everyone to have their audio unmuted and video on to mimic an in-person meeting as much as possible. 7. Schedule a Weekly All-Hands Meeting This gets us warmed up for the week. We’ll see how everyone’s weekend went and dig into the week ahead. Mike (our CEO) will start by giving a quick recap of our company-wide metrics, goals, news from the previous week, and priorities for the coming week. We will then review our current product & marketing boards to see if there are any obstacles, outstanding questions, etc. This is not a time to go in-depth but rather schedule a follow-up time to pair with your colleagues. Related Reading: How to Build Organizational Alignment Easily 8. Use Collaboration Calls for In-Depth Work Collaboration calls are a time for us to get together as a team and work on a larger project or idea. Generally, we will decide on our Monday kickoff call what we will discuss on a team collaboration call. Some ideas: Review a product cycle item — What is the status of a current product cycle item? What is needed from others here? Is there a mockup that someone would like to present? Etc. Play a game — Use this as a time to play a collaborative game as a team. Brainstorm — Working on a bigger product or marketing idea that you need input from others? Use this as a time to present and collaborate on bigger ideas that involve the entire company. Be prepared with activities to guide the brainstorm session! Other talking points: Give a shout-out to a team member and thank them. Tell them why! Tell us a story about something Visible related! Could be a customer story, a bug you found, something you designed, etc What did you learn last week? (Doesn’t have to be Visible related!) What is something you are proud about from last week? 9. Set up Recurring One-on-One Meetings One-on-one calls are to make sure we are identifying opportunities to serve one another better, a chance to deepen our relationship as well as uncover any challenges before they grow into something larger. The time should also be spent talking about near terms goals & priorities but also long-term development as well. Every one-on-one check-in is the employee’s time and the time can be used for whatever they deem most valuable (90% of the time for the employee). To make sure the time is used in a mutually beneficial way we want to make sure the employee is providing a quick update (before the call) with how everything is going, how they are feeling, and what challenges they are facing. 10. Use Show & Tells To Share and Connect Every Thursday a team member presents a show and tell. The topic does not have to be work related. It can range from your favorite tacos to how venture capital works to budgeting apps for personal finance! Remote Team-Building Tips Having different opportunities for casual conversations and team building is a surefire way to improve remote work for everyone. One of our favorite ways is by playing virtual games (Jackbox Games, CodeNames, etc.) to loosen up and have fun. We have also seen success when giving individuals the opportunity to connect and work with cross-functional teammates. 11. Create a Virtual Water Cooler The “virtual water cooler” in Slack has been a great way to connect with teammates outside of work. As we wrote in the post above, “We do not have hard-set guidelines for what should be posted in the #watercooler channel but it generally consists of the following: Food/what we ate — Pictures or recipes for what we are cooking at home/eating at restaurants. We all love to eat at Visible so this is big for us. Random videos/pictures/stories from our day-to-day lives — For example, a current event or something big that may be happening in someone’s respective city/neighborhood/etc. Travel and Hobbies — Being a remote company, a lot of us spend a good amount of time in different locations. We love to share pictures and stories from our time in new places. Work Inspiration — This is also where we share examples and inspiration of something cool we see a different company doing. Anything from a new product feature to an intriguing marketing email. Fun Stories — If someone runs into a fun story, stat, or fact they run into online, we tend to share it in #watercooler.” 12. Have Fun With Regular Non-Work Activities Bringing teammates together with non-work activities is a great way to build camaraderie and relationships. Check out our post, 34 Remote Team Building Ideas for Growing Startups, to learn about some of our favorite specific activities. 13. Plan Yearly Company Offsites To Get Together Nothing beats the energy from getting to meet with team members in person. We relentlessly prioritize getting together two times a year as a time. Offsites serve three purposes: To have fun To give us the chance to connect in person and collaborate on big, strategic initiatives. To see a more human side of your team. To see how tall your colleagues are ;). Offsites have become an integral part of our culture and how we work together. Over the course of a week we are able to break down big problems and initiatives then channel that into focused work when we depart back to our homes. Over the last few years, we’ve had offsites in the following locations: Copenhagen Indianapolis Montreal Chicago Dublin Amsterdam Lisbon Barcelona Tulum The term “offsite” gets thrown around a lot in the startup and corporate world but what does an offsite actually look like to a remote organization? Choose a Location and Date for the Offsite At Visible, we are spread out across the world. We have employees in North America, Europe, and Asia. With that being said, finding a location for our offsites can be tricky. A couple of things we look for in an offsite location: A location that everyone can get to in a reasonably timed and priced flight. We do not want someone to have to fly for 24 hours with 2+ layovers, etc. A location that is not too expensive once you are there. Breaking bread is a cornerstone of our offsites, so having a place where you can go out for a nice meal without breaking the bank is important to us. For example, a dollar went a long way in Lisbon compared to Copenhagen. A location that has a tech culture. It is fun to go somewhere with a strong tech/startup culture. In the past, we’ve been able to meet and work with our customers. Somewhere new. Being a small team, we are able to go to places that are new to each of us. Inevitably, this won’t always be the case but is a fun factor for now. Once we pick a location, we will book accommodations. Our goal is to give everyone their own bedroom, have a place to work as a group, and be in a central location that is within walking distance to restaurants, bars, and transportation. We’ve done everything from a high-end hostel, to single Airbnbs and even a houseboat on the canals of Amsterdam. Depending on the city, different options may make more or less sense. As we are all travelers ourselves, we have found Airbnbs to be the most practical for us as a group. In order to maximize our time, we generally have to include a weekend or a weekend day (which no one ever has an issue with). This allows us to wrap the offsite around a weekend and not miss an entire week of our usual day-to-day work. We send out a Doodle which makes it incredibly easy to coordinate everyone’s availability. Decide How You’ll Work During the Offsite Deciding when and how to work during an offsite is something that we are constantly tweaking. While offsites are intended to strengthen personal relationships we have accomplished some awesome work. The last few offsites we come with a big vision or theme for the week. From here, each individual (eventually may just be unit leaders/managers, etc.) is responsible for coming up with a group session related to their business unit. For example, we kept hearing from our customers about the pain points of fundraising. This became a focal point of our fall 2019 offsite and how the “fundraising” product was born. We came back with a beta version of the product, design for future versions, our Connect database (named at the offsite), and a marketing webpage for the new Fundraising product. Decide What Non-Work Activities You Will Do As mentioned, everyone is responsible for coming up with a work session for the offsite. In tandem, we pair up with a different co-worker (someone we may not always work directly with) and come up with a team activity that is unrelated to work. We are assigned a day with our partner and set out to find an activity. This has led to some of our best memories and is often what we look back on at future offsites. A couple of things we have found to work best: Boating/Sailing — A fan favorite has been sailing and boat cruises we’ve taken as a team. We have generally found these on Airbnb Experiences but are an awesome chance to check out a new city and relax with teammates. Cooking Classes — A chance to work directly with a teammate, plus eat great food. Will certainly be including more of these in the future. Escape Rooms — Fun way to work on team building. Sports/Hiking — Another chance to find a new skill and work as a team. We all learned how to longboard at our last offsite! Dinner — Believe it or not, coordinating dinner for a large group can be tough. We would highly encourage having reservations in advance to avoid long waiting times or eating at subpar restaurants. We learn something new about running an offsite at each one. By no means do they go off without a hitch, but they are invaluable to us and something we relish. Remote Hiring and Onboarding Tips Hiring for a remote organization is a double-edged sword. You have the world as a hiring pool but… you also have the world as a hiring pool. What we mean is that you have the ability to hire anyone in the world so you don’t have to compete with tech hubs and “hot” companies for top talent. However, this means that you are likely getting a huge number of applicants and need to have a dialed system to vet and hire candidates. 14. Post Jobs on the Right Remote Boards Leveraging job boards are a great way to get the word out about a new position. There have been countless job boards specific for remote workers as well as traditional options. Some popular options: AngelList Remote.co We Work Remotely 15. Simulate Remote Work During the Interview Process You likely do not have the opportunity to meet with them in person so being comfortable with video calls and evaluating work/writing is crucial. As we previously mentioned, building trust does not need to take place in a physical office. It takes place in evaluating communication and work. This same idea is relevant when hiring. At Visible, we are generally in search of “self-starters” and someone that is comfortable working alone/remote. Like most companies, our hiring process starts with short video calls with Visible team members. Once we have determined if they are a fit for Visible, we try to simulate remote work as much as possible. To start, we use a paid project for the candidate. From the second we start a paid project, we are building trust with the potential candidate. Generally, the project is related to a future Visible product, marketing plan, idea, etc. To best simulate remote work, we invite the candidate to a Slack channel where they can ask questions and interact with the team. Hiring for a remote position is challenging but rewarding. No matter how you approach hiring a remote employee, communication and trust should be front and center of the process. 