Hello {{First Name | founders}}!
Welcome to βTactical Tipsβ by Jerel and Shuo at DECODE, where we cover one new idea to help you build and grow your startup β every week in <5 minutes!
Today, weβll be answering the question: βHow to compensate early hires?β.
If you are trying to land and motivate your first key hires, todayβs newsletter is for you.
π₯ Inside this issue:
β
3 tactics to compensate early hires
β
2 traps to avoidΒ
β
1 tool to leverageΒ
πLetβs dive in.
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3 tactics to compensate early hires
π Try out candidates on a contract-to-hire
The best talent will consider contract-to-hire, because itβs the best way to assess long-term compatibility β of course, you still need a contract (and sometimes NDA)
This gives the potential full-time employee a chance to build relationships and assess fit
Test each other out for X number of days or months; then at the end of it, talk about whether it should be a full-time relationship
π΅ Define your compensation framework early
Build a framework for how to compensate early hires after assessing for the right fit
Compensation should reinforce the specific value a function contributes to the wider organization:
Sales thrives on immediacy and ownership β fuel performance and discipline in equal measure
Customer success depends on relationships and retention β reward long-term value, not short-term wins
Product and engineering lives at the intersection of vision and execution β spark urgency and shared accountability for outcomes
Determine compensation framework by asking:
What are the company values, and how can these be reflected in comp?
What will be the balance of equity versus cash?
Where will we sit on the transparency spectrum?
What percentile will we aim for our employees to hit?
How will top performers be rewarded?
Is the philosophy fair, simple, and defensible?
Is it scalable?
Donβt wait for review season to talk about pay β recognize impact in real time and reward that with off-cycle comp increases
π Introduce 4 salary tiers
Define 4 levels that reflect experience and contribution, based on company values
Level 1: Junior / entry-level. 0-3 years experience. Early in their career/new to the function. Requires more guidance and mentorship.
Level 2: Mid-level / experienced individual contributor. 4-7 years experience. Solid practitioner who can execute independently. Doesnβt require constant direction.
Level 3: Senior / expert. 8-12 years experience. Seasoned professional who brings strategic depth and can mentor others. May begin to define processes or best practices for their function.
Level 4: Principal / leadership. 10-15+ years experience. Deep expert or early functional leader, may be one of the first managers in the org. Owns a discipline or domain outright. May receive performance-based equity or leadership bonuses.
2 traps to avoid
π¨ Over-giving equity to land top candidates
Over-giving equity may lead to dilution of ownership and control for founders
To give perspective, a very late growth stage company might give 1% to their newly hired CEO
First ten hires rarely exceeds 10% of the total equity pool
π¨ Paying at the top of the market
Bonuses are for past performance, and compensation package is for future performance
Paying top of the market even when you can is not sustainable, especially if future performance is uncertain
Manage the balance between stewardship and reward by establishing the right early compensation to allow room for rewarding results (use equity to catapult total compensation)
1Β tool to leverage
π Best practice to determine compensation
Bonus: 1 trend to spark startup ideas
π Gen Alpha is redefining culture, consumption, and influence online
Born 2010β2024, Gen Alpha wields $100 billion in spending power, thrives online, and values participation over passive consumption
Gen Alpha is pushing the next evolution: participation; platforms like TikTok, Roblox, and Discord are the main stage:
Itβs not enough to get the joke; you need to remix it, clip it, meme it, launch the next viral wave.Β
Humor has become a form of capital; the funniest voice wins attention, status, and algorithmic reach
internet fluency and comedic timing now define influence as much as beauty or aesthetics once did
Brands thriving here embrace βunhingedβ marketing, real-time banter, and community-driven chaos (e.g. Nike is using Roblox to reach younger audiences with βNIKELANDβ)
Opportunities include:
Community-first experiences: Building brands that thrive in TikTok comments, Roblox worlds, and Discord communities
Meme-driven commerce: Products, NFTs, and digital items that reward cultural participation
Creator-centric team: Treating community managers like PMs, hiring meme-literate employees, valuing βshitpostingβ as much as performance marketing
Continue learning
Upcoming opportunities
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