Stark HR Magazine Jan/19 - Page 13

tartups have a

particularly hard

time towing the line at this part of the process. Founders don’t want to draw hard lines because they feel this need to do anything to get talented people in the door, but they’ll end up paying for that decision later.

Most startups overpay for talent because they undervalue their own equity — so the candidate will too. You have to remember that when people are joining your company, they're making a bet on its future and the value they will add to its future. Sometimes you need to remind them they are making a bet, and that it’s the kind of bet you have to make if you want to join a 10-person company.

To change a candidate’s perception of your equity offering, supply them with the numbers and enough information so they can another startup at a similar stage is paying them more cash.

No matter how smart the people who walk in the door, many won’t understand how to value their equity. For this reason, one of the best things an HR person can do really early on — either in writing or a speech at an all-hands meeting — is to educate everyone about what they’re looking at. You should also give them the most recent valuation of the company, the number of outstanding shares and the basis point. They can do the math from there, and you should encourage them to think both about the best and the worst case scenarios so they truly evaluate the risk they're taking and the possible reward. First and foremost, any new hire should be looking at what their equity will be worth in 2 to 10 years, not what it’s worth today.

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Any new hire should be looking at what their equity will be worth in 2 to 10 years, not what it’s worth today

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estimate the low, medium and high outcomes based on public equivalents.

You should not lose candidates because another startup at a similar stage is paying them more cash.

No matter how smart the people who walk in the door, many won’t understand how to value their equity. For this reason, one of the best things an HR person can do really early on — either in writing or a speech at an all-hands meeting — is to educate everyone about what they’re looking at.

really early on — either in writing or a speech at an all-hands meeting — is to educate everyone about what they’re looking at. You should also give them the most recent valuation of the company, the number of outstanding shares and the basis point.

They can do the math from there, and you should encourage them to think both about the best and the worst case scenarios. scenariosthey truly evaluate the risk they're taking and the possible reward.