16. Start Onboarding Remote Employees Before Day One Onboarding an employee across the country or globe can feel odd. In order to make sure a remote onboarding goes smoothly, we suggest a few of the following steps: Timeline — Set up an agenda and expectations for the first few days/weeks for a new hire. We use a Notion doc and create a day-by-day agenda for the first week so they know exactly what to expect and what needs to be completed. Introductions — Give new employees an opportunity to pair with different teams and teammates. It is a great way for new employees to get a lay of the land and build relationships. Software — Part of our timeline/onboarding document, is setting up the software and explaining what each one does. Merch — Send a shipment of your merch and team gear so they feel welcome! Technology — Make sure your new hires have the hardware they need to get the job done. Remote Work Tools To Level Up Your Team As we mentioned previously, Slack and Zoom have combined to essentially become our office but we have a number of other tools we use to help communicate and facilitate remote work. Slack for Messaging, Company Updates, and Fun Slack is the lifeblood of our business. 95% of our communication takes place in Slack. We break our channels into different business units and try to have as much automation as possible within Slack. For example, we have a channel where we can see when a new trial is started, a channel that funnels in our Intercom conversations, etc. We do try to keep most of our Slack conversations in public channels. As a note, we are a smaller team so most channels are not too noisy and anyone is welcome to mute a channel that they find irrelevant/distracting. Zoom for Video Conferencing As we mentioned earlier, we use Zoom for any necessary face-to-face meetings. As a distributed team, meetings are a crucial medium for our team to connect, share & collaborate. Here are some general guidelines for all meetings. Video should always be on by default (unless you have some serious connection issues). Your microphone should always be on and not muted. We want to feel like we are next to each other in a meeting. Visual and verbal queues & feedback are important ways we communicate. Try to find a quiet place with limited background noise. When applicable, send out an agenda, documents, etc prior to the meeting for the attendees to review. Jell for Daily Standups Jell — Jell is a tool we use to post personal standups on a daily basis. Each morning, every team member fills out a simple prompt that asks what they are working on that day. From here, the answers are sent to a channel in Slack where we can see where other team members may need help. Notion for Task Management and Internal Documentation Notion — We recently switch to Notion for (1) our task management and (2) our internal Wiki. We use Notion to monitor our current product cycle, current marketing tasks, and customer success tasks. Each team member has full access to all boards to see the status of different projects and tasks. We also use Notion as our internal Wiki. This is where we host everything and anything about Visible and how we work. If someone has a question about a company policy or workflow, they can check Notion. We are also diligent about documenting meetings so we this is where team members can find notes and discussions from past meetings. HIVEGEIST for Working Remotely The HIVEGEIST community consists of remote working professionals who share their vision of a decentralized life. With HIVEGEIST, you not only belong to the strong network of our members, you also immerse yourself in the local community. Use one-time code, VISIBLE20, for a 20% discount on the first month for your community. Visible for Aligning Our Team We use Visible to dogfood our own product and for our CEO to send out a weekly Update to the team. A weekly note from our CEO allows everyone to have a holistic view of what is happening with the business and where current metrics stand. Final Thoughts on Managing Remote Teams As technologies continue to advance so will the way we work. Remote work may not be a perfect fit for every company but we believe that it is here to stay. Each day we learn something new about working remote and the benefits that come with it. If you’re interested in getting started with remote work or want to learn more, shoot us a message to marketing@visible.vc Other Resources on Remote Work Below are the blog posts, guides, and other resources that we have looked to when implementing remote work at Visible: Our 9 Favorite Posts on Remote Work The 2021 State of Remote Work Why Everyone Loves Remote Work Remote Stories Why Naval Ravikant Thinks Remote Work Is The Future How to Lead a Remote-Friendly Startup How Remote Workers Make Work Friends Remote First Capital

Naturally, communicating when times are tough is intimidating. No one likes to share what is potentially bad news. However, when times are tough it is more important than ever for leaders to communicate with their stakeholders. Loads of VCs and founders have written about the importance of communication during a crisis over the past few weeks: “First [of six disciplines for challenging times], transparent communication… There is no better example than Winston Churchill. As you articulate communication plans, speak with transparency, candor, and gravity.” — Tomasz Tunguz in Six Startup Disciplines for Challenging Times “When people get Happy Talk instead of Hard Talk, it doesn’t reassure them. In fact, it does the opposite: It causes them to question the credibility of their leaders, which heightens their anxiety and makes them feel rudderless.” — David Sacks in Happy Talk Versus Hard Talk “Culture should be a priority. And today it is more important than ever. For the amount of time we spend working it should be positive, enjoyable, challenging in a good way and everyone there should feel connected to the company. Happy people make for happy atmospheres regardless of the hard work being done.” — Joanne Wilson in Culture is Important Now More Than Ever “Communicate, communicate, communicate. It is even more important in a remote environment.” — Seth Levine in Tips For Working from Home From The Foundry Network “Regardless of the times, entrepreneurs should send a weekly email update to their constituents — employees, advisors, mentors, and investors. People want to know what’s going on. People want to help. Regular email communication is the most repeatable, and scalable, method.” — David Cummings in Weekly Communication “Key learnings – a) understand and optimize your cash position b) increase communication with team, investors and customers. More the better. c) organize around your customer – shift resources to help them. d) look for opportunities that others won’t see e) stay optimistic!” — Scott Dorsey on Key Learnings from Leading Through 2008 Crisis Everyone can come out and say that now is the time to communicate but that does not mean everyone will do so. Communicating when times are tough is easier said than done. Considering our bread and butter is investor and stakeholder communications, we decided to take a look at our data and see if leaders are in fact stepping up during these tough times. The results? Startups and leaders and taking communication incredibly seriously. First, we took a look at Update recipients by month: This chart is simply the total number of Update recipients by month. Clearly March has been our best month to date. It is refreshing to see leaders and founders doubling down on communication. So how are the recipients receiving the Updates? Very well. The chart below is number of Update Reactions, our version of a thumbs up/like, by month: The result? Investors, team members, and other stakeholders are trying to be as supportive as possible. It is incredible to see leaders double down on communication and their stakeholders pass along support. Leaders who can step up now will ensure that their team, investors, and other stakeholders are at ease. Plus, they’ll position themselves for success when we get through the current crisis. As Naval Ravikant wrote, “Leadership in the coming months, at every level, is the audition to lead in the coming years.” If you are ready to get an Update out to your investors or team, start your Visible trial here.

As many companies are transitioning to remote work for the first time it is normal to feel overwhelmed. Getting used to the social norms of working from home can be odd for some individuals: no group lunches, desk visits, mid-day games, and “water cooler talk.” Remote Work at Visible Being remote for the last 5 years, we’ve missed the serendipitous moments and random conversations that take place at an office. We have done our best to fill the void with different Slack channels, games, Zoom calls, and offsites (more on that in a different post). Being able to have personal conversation outside of work is vital to any startup culture. Being able to translate that conversation when working from home is just as important. Out of the different strategies and ideas we have tried to mimic office communication, the one that has stood the test of time is the #watercooler Slack channel. Our #watercooler Slack channel is exactly what it sounds like — a chance to take a break from work-related tasks to discuss hobbies, interest, food, and current events. Our Favorite Slack Channels We all like to see our respective Slack channels light up, but there is an added excitement when the #watercooler channel lights up (especially later in the day). We do not have hard set guidelines for what should be posted in the #watercooler channel but it generally consists of the following: Food/what we ate — Pictures or recipes for what we are cooking at home/eating at restaurants. We all love to eat at Visible so this is big for us. Random videos/pictures/stories from our day to day lives — For example, a current event or something big that may be happening in someone’s respective city/neighborhood/etc. Travel and Hobbies — Being a remote company, a lot of us spend a good amount of time in different locations. We love to share pictures and stories from our time in new places. Work Inspiration — This is also where we share examples and inspiration of something cool we see a different company doing. Anything from a new product feature to an intriguing marketing email. Fun Stories — If someone runs into a fun story, stat, or fact they run into online, we tend to share it in #watercooler. While there is no substitute for in person conversation, being able to take a break and have casual conversation with co-workers is a must when working from home. Being fully remote ourselves, it has allowed us to get to know each other as if we were working in an office. For those working from home for the first time, give the #watercooler a try and let us know what you think!

