Startups are a hot commodity in the 21st century. If you are a young person entering the workforce, or a seasoned employee looking for a change, it is likely that a startup firm seeking talent has caught your attention. These companies are engaged in bringing technological innovations to market and can provide outstanding growth opportunities for qualified candidates. Startups can provide a very flexible learning opportunity that combines excitement of creating something new with economic upsides if the business takes off.
Having said that, however, startups can certainly be a risky venture for new hires. Many startups are high-growth firms that operate in a sink or swim environment. By most estimates, 90% of startups that open their doors (or mobile apps) fail within the first five years. Despite such a risk, many entrepreneurs and job-seekers are drawn to the growth prospects of successful startups.
Successful startups include names like Facebook, Airbnb, Snapchat, Xiaomi, Jingdong and Square. In Singapore, readers will be familiar with startups like Lazada, GrabTaxi or Zalora. These companies all have high-profile growth stories and the early employees have done very well for themselves financially.
Average Income of Startup Employees: Salary and Equity
So the question remains: What should you expect in terms of compensation when joining a startup firm? It is important to understand that many startups do not have the necessary cash flow to pay skilled employees competitive salaries in the country they operate within. For this reason, firms typically offer equity as an incentive for prospective hires to join the company.
The best way to think about these equity offerings is as a percentage of ownership, similar to buying stock in a publicly traded company. If the company is successful, you will own a portion of this success. In the best case scenario, your startup will go public and these privately held equity shares will be converted to public stock. If the company remains private, you may be able to sell this equity to other stakeholders or outside investors. The worst-case scenario is that the firm goes under and your equity stake is worth nothing. Below is a table that summarises the average salary and equity that employees receive at startups in different regions.
|Business (Sales or Marketing)||Technology (Developers, Designers)|
|Salary (USD)||Equity||Salary (USD)||Equity|
|San Francisco||$99,000||0.25% - 0.90%||$117,000||0.25% – 2.40%|
|Seattle||$78,000||0.25% - 0.40%||$106,000||0.50% - 0.90%|
|France||$51,000||0.50% - 0.90%||$51,000||0.50% - 0.90%|
|New Delhi||$14,000||0.25% - 2.40%||$6,000||0.50% - 0.90%|
|Mumbai||$6,000||1.00% - 2.40%||$6,000||0.50% - 0.90%|
|Singapore*||$78,000||1.00% - 5.00%||$108,000||1.00%|
*It is important to note that the data for Singapore-based business and technology positions is showing the compensation for a Chief Technology Officer and Vice President of Sales, respectively. For all other countries, the compensation and equity estimates are an average of leadership and entry level roles.
Typically, how early you join a startup and the level of seniority you receive in the firm determines how much equity you receive. To put it another way, your equity compensation is proportional to the amount of risk you take and contribution you are able to make to the firm's success. Fred Wilson, a famous venture capitalist in New York, has a nice summary of how to think about equity compensation. He recommends multiplying a person's salary by a factor, listed in below table, to get at how much equity compensation an employee should receive. For example, if you make S$100,000 in salary as a senior member of a firm, your equity compensation should be S$50,000.
Comparing Singapore's Startup Scene to Other Regions
Singapore has long been a hub of international trade and finance. More recently, a budding startup scene has begun to develop. One resource that every job seeker in Singapore can use immediately is the job listings on Angel.Co. This job site is exclusive to startup firms, and at the time of this posting there are nearly 1,000 Singapore-based startup jobs listed. If you are in the job market, or currently negotiating compensation at a startup, this is a fantastic resource.
When looking through these job listings, it is clear that startup compensation within Singapore can be competitive with salaries offered in the United States and Europe. The truth remains, however, that California remains the place where startup employees make the most amount of money. In Palo Alto, California, the average salary across skills levels is around $115,000 per year. Just behind Palo Alto is Silicon Valley, San Francisco and Orange County, each posting average salaries of $106,000, $104,000 and $100,000, respectively.
Startups in India provide the lowest average compensation, with average salaries in Delhi, Punjab and Madhya Pradesh ranging between $1,000 and $5,000 per year. However, we must put that number into context as India has extremely low wages to begin with (an average India earns $3,540 per year) and an abundance of technically skilled coders and developers, unlike other markets where has been a shortage of those talents.
Different Pay For Different Skill Sets
Our research has shown that developers and user-interface designers receive the highest average salary and equity offerings from startup firms. These individuals are truly the brains behind the operation and are critical in bringing any disruptive technology to life. Just look at Facebook. Mark Zuckerberg coded Facebook into life in his dorm room at Harvard. In the startup world, ingenious developers are a highly-prized commodity.
Compare these technology-based positions to the sales and marketing side of a startup, and it is understandable why these sales positions receive lower compensation. Sales professionals bring less technical knowledge with them to a firm and are more easily replaced. If you are looking to gain ground at a startup, consider adding some technical computing power to your resume in the months and years to come.