Remote work is here. Even if it is only for the next couple of weeks/months, companies are transitioning to remote work. The obvious distractions combined with companies transitioning to remote work who do not have a system in place will lead to many companies’ productivity and growth taking a hit. At Visible, we believe in remote work. We have been fully remote for 5 years and have learned a lot along the way. We’ve tested just about everything — especially when it comes to weekly communication. Slack and Zoom are essentially our office. We’ve been using Zoom to power our meetings since day 1 (we love Zoom but love them even more after offering their product for free to educators and students). In order to (hopefully) help more companies increase productivity while working from home, we’ve shared weekly meeting examples and guidelines for Zoom calls below. Zoom Meeting Guidelines As a remote team, meetings are a crucial medium for our team to connect, share & collaborate. Here are some general guidelines for all meetings. Video should always be on by default (unless you have some serious connection issues). Your microphone should always be on and not muted. We want to feel like we are next to each other in a meeting. Visual and verbal queues & feedback are important ways we communicate. Try to find a quiet place with limited background noise. When applicable, send out an agenda, documents, etc prior to the meeting for the attendees to review. Below are a few examples of different meeting formats we have found to be most valuable: Weekly kickoff and standups Collaboration and brainstorming One on Ones Show & Tell Monday Kickoff & Standup This gets us warmed up for the week. We’ll see how everyone’s weekend went and dig into the week ahead. Mike (our CEO) will start by giving a quick recap of our company-wide metrics, goals, news from the previous week and priorities for the coming week. We will then review our current product & marketing boards to see if there are any obstacles, outstanding questions, etc. This is not a time to go in-depth but rather schedule a follow up time to pair with your colleagues. Collaboration Calls Collaboration calls are a time for us to get together as a team and work on a larger project or idea. Generally we will decide on our Monday kickoff call what we will discuss on a team collaboration call. Some ideas: Review a product cycle item — What is the status of a current product cycle item? What is needed from others here? Is there a mockup that someone would like to present? Etc. Play a game — Use this as a time to play a collaborative game as a team. Brainstorm — Working on a bigger product or marketing idea that you need input from others? Use this as a time to present and collaborate on bigger ideas that involve the entire company. Be prepared with activities to guide the brainstorm session! Other talking points: Give a shout out to a team member and thank them. Tell them why! Tell us a story about something Visible related! Could be a customer story, a bug you found, something you designed, etc What did you learn last week? (Doesn’t have to be Visible related!) What is something you are proud about from last week? One on One Meetings One on one calls are to make sure we are identifying opportunities to serve one another better, a chance to deepen our relationship as well as uncover any challenges before they grow into something larger. The time should also be spent talking about near terms goals & priorities but also long term development as well. Every one on one is the employees time and the time can be used for whatever they deem most valuable (90% of time for the employee). To make sure the time is used in a mutually beneficial way we want to make sure the employee is providing a quick update (before the call) with how everything is going, how they are feeling, and what challenges they are facing. A couple of blog posts we used as inspiration for our meetings: Managers, Take Your 1:1s to the Next Level with These 6 Must Reads 28 Questions For Insightful One-On-One Meetings Show & Tells Every Thursday a team member presents a show and tell. The topic does not have to be work related. It can range from your favorite tacos to how venture capital works to budgeting apps for personal finance! Every week a team member presents a show & tell — @VisibleVC related or can be anything you are passionate about… This week we learned about mechanical keyboards. I had no idea the massive community that exists! pic.twitter.com/mhFyS7m3C0 — Mike Preuss (@MikePreuss) December 18, 2019 We hope this helps with how your team can use Zoom as you navigate remote work. If you have your own tips and tricks, we’d love to hear them! Or if you’d like to learn more about how we successfully work from anywhere, feel free to reach out.

At this point, it is expected that most companies and corporations will be exploring working from home/remote work for the coming weeks. There has been an explosion of “work from home” blog posts, resources, tweets, etc. over the past couple of weeks. In order to help cut through the noise, we have shared our 9 favorite blog posts on remote work below. The post are largely curated from our weekly Founders Forward Newsletter. We search the web for the best tips to attract, engage and close investors, then deliver them to thousands of inboxes every week. Want in? Subscribe here. The Remote Work Report by GitLab The team from GitLab surveyed 3000+ remote employees to explore the future of remote working. Work From Home Seth Godin, business author, offers a framework to help employees determine when and how to work from home. REMOTE: Office Not Required Jason Fried, CEO of Basecamp, is temporarily offering full refunds to anyone who buys the Basecamp book, “REMOTE: Office Not Required.” The State of Remote Work 2020 The team at Buffer share insights and data from surveying over 3500 remote workers. Upside.fm Podcast: Powering Communication for Founders and Investors Our founder, Mike Preuss, had the opportunity to join the Upside.fm podcast to discuss all things remote work, investor communication, and portfolio management. Best Practices for Managing Remote Teams: A Psychological Perspective Steph Smith of Toptal discusses how remote work can deeply influence the dynamics of workplaces and individual teams. How to Create a Remote Work Routine That Works Marcus Wermuth of Buffer shares his remote work tips to help form a routine that maximizes creativity and productivity. How to Build Social Connections in a Remote Team Claire Lew, Founder of Know Your Team, offers 7 tips to help remote employees and managers build a social connection. At Visible, we have been fully remote for the last 5 year. Next week, we will share more specifics and advice form our time as a remote company.

When I started drafting the note earlier this week I was going to ask you about Covid-19 and how it will impact your business in the short, medium and long term. Well… a lot has changed in 72 hours and you would think we are going through GDPR again with how many emails I’ve received from vendors that I haven’t heard from in years. I don’t want to make light of the situation, it is serious, but figured you might be tired of the constant reminder. (*some extra notes at the end) Instead, I want to share the story of Richard Montañez. If you haven’t read his story yet — please do. It made the rounds a couple years ago but want to re-share as it is one of my favorites. In short, Montańez was a janitor at a Frito-Lay plant but became the inventor of the Flamin’ Hot Cheeto and is now a VP at Frito Lay. Two of my favorite quotes from the article: “There’s no such thing as ‘just a janitor” “Act like an owner” Great ideas, innovations and processes can bubble up from anywhere in an organization. It took guts for Montańez to call Roger Enrico (CEO at the time) to pitch the idea. It took equal guts from Enrico to be open and receptive to fielding a call from someone at the Cucamonga plant. Last Week’s Note – The Press “Whenever that happens, I’ve called it “the floodgates have opened” and I do the exact same thing. Love it” “To me, skills are highly influenced by your state of mind, mind and body fitness, your relationship with your loved ones, what you ate 2 hours ago… And much more. In some days, you’ll be able to overcome some challenges much more easily than in some others.” “I just wanted to say thanks for the email below; coming during the cancellation of a major event, it was a calming and encouraging read”

When times are tough (which they will be) being a founder can often feel like you are alone on an island. Having people to open up to and work your way through the troughs is key not only for your mental health, but your company’s health as well. Establishing a trusted circle of mentors, advisors, and peers, your personal board of directors, from day one is a great way to prepare for what lies ahead in your company building journey. What is a personal board of directors? A traditional board of directors is “ a group of people who jointly supervise the activities of an organization.” A personal board of directors is a group of individuals that can offer advice and direction for both personal and life decisions. Your personal board should be a trusted group you can lean on when making difficult decisions. Just as a board of directors holds an organization accountable, the same could be said for your personal board of directors. Who should be in my personal board of directors? Finding the right mix of individuals for your personal board of directors can be tricky. They should be a collection of individuals that are willing to give honest and candid feedback. Generally speaking, this means leaving family and close friends off of your board of directors. The team at Harvard Business Review suggests including a mixture of the following people: “First, you need fans — people who support you and will deliver tough feedback with kindness and good intent.” “Second, recruit potential sponsors — senior leaders who can advocate for you when it’s time for a promotion.” “Third, include at least one critic. These people may be the toughest to approach, but they can be the most valuable.” No one wants to face criticism; but it is an important aspect of personal and company growth. This mixture of individuals will be able to help with professional development, company strategy, and major life decisions. Assembling your personal board of directors Asking people to be on your personal board of directors can be an intimidating tasks. We suggest building a list of people you would find to be a good fit (using the criteria from above). Start with your top choices and make your way down the list. If you get no response or a simple “no,” don’t fret. Simply move on to the next person on your list. If you’ve done your research and built a proper list most of the people should be eager to help you. As we wrote in our post, “Startup Leaders Should Have Mentors. Here’s How to Find One,” we suggest when reaching out, “you should make sure to 1) explain why you’re reaching out to them specifically and 2) ask to meet with them once instead of asking them to commit right away. Those two things will make them much more likely to say yes.” Well a personal board of directors can’t guarantee success it can certainly help as you struggle through the inevitable tough times of building a startup. If you’re interested in learning more about approach mentors and advisors, be sure to check out our mentors post here.

I’ve been grappling with the idea of getting a CEO coach for a while. In particular, I’m always looking for ways to level up my leadership skills. Sidenote: I recently read Conscious Leadership based on a referral from one of our customers and loved it! I’m curious, do you have a CEO coach (or any type of coach)? What types of issues do you work through? If you have 2-3 minutes, I’d love for you to respond to this survey — I can’t promise your typical 10-20 seconds 😉 Transparently, we’re thinking through ways how we can offer coaching services to our customers. It appears that wellness and vulnerability are resonating based on responses to last week’s note. -Mike

For first-time founders and leaders of early-stage startups, determining compensation for the CEO and early employees can be tough. On the one hand, you need to hire the best talent, retain them, and incentivize their performance to have the right team in place to grow. As a founder and/or CEO, you also want to pay yourself enough to get by and prevent money from being an unnecessary distraction. On the other hand, you need to keep cash in the bank and appease your investors and board members that you’re extending responsible offers. How do you determine what’s best? The right approach won’t include a one-size-fits-all answer for every business. However, successful founders do tend to establish consistent tactics early on and lean on research to find their solution. It includes understanding the competitive compensation you can afford, the value of your business, and the sum total of benefits available to you and your employees. Here are some of the best practices and advice on approaching your boards with proposed plans once you’ve determined the right way forward. Average Startup CEO Salary in 2021 In the Kruze Consulting report on 2021 CEO salaries, the team surveyed over 250 startup leaders and found salaries have slightly increased. While they initially dipped at the start of COVID, the average CEO salary is now hovering around $146,000 a year. The salary varies by company stage and industry — learn more below: Startup CEO Salary breakdown by Industry One of the places to start when evaluating your CEO salary is by evaluating the benchmarks and peers in your industry. As you can see below, the average salary of a seed-stage startup CEO varies depending on the industry. The following data is from the Kruze Consulting 2021 Startup CEO Salary Report: Biotech – This has remained fairly consistent year to year as the space is more mature. Ecommerce – Ecommerce companies can be started and built with individuals and smaller teams leading to a smaller salary Fintech – A hot space in VC leading to more companies being funded with more money. Hardware – A more mature space leading to a higher salary. SaaS – Similar to fintech, a hot space in VC leading to more companies being funded with more money.  While the industry certainly has an impact on a CEO’s salary — the stage and capital raised seem to have the largest impact on a startup CEO’s salary Startup CEO Salary breakdown by funding stage Using the same report, Kruze Consulting 2021 Startup CEO Salary Report, as above you can see that the capital raised greatly impacts a startup CEO’s salary. Presumably, as a startup raises more capital they are growing as a company. This means that the CEO likely deserves a higher salary as they continue to bring in the new revenue and grow their bottom line. For example, if a company has gone on to raise their series A that is a testament to the companies growth and should be reflected on the CEO’s salary. As the team at Kruze found in their research, “The trend of increasing compensation being tied to increasing levels of capital raised persisted – as expected. Seed stage salaries – for companies that have raised less than $2 million in total funding – seem to be still recovering from the COVID crisis, and the overall pay there is down from $120,000 in 2019. However, at all other levels pay is more or less flat to up quite a bit.” $0-$2M (Avg) – Companies that have yet to prove product-market fit so likely as a lesser salary $2M-$5M (Avg) – Similar to $0-$2M this range has yet to give investors and board members the full confidence of a large exit $5M-$10M (Avg) – On the path to a larger exit and team warranting a larger salary. $10M+ (Avg) – Likely companies with a solidified model and likelihood of a large exit. Related Reading: The Understandable Guide to Startup Funding Stages How to Determine a Startup CEO Salary Startup CEO Salary Calculator Once you understand the benchmarks and industry trends, it is time to determine what your annual salary should be as a CEO. While there are quite a few factors that go into determining your salary we find the following to be most important. Certainly, there are a few other factors that will go into a startup founder’s salary as well. For example, if a founder is headquartered in Silicon Valley their cost of living is higher and likely requires a higher salary. How much money is in the bank? This is an especially important question to answer when you’re trying to hire your first employees. You have to be able to afford the talent you’re recruiting without cutting your financial runway unnecessarily fast for some quick-to-compete cash package. If the CEO is also a founder, it will be much easier to manage their annual salary because the value of their compensation package will likely lean much heavier toward equity than cash. But bringing in non-founders takes actual dollars and requires confronting these tough questions: how much money do we have? How long will this last us? How does a cash package for X employees change this? What’s your current valuation? Next, it’s time to determine what your business is worth so the value of equity can be established. For venture-backed companies, you can find this answer through an official 409A process or less formally (as Fred Wilson proposed in 2010) by using the valuation of your last financing round or the most recent offer you received to purchase your business. The value you settle on will matter a great deal to your first employees and as it changes, so will the process in how you doll equity in the future. What’s the competitive salary for this position and experience? The reality is most venture-backed startup CEOs typically make somewhere between $75,000-250,000. This has long been an acceptable salary range depending on the cost of living adjustments and the value of the business, and as long as the fledgling business isn’t truly desperate for cash. As noted in Business Insider here, Seth Levine’s observation on CEO salary in 2012 still holds true compared to the 2019 Kruze salary report data above: early on companies that have raised $500,000 or less cap out at $75,000, companies that have raised $1 million or less pay between $75,000-$125,000, companies that have raised between $1-$2.5 million pay closer to $125,000. The greater the fundraising numbers are from there, the more likely the CEO pay range climbs closer to $250,000. How to Determine Startup employees Salary Determining how to properly compensate employees at a startup is also a tricky task. As we wrote about in our post, “How to Fairly Split Startup Equity with Founders,” startup employees are generally looking for something more than a salary — transparency, collaboration, ownership, responsibility, etc. Oftentimes a startup can’t offer the salary an established Fortune 500 company may be able to offer but they can offer equity and intangibles that an employee can’t find elsewhere. With that being said — a salary is what ultimately can be the factor that determines if an ideal candidate will jump ship to join your company. How much common stock will you issue an employee? Your employees have options for where they work. Many of those options will offer greater short-term rewards, while you are likely to offer below market value in cash compensation. But early employees will be attracted to your business in part because of the long-term payoff. “When someone works for less salary than they deserve (meaning: what they could make elsewhere), I think of that as a cash investment they’re making in your company,” Jason Cohen writes. That comes in the form of common stock. Paul Graham has put together some valuable formulas for determining the equity of your first few dozen employees based on the expected value they bring to your business. That said, it’s unlikely in most cases for non-founders to receive more than 5% of the business (bringing on a CTO can be the one common example of exceeding this mark). Previously Brad Feld has argued that a founder CEO will be in the 5-20% range, a founder CTO in the 2-10% range, other co-founders between 3-7% and non-founder early employees between 0.5-5%. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary. Related Resource: How to Fairly Split Startup Equity with Founders Are you issuing stock options or restricted stock to your first employees? In their helpful guide on employee equity, Gusto evaluates the decision to issue stock options, the chance to buy stock at a certain price, and restricted options, the right to buy stock under specified restrictions. The distinction between the two may impact early employee decisions on how they personally value their stock. You will want your boards input on this process early on. Related Reading: Employee Stock Options Guide for Startups What motivates your early hires? Now comes the really hard part. “For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula,” Fred Wilson writes. “Getting someone to join your dream before it is much of anything is an art not a science.” You’ve got a package in mind that includes a salary you can afford and an equity stake that makes the offer competitive if your company grows as expected. But you’re hiring unusual people to take this ride with you and understanding the package that will satisfy their ambition will also likely require rounds of negotiations and probing questions from you about their true motivations. Are your investors on board? Much like a competitive package for an employee, a CEO’s compensation and equity stake will require negotiations – this time with your investors. Having the above questions answered will help. Staying within a competitive range is needed to appease your current board and attract new investors (for example Peter Thiel has publicly stated he passes on any startup saying it’s CEO more than $150,000). As a CEO, you also want to examine your own motivations in a negotiation, especially if you are attempting to increase your salary or equity stake. “When two sides in a negotiation can’t come to a deal, it’s often because the two sides don’t have a clear enough view of what each other’s alternatives are if they can’t agree,” Tim Jackson writes. You don’t want to walk away from a tough negotiation having damaged your relationship with investors on your own compensation or shown irresponsibility when proposing packages for early employees. A well-researched proposal that clearly assesses your company’s current financials, demonstrates the expected impact fairly compensating an early employee or CEO will have and honors your commitment to delivering the return they expect on their investment will get you to reach mutually agreeable terms. Transparency and preparation are key. Related Reading: Private Equity vs Venture Capital: Critical Differences Startup CEO Salary FAQ To sum up the common traits that go into determining your salary as a CEO, check out the common FAQs and takeaways below: How much should a startup founder CEO pay themselves? In 2021, the average CEO salary was $147,000. At the end of the day, it is entirely dependant on the business, industry, and lifecycle. How does funding impact startup CEO salary? The later the stage a company is, the higher their salary is. As a company matures and grows, so does the salary of the CEO. How does your industry impact startup CEO salary? Industries and different verticals can lead to varying salaries. Markets that are receiving more funding and exiting at higher clips generally warrant a higher salary. How much equity do startup CEOs get? This is entirely dependent on the funding and financial instruments a company decides to use. Someone that has funded their own company and taken no outside financing might own 100% of the company. On the flipside, a founder that has raised multiple rounds of venture capital might only own a small % of their company.

What is Startup Culture? Every business has a culture. An offshoot of Silicon Valley culture, startup culture prizes ownership, transparency, growth, and ownership. Startups are about disruption and revolution: they’re about changing the way a market currently solves a problem. A strong culture informs employees of what is expected of them, courts the best and most motivated employees, and builds the foundation for a long-term, successful enterprise. Traditional Startup Culture In recent years, successful startup cultures have experienced an evolution. Rather than being singularly mindful and driven, such as the early days of Apple, they are now embracing failure and work-life balance. Employees have begun to reject the traditional tenets of startup culture, which often had employees working long hours and numerous days in pursuit of perfection. Instead, startup cultures are now taking notes from giants like Google, encouraging both innovation and failure, and allowing employees to experiment. Modern startups have many employee-based amenities and ensure that their employees are inspired and motivated. At the same time, startups use their culture to make sure that their employees remain engaged and invested, and that their employees are continually working to produce ideas and technology. Relationships Startup cultures encompass the company’s relationship not only with their employees, but also their vendors, customers, and even products and services. A startup is often seen as a cutting-edge, maverick company: a company that is willing to try out unique and risky propositions for the greater good. In terms of customer care and product development, startup culture may be customized to suit the business. Not all startups are alike, and not all startups buy into the traditional ideas of Silicon Valley culture. Instead, startups tailor their culture to their mission statement and their values, and they make it clear what their business is about. This is one reason why mission statements and values statements have become an important component of the modern business. A company’s culture may evolve over time, but what is most important is that a company understand its culture in-depth, and enforces its culture at all times. A strong company culture is what ties the company’s employees together, creating the company’s brand and identity, and driving the company onward toward success even as it scales upwards. A company with a weak culture will have uncertain employees who may not necessarily know what is expected of them. There are many examples of different company cultures that a business can pattern itself against, but ultimately the company’s culture is often going to be informed by its higher-level executives and employees. Why Culture is so Important to Startups Culture is incredibly important to startups. Oftentimes startups don’t have the resources and capital to compete with larger corporations to attract top talent. With that said, it is important to offer intangibles (and equity) to attract top talent. In addition to being able to attract top talent, establishing a strong culture from the early days will help build in all aspects of building your business as you continue to grow and hire. Hiring As we mentioned, establishing a strong startup culture is a surefire way to compete for top talent. Early stage startups generally can’t compete with pure salary compensation but can offer intangible benefits that can sway an individual to join your organization. To learn more about how to hire for you startup, check out our guide here. Outside of hiring new employees, culture is incredibly important in other aspects of your business as well. Retention Generally speaking, it is more cost effective to retain an employee than hire a new one. Startups usually do not have the resources (or time) to recruit and train a new employee. With that said retention is vital to success. An easy way to make sure companies retain their top talent is by offering a culture that gives them the intangible benefits they want. No longer are the days of ping pong tables and sparkling water. Happiness Going hand-in-hand with retention is the ability to keep employees happy. If employees are being given the intangibles they want and believe in what they are working towards chances are they will be happy. And a happy employee is someone that will stick around and only strengthen your company culture further. Buy in A strong culture will create buy in from individuals across the organization. As most startup leaders know, building a startup is full of ups and downs. Having buy in from the earliest employees is essential during the downs to keep everyone motivated and focused on the vision. Who Owns Culture Building at Startups When growing your headcount at a startup, everyone plays a role in building the startup culture. Oftentimes the top sets the tone and leaders across the organization help implement and build the culture. Founder(s) and CEO Generally a startup begins with a small headcount of founding members and leaders. They are usually the subject experts or most qualified in their respective department. It is on these founders and leaders to set the tone for the culture of the entire organization. As startups begin or continue to hire it is vital that the leaders lead by example. For example, if you want a culture of transparency and open communication then it is important that the leaders and founders practice transparency and open communication. As the team at First Round Review puts it, “Companies tend to reflect everything about them [founders]— their personality, strengths, weaknesses. So when you start defining culture in an intentional way, first look at yourselves. If you’re not a founder, look at your CEO and the people who were there at the very beginning.” The First Round team goes on to say, “If a founder is competitive, the company will be more aggressive and competitive. If they are analytical and data-driven, the company will tend to make metrics-based decisions. On the other hand, if a founder deliberates too long over decisions, their startup may have a hard time moving as fast as it should. If a founder is a designer, the way the company builds products will likely be led by design.” Human Resources Usually when a startup has less than 10 employees the culture can be fairly rudimentary. It may be based off of how the founders/leaders work and have a few core ideas. Once a startup gets to the point where they can hire a HR leader or team, culture may be elevated to a new level. An HR leader can come in and dissect what is or is not working about the current culture and put the playbook in place to hire individuals that fit the culture. As the team at BambooHR puts it, “One of the roles of HR in a startup is to make sure the company lives up to its values by hiring people that align with the company’s vision.” Leaders As we previously alluded to the leaders of each business department are the role models for culture. Once you grow your headcount to a point where founders are no longer working with every individual, it is on the leaders and managers to practice the values and be the role model for those working on their team. Startup culture generally starts at the top. Even if a startup’s vision and values are not written on paper, the earliest team members are likely practicing them day in and day out. Learn how you can formalize your startup culture below. 5 Steps to Build A Desirable Startup Culture As we mentioned previously, a startup culture usually starts with the founders and what they bring to the table when a company starts. As the team at First Round wrote, “80% of your company’s culture will be defined by its core leaders.” Questions for Leaders While it can feel burdensome to take the time to formalize your culture in the early days, there are a few easy steps you can make to get things headed in the right direction. As we mentioned earlier, if a founder wants a culture of transparency they have to practice it themselves. In the early days, there are things that founders are implementing and practicing if they realize it or not. As a founder, you can ask yourself questions and it will give you a basic outlook of your “culture” (or how you work as a leader). Ask yourself things like: What am I good at? What are my weaknesses? How do I work? What characteristics do I look for in co-workers? What qualities do I dislike about co-workers? etc. Once you answer these questions, your culture will start to take shape. Common characteristics will start to appear and you will have the basis for your “company culture.” Define the Vision Statement Once you are ready to start formalizing the questions above you can start with the vision. As the team at HubSpot describes it, “A vision statement describes where the company aspires to be upon achieving its mission. This statement reveals the “where” of a business.” This is the overarching goal of where you want your business to end up. While it should revel “where” you want to take the business it also plays into “why” you exist. In a slightly varying definition, the team at Matter describes a vision statement as, “A vision statement explains why a company exists at a high-level. It is aspirational, inspirational, motivational, future-looking and coincides with the founder’s vision for a better world. The very word, “vision” has everything to do with seeing; and vision statements have everything to do with how the founder sees the company evolving and impacting the world.” Define the Mission Statement If the vision statement is where you want to go, the mission statement is how you will get there. As the team at Entrepreneur defines it, “Every successful startup has a clear goal or vision as to what they want to accomplish. While cynics would say that the ultimate mission of any business is making money, the most successful startups generally have a larger sense of purpose. And the best way to express that aspiration is with a well-written mission statement that establishes your company’s core values and highlight its goals, no matter what niche you might be working in.” A mission statement is your roadmap for achieving your vision. This is at the core of a startup’s culture and should be looked to often as you set goals and product roadmaps for the future. Define the Core Values At the end of the day, core values are the DNA of your startup culture. They act as a guiding principles for you how you and your team work. As the team at Wired writes, ” Choose values that are actionable and resonate with your company. If you identify your startup culture with values related to being bold but you know that isn’t important to your success or appropriate for your business, perhaps you should take a closer look at what makes your company tick. Values aren’t something that you have to put in writing for public display, that style isn’t for every startup. However, values should be something that most people can relate to and routinely act upon.” Values should be the acting principles of how your team works. If you think back to the original questions a founder should ask themselves, the values and principles will likely be clear. As you continue to bring on new employees look back at your values to see if they’re still being practiced. Practice What You Preach No matter what you put down on paper if you are not practicing what you preach a culture will cease to exist. For a startup culture to last, it is vital that the leaders are practicing the values and working towards the mission and vision each and everyday. If times get tough and the leaders abandon the company culture, chances are everyone else in the organization will as well. Remember what the First Round team said in the fact that, “80% of your company’s culture will be defined by its core leaders.” If you practice what you preach, building culture throughout your organization will come naturally. How to Maintain Culture While Growing Writing your mission, vision, and values is a small part of the battle. In order to best build a startup culture you need to actively maintain it and make sure it is being practiced across the organization. Here are a few ways to make sure you are maintaining culture while growing your headcount. Hire for Culture When bringing on new employees it is important to test if they are a cultural fit. If you have your values written, it should be fairly easy to test if an employee is a fit for your team. You can have multiple team members interview candidates to get their read on a potential candidates fit as well. Make it clear during the interview process what your company values and what mission and vision you are working towards. This should set the tone and expectations for if they do join your team. Tweak & Re-evaluate Even if you do a great job hiring for culture, chances are your company culture will continue to evolve. It is natural! Take the time to look back at your culture every few months and just see if things are changing. Don’t feel like it is something you need to update immediately but keep tabs on to discuss with your team and leaders. Survey A surefire way to see if your building and maintaining your culture is by surveying your team members. Something as simple as a prompt to measure their happiness level at work can do the trick. If something feels off or you are getting negative feedback about the culture — it may be time to make some changes and see what you can be doing differently. At the end of the day, it is up to the leaders to set the tone for the company culture. If they continue to practice what they preach and hire for culture, maintaining culture should be easier across the board. 5 Great Company Culture Examples It’s not always easy to intuit what a company culture is. Taking a look at some company culture examples can help, both in terms of what to do and what not to do. Here are some company culture examples to consider: Lyft vs. Uber Culture Early on in development, Uber established a problematic company culture, with team culture activities that often involved alcohol. Uber experienced numerous complaints and scandals during its growth, due to this problematic company culture. By contrast, Lyft was able to establish a company culture of responsibility and safety. It experienced far fewer complaints and scandals, and garnered a better reputation in the industry. Of course, in terms of market share, Uber eclipsed Lyft. But it has experienced significant and lasting damage to its reputation over time. Company culture isn’t everything to a business, but it is a lot. Neither Uber nor Lyft have been able to achieve profitability within their market. When considering office culture ideas, looking at cultural goals examples can help. Many companies pattern themselves after the companies that they find most successful and inspiring. Consider these examples of company culture statements, from the largest companies in the world: Google’s Ten Things We Know to be True This outline’s Google’s philosophy: customers first, do one thing well, and don’t be evil. Google has long-believed in serving the customer before everything else, as well as focusing on a singular thing at a time. Apple’s Vision Statement Apple is committed to bringing “the best user experience to its customers through its innovative hardware, software, and services.” Apple sees itself as being a world leader in technology, bringing customers the best user experience possible. Microsoft’s Corporate Mission Microsoft seeks “to empower every person and every organization on the planet to achieve more.” In recent years, Microsoft has been focusing on behind-the-scenes technologies such as their Azure Services, as well as collaborative and communicative products like Office 365 and MS Teams. As you can see, these cultural statements are brief and impactful. While the actual mission statement, company culture, and guidelines may be more in-depth, the company culture needs to be able to be explained in a simple, succinct way. Of course, these are also some of the largest companies in the world. But they all started out as startups, and their cultures have remained largely unchanged since then. Google started out with the mission of “don’t be evil.” Apple started out providing useful technology with superb interfaces. Similarly, Microsoft has always been user-focused when developing its products. It’s often said that an expert or a professional is an individual who is able to explain complex concepts in simple terms. Similarly, a business that really knows its identity will be able to describe its identity within a single sentence. This single sentence should resonate strongly with both employees and customers. Being able to simplify a company culture is critical, because a company culture has to be simple in order to be followed. An overly convoluted or complex company culture will be impossible to maintain for any business, and will lead to more confusion than is necessary. Amazon’s Culture And then there are the companies that have a more traditional corporate culture. As an example, many have stated that they are dissatisfied with Amazon’s corporate culture in recent years, which puts a performance-driven environment first. Amazon’s culture emphasizes an “outstanding, continuously-improving customer experience,” which has reportedly led to burn out and fatigue in many of its employees. An emphasis on “relentless focus” has led Amazon to be successful, but also the target of a number of high profile labor complaints. What's it like Working for a Startup? Working for a startup is often a cross between passion and a calling. People work in startups not to make the most money, but rather to be a part of something that they feel really matters. Working for a startup salary is often demanding and requires an employee to wear many hats, but there’s the hope that an employee may get in on the ground floor of something special: the next Google or Microsoft. What Talent Wants Consequently, an employee wants to feel as though they are valued, and they want flexibility and perks. Well, employees do value things like a ping pong table and snacks in the office, it can often be boiled down to 4 things that modern talent wants in the workplace: ownership, transparency, growth, and collaboration. Ownership There are two types of ownership for a startup employee, the type that shows up on a cap table and the type that stems from having an opportunity to lead new projects, products, and processes within a company. Transparency Employees want to know how their business is performing and how they will impact the business. At the end of the day they are asking themselves — Are the executives of the company being open and honest about the prospects of the business as well as our current performance? Does the company have systems in place to communicate that performance and give every team and person insight into how their contribution is affecting the growth of the business? Growth Let’s face it, no matter how amazing the culture at your company is, people often take jobs because of what it will mean for them personally. That means everyone that joins your company is doing so because they feel it is the best thing for them to be doing right now so that they can continue on the career path they have visualized for themselves. The difficulty is keeping people engaged enough to continue feeling this way. Collaboration The desire among companies to remain lean along with the uncertainty of what may transpire each week within an emerging business has given rise to the full-stack operator. People with a diverse skill-set (and, again, intellectual curiosity) will quickly form opinions on how the company outside of their specific role is being run and will want to make a contribution. Startups necessarily must be more flexible than traditional companies because they are already asking so much of their employees. A startup is going to ask their employees to work for them far beyond the traditional work week, while also continuously giving their all. Most startups are fairly lean on funding, and consequently they need to be able to reward solid performance in creative ways. Many startups use things such as corporate catering, health plans, on-site childcare, and other quality of life benefits to keep their most talented staff. But it has to be understood that those who are interested in working for startups do know that they’re going to be working for less: they need to believe in the business itself. As long as they believe that the business is going to be successful, disruptive, and innovative, they are likely to remain onboard. Much of this has to do with the culture. Why Should Someone Pick Your Company? Most people who work for a startup have already considered the working for a startup pros and cons. Ultimately, there are two major reasons people decide to work for a startup: The soft benefits are fantastic. The future opportunities are great. An employee may forego a significant salary if they feel that the startup’s soft benefits compensate for the loss of income. If an employee needs flexible time, so they can spend time with their children, or if an employee likes to go on lengthy vacations but still gets their work done, a startup may be the right environment for them. But one of the major benefits of working for a startup relates to future opportunity. Employees often want to buy into a business: they want shares of the business, or they want to be able to have upward mobility within the business. In the tech center, many employees come from businesses that paid them well, but there was no light at the end of the tunnel. And many employees really want to feel like they’re making a difference in the world. They want to feel as though the work they do is appreciated and matters. Working for a startup vs big company means that the big company funding isn’t there, but that the startup can be more flexible in terms of the employee’s own goals and desires. A startup can court better talent by providing opportunities for growth, working around the needs of the employees, and putting an emphasis on quality of life.

In his seminal 1964 book Managing for Results, business management guru Peter Drucker remarked that the success of a business is increasingly dependent on a company’s ability to effectively utilize talented people. Over the years, he spoke of a structural change from manager-controlled businesses to more decentralized structures and a paradigm shift from treating people as a cost center to viewing them as a resource. Peter Drucker believed in empowering employees through ownership, transparency in the workplace, growth, and collaboration. These ideas have stood the test of time and have become a vital proponent of startup culture. On Knowledge Workers: Even if employed full-time by the organization, fewer and fewer people are “subordinates”–even in fairly low-level jobs. Increasingly, they are “knowledge workers”. And knowledge workers are not subordinates; they are “associates”. – Drucker, Management Challenges of the 21st Century On Managing People: “You have to learn to manage in situations where you don’t have command authority, where you are neither controlled nor controlling. That is the fundamental change. Management textbooks still talk mainly about managing subordinates. But you no longer evaluate an executive in terms of how many people report to him or her. That standard doesn’t mean as much as the complexity of the job, the information it uses and generates, and the different kinds of relationships needed to do the work.” – Drucker, HRB: The Post-Capitalist Executive This contrarian insight, cultivated in the age of the rise of grey flannel suit Corporate America, proved prescient, as today’s employees want (or simply have the leverage to demand) more than just a paycheck from their employers. To attempt to wrap up his decades of writing and thinking into one paragraph, his philosophy on hiring, organizing, and managing people is thus: As the success of business ventures become more and more dependent on attracting and retaining talented people, competition for high quality “knowledge workers” increases. Companies who focus on measuring what actually matters and empowering team members through ownership, transparency, growth, and collaboration have a competitive advantage. When it comes to startup culture, the characteristics mentioned above, ownership, transparency in the workplace, growth, and collaboration, can be used to attract talent. Ownership There are two types of ownership for a startup employee, the type that shows up on a cap table and the type that stems from having an opportunity to lead new projects, products, and processes within a company. To compete in a competitive hiring market, fair compensation and an openness to talking about what that compensation looks like under different scenarios is table stakes. Everyone you offer equity compensation to should know how, for example, dilution or a down round will impact how much their options may be worth. Even if you are hiring people with some cap table savvy, sending them something like this or this can be helpful…again, this is table stakes. Where smart companies gain a competitive advantage is by working to maximize the second type of ownership for every team member. This is done by embracing autonomy. The actions taken early in a company’s life have an outsize impact on what it will become in the future and the people you hire early will be the ones taking those actions. If you aren’t focusing on growing the value of what could be called operational ownership, you limit the long-term value of everyone’s equity ownership. “Knowledge workers have to manage themselves. They have to have autonomy.” – Drucker How employees think about ownership: Is it clear how much of the company I own and what will happen to my ownership under different scenarios? Am I in a position where I am challenged to take ownership of new processes and initiatives, even if I am simply an individual contributor with no direct management responsibilities Do I have a stake in the company that goes beyond what shows up on the cap table? Transparency in the Workplace In a recent guest post on the Visible blog, Wagepoint’s Leena Rao asked whether “radical transparency” is the way forward for startup marketing. While many companies have taken to the idea of transparency in the workplace with regards to their operations and metrics, it remains a difficult balance to maintain. Sharing everything is great in theory but won’t it be distracting for people? And what happens if we have a bad stretch as a company? In reality, there is not a once size fits all answer to how startups should tackle transparency in the workplace. In spite of efforts to standardize how metrics in the private markets are tracked, dictating exactly what metrics and information each company should share (and with who) is a completely different beast. The key takeaway for executives looking to make transparency a part of their business is to remain consistent with what is shared and how it is shared. This helps build trust through predictability. How employees think about transparency in the workplace: Are the executives of the company being open and honest about the prospects of the business as well as our current performance? Does the company have systems in place to communicate that performance and give every team and person insight into how their contribution is affecting the growth of the business? Growth Let’s face it, no matter how amazing the culture at your company is, people often take jobs because of what it will mean for them personally. That means everyone that joins your company is doing so because they feel it is the best thing for them to be doing right now so that they can continue on the career path they have visualized for themselves. The difficulty is keeping people engaged enough to continue feeling this way. Working to understand what someone is looking for out of the position and over the long term before they come on board is one way to make sure you are setting a relationship up well for the long term. Training and development is another, often neglected, investment that companies can make…and it doesn’t have to involve expensive, comprehensive programs and teachers (read: consultants). If you are bringing intellectually curious people into your company (you shouldn’t be hiring people who aren’t), they will want to take control of their own professional growth and development, you just need to help provide the tools. This can be as simple as a $20/month Kindle allowance or Treehouse membership or a couple of days to attend a conference on their preferred programming language or design discipline. How employees think about growth: Is the company growing the way that it should be and am I contributing to that growth? Is being at this company in this position helping me grow my career? Collaboration The desire among companies to remain lean along with the uncertainty of what may transpire each week within an emerging business has given rise to the full-stack operator. People with a diverse skill-set (and, again, intellectual curiosity) will quickly form opinions on how the company outside of their specific role is being run and will want to make a contribution. Your first inclination may be to look at this as a meddlesome distraction full of meetings that start 10 minutes late and end with no actionable next steps. In fact, it can be just the opposite if executed properly. No matter how great tools like Slack or Trello are at keeping everyone in touch and on the same page, they haven’t (yet) replaced the impact a well thought out discussion can can have on the direction of your business. These discussions make it easier to get to the bottom of what work is most important for everyone at your company to be focusing on each day. That is why, even when it becomes more and more difficult to bring everyone together physically, things like show-and-tells, scheduled team catchups, and 1:1’s can be so impactful for a business that moves quickly. How employees think about collaboration: Do the different teams or functional groups in the company work well together? Am I getting the opportunity to work on different projects and learn from people with different skillsets than my own? Building a startup culture centered around ownership, transparency in the workplace, growth, and collaboration can be an easy way to attract top talent. Want the top content for building a strong startup culture delivered to your inbox every Thursday? Be sure to sign up for our Founders Forward Newsletter here.

Our Thoughts on Do Better Work There are two basic types of leadership book. The first is the philosophical book. Books in this category are full of fresh ideas and illustrative stories that are meant to inspire. Reading them feels good, and finishing them feels even better. They’re empowering. The best books of this type include one or two key concepts that stick with us long after we’ve turned the last page, influencing our future behavior; the others give us a temporary boost of energy and enthusiasm before they’re forgotten. The second type of leadership book is the practical book. These books forego inspiration and ideology for marching orders. Full of specific guidelines and tactics, the most effective practical books become trusted manuals for doing business well. The majority get bookmarked and put down about a third of the way through, never to be picked up again. Do Better Work is a rare book that falls in both categories. In it, author Max Yoder weaves the philosophical and the practical together, seamlessly and to great effect. The result is a leadership book that is not only helpful, but delightful and surprising to read—one where step-by-step instructions for, say, sharing work before you’re ready or achieving clarity, fit neatly alongside the lessons we can learn from philosopher J. Krishnamurti or the vulnerability of superheroes. I’m acquainted with Max—Visible and his company, Lessonly, share common investors—and his warmth and optimism, both immediately obvious when you meet him, make up the DNA of Do Better Work. Other touches, like the Vonnegut-esque sketches scattered throughout, make the book feel less like a typical leadership volume and more like a diary. Although Yoder writes about himself very little in Do Better Work, it still feels like a deeply personal read. Each of the book’s chapters is a vignette, with a simple title printed to look like handwriting. Fittingly, each of the chapter titles reads like it’s taken from a to-do list: Look For Opportunity, Ask Clarifying Questions, Get More Agreements. If there’s a central theme, it’s one of empathy and vulnerability, presenting interpersonal risk-taking and openness as the true path to better business outcomes. If there’s a flaw here, it stems from the author’s apparent reticence to insert himself into the work. It’s telling that Yoder gives a paragraph each to three of the major turning points in his life, but spends almost four pages on the lessons we can learn from production issues on the set of Jaws. It’s unclear whether more details about, say, Yoder’s failed first startup, Quipol, would’ve made the book better, but it is apparent that he’s more comfortable sharing others’ stories than his own. Do Better Work was self-published, largely because Yoder was resistant to publishers’ requests to inflate the word count. The final product is refreshingly free of fluff, but the book’s independent status may keep it from getting the full recognition it deserves. In the spirit of optimism, I have to hope that does not end up being the case. Do Better Work is a singular, winsome and challenging book for leaders and their teams alike.

Founders are in constant competition for 2 resources — capital and talent. In order to attract the best talent, founders need a culture, strong business model, capital, etc. to bring in new talent. However, talent will also require financial means and ownership to take the leap to work for a startup. Related Resource: How do you Determine Proper Compensation for Startup CEOs and Early Employees? In order to best attract top talent, founders need to have a gameplan to split and distribute equity in their business. Learn more about splitting equity with co-founders, early employees, and advisors below: What is the difference between equity and stock? Stock and equity are generally one in the same. As put by the team at Investopedia, “Equity, typically referred to as shareholders’ equity , represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debt was paid off in the case of liquidation.” This is largely made up of shares or stock, which can be defined as, “A stock, is a security that represents the ownership of a fraction of the issuing corporation.” Understand Options vs Shares When determining how to split equity amongst your founders and early employees, it is important to understand the language you’ll encounter. Learn more about the difference between equity and stock below: What are options? Note: When determining your startup equity structure, we recommend consulting with your lawyer. Investopedia defines employee stock options as, “a type of equity compensation granted by companies to their employees and executives. Rather than granting shares of stock directly, the company gives derivative options on the stock instead. These options come in the form of regular call options and give the employee the right to buy the company’s stock at a specified price for a finite period of time.” What are shares? As defined by Investopedia shares are, “Shares are units of equity ownership interest in a corporation that exist as a financial asset providing for an equal distribution in any residual profits, if any are declared, in the form of dividends. Shareholders may also enjoy capital gains if the value of the company rises.” Key differences between stock options and shares Options and shares are closely related. Ultimately an option gives the founding team the “option” to buy shares at a set price at a later date. When determining how to split up equity among your early team and founders remember that it can be a tool to keep everyone involved motivated and invested in the success of your business. Related Resource: What is a Cap Table & Why is it Important for Your Startup Company ownership When it comes to company ownership, stock options and shares have slightly different meanings. As put by the team at Seed Legals, “Shares give the holder immediate ownership of a stake in the company. Options are the promise of ownership of a stake in the company at a fixed point in the future, at a fixed price. Option holders only become shareholders when their options are exercised and have converted into shares.” Related Resource: Startup Syndicate Funding: Here’s How it Works Vesting Schedules As we wrote in our Employee Stock Options Guide, “when you receive a stock option this is not actual shares but rather the ability to buy shares at a later date. In order to retain employees, most companies will include a vesting schedule with their offer. This is the schedule in which you will have the ability to exercise your shares. A vesting schedule usually takes place over a period of time and may be split over the course of a few years or milestones. The most common vesting schedule for startups is a time-based schedule. This means that you’ll receive a set amount of shares over a set amount of time. Usually, there is a “cliff” which is a set date when you get the first portion of your shares. The most common startup setup is a 4-year vesting schedule with a 1-year cliff. This means that after working for a company for a full year, the employee will receive the first quarter of their shares (1-year cliff). After the first year, the employee will receive their remaining shares over the next 3 years on a specific calendar. Usually 1/36 of the remaining shares each month.” Cash Requirements As options are the ability to buy stock at a future date at a set price, employees will likely need cash to exercise their stock options. On the flip side, stockholders will not need to cash to exercise, as they already have their ownership/stock in the business. Taxes Determining when to exercise stock options can have tax implications. As put by the team at Crunchbase, “For incentive stock options—popular among startups—in addition to paying the strike price to buy those stock options, employees face taxes based on the difference in a company’s fair market value, and could potentially be exposed to alternative minimum tax as well.” Splitting Startup Equity with Founders There is no “one size fits all” strategy for distributing startup equity. Determining how to split equity among investors and later employees is fairly straightforward, but determining the equity split among founders and the earliest employees can be tricky. You can learn more about dilution and distributing equity with investors here. Even the most experienced leaders struggle with the issue of fairly dividing startup equity. To help alleviate the stress, we laid out a few thoughts for determining how you want to split your startup equity. Related Resource: The Main Difference Between ISOs and NSOs When do you split founder equity? Generally speaking, you will want to split founder equity in the earliest days of the business. If you are approaching investors for a pre-seed or seed round of capital and have yet to split equity with the founding team that could be a red flag for investors. By getting the buy-in from the founding members you’ll be able to approach customers, investors, and partners easier knowing the founding team is motivated and invested in the success of the business. Generally, if you are about to make the leap to be a full-time founder you will want to understand your equity split by this point too. How do you split founder equity? Splitting startup equity among startup founders is one of the first tough decisions a founding team will make. If you do a quick Google search for how to split startup equity among founders, you’ll get countless different ideas and suggestions. Commonly, you’ll see lawyers, startup founders, and VCs recommending to split depending on a number of different qualities. We’ve listed a few examples below: Experience – Do you have experience running and scaling a successful startup? Expertise – Do you have knowledge in the specific market you’ll be operating? Ideas/Intellectual Property – Did someone come up with the original idea for the company and turn it into intellectual property? Time – Are you dedicated to the company? As investor and founder Mike Moyer puts it; “The right way to think about equity is to think about a startup as a gamble… The value of each person’s bet is always equal to the unpaid fair market value of his or her contribution. Each day people bet time, money, etc. The betting continues until the company reaches break even or Series A.” On the other hand, Michael Siebel, CEO of YC, offers a controversial take for splitting startup equity: equal equity splits among co-founders. Michael shares many reasons why it makes sense to equally split your startup equity and not use the factors listed above. The more equity, the more motivation. The more motivated your founding team, the higher the changes for success. Another reason Michael shares is the idea that if the CEO or Founder does not value co-founders, no one else will, either. For example, if co-founder equity greatly varies, this suggests to your investors that the certain co-founders might not be as valuable or qualified. As Michael puts it, “Why communicate to investors that you have a team that you don’t highly value?” Related Reading: How do you Determine Proper Compensation for Startup CEOs and Early Employees? + 4 Ways To Find the Perfect Startup Co-Founder Still searching for your co-founder? Check out why Yaw Aning, Founder of Malomo, believes finding a solid co-founder is one of the best things you can do when building your company: Equity for employees Once you have determined your equity split among founders, you’ll be able to use your remaining equity and option pools to attract top talent. If you want your earliest employees to be your most impactful, creating an emotional attachment to your startup’s success is vital. Your first hires are key, and creating the perfect split between their salary, equity, and benefits can be difficult. There is no magic formula for splitting startup equity among your earliest hires. When do you give equity to employees? Leo Polovets, VC at Sosa Ventures, studied job postings and laid out the typical amount of equity depending on what number hire the person is: Splitting startup equity with your first hires will often require negotiations, and the process will vary from employee to employee. Once you start hiring outside your core team, you’ll want some type of predictable system in place for sharing equity. There is no right answer for sharing startup equity with co-founders and early-stage employees. It is more art than science in the earliest days. Just remember to be fair as you’ll be spending every day with these people. A solid relationship among the founding team will greatly increase the chances of building a successful company. How do you distribute equity to employees? As we wrote in our Employee Stock Options guide, “Deciding when and how to issue employee stock options can be a difficult task. A startup or founder needs to understand how much they should pay employees in cash and then add in stock options. When setting out to issue stock options it probably looks something like this: Define the role you are looking to hire. Decide what their total compensation should be. This can be taken from similar job postings and the market as a whole. Decide how much of their total compensation you would like to pay in cash (AKA their salary). Determine the gap between their salary and total compensation. This is entirely up to the startup or founder. It can be difficult to place a number here as the value of the company is solely on paper. Samuel Gil of JME Partners recommends doubling the value here. For example if there was a $10K difference in their salary and total compensation a startup should offer $20K in added compensation. The next step is to determine the exercise price for the stock options. As Samuel Gil writes, “As we have previously reasoned, we will assume that a fair price for the stock options is the same as the price of the common stock. So, how much is the common stock worth? The most frequent procedure is to apply a discount (e.g. 25%) to the latest preferred stock value, since common stock doesn’t have the same economical and political rights that preferred stock (what VCs usually buy) does.” Issue the number of shares. This is up to the startup and founder but can be calculated with the logic above. If you find the common stock price to be $5 and need to compensate an employee $20K that would be 4000 shares. This can be quite subjective as we need to remember dilution and valuation can rapidly change.” Splitting equity can sound intimidating when approaching it for the first time. By taking care of it and having a game plan in your early days will help as you continue to scale your business. To learn more about specific stock options and equity structure check out our employee stock options guide here. Related Reading: How do you Determine Proper Compensation for Startup CEOs and Early Employees? Dividing equity for directors and advisors Outside of employees and investors, startups have the ability to give other stakeholders in the business equity. One of the common/debated people startups grant equity to are both directors and advisors. Equity for directors Ultimately, determinig to give equity to directors is a choice startup founders can make. If you do decide to give equity to directors, you should expect to give up less than .25% of your business. As put by the team at TechCXO, “Independent directors also expect to receive equity grants along with their cash compensation. The amount and frequency of such grants also varies by the stage of the company. However, an early stage company should expect to grant 0.1% to 0.25% of equity with a vesting period of 2 to 3 years. Additional annual grants are also expected” Equity for advisors As we know by now, equity is a prized possession for startups. However, there are countless people and shareholders along the way that will help move your business forward. We constantly are asked if you, as an early-stage founder, should share equity with advisors and mentors. Support your startup’s growth with Visible In order to best keep all of your stakeholders headed in the right direction, founders need a system in place to keep tabs on their most expensive asset — equity. By regularly communicating with investors, teammembers, and advisors, founders will be able to tap into their capital, resources, network, and experience. Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days.