At Startups, Salaries May Be Rising for Engineers But Not Execs

Earlier this week, I had the chance to catch up with Jeff Markowitz, the managing partner for Heidrick & Struggle’s venture capital practice. I wanted to talk about pay at startups, which VCs tell me is on the rise, along with valuations. We wound up talking about execs’ renewed faith in equity, where the jobs are right now, and why it’s still possible to pluck people out of both Facebook and Twitter. Our conversation, edited for length, follows.

Q: Which executive level jobs are seeing the biggest pay increases?

A: At the executive level, it’s been pretty consistent, although the M&A window has clearly opened up so there’s a lot more activity and exits, so executives’ equity is worth more.  To take a pay cut for equity that may never see the light of day is always risky, but now that the M&A window has opened up, people aren’t questioning the value of that equity.

Q: I hear and read that it’s harder than ever to recruit top engineers, partly owing to the ongoing showdown between Facebook and Google. Is it also harder to recruit top execs into startups?

A: It hasn’t been as much of a problem. The issues are with Twitter and Facebook – those are awesome companies – but what happens now is their valuations are so high that people coming in are getting stock at very high values. They’ll still do well, but they if they’re entrepreneurial execs, they may see the stock of what’s potentially the next  Twitter or Facebook as much more valuable.

We’re also recruiting people out of Facebook and Twitter to young companies. That’s not true across the board, but companies that are strong and backed by top-tier venture firms are very attractive [to potential recruits], even if they’re right now at one of those companies.

Q: Are startups looking for big company execs to help them grow?

A: When we get people from big companies to join young companies, most of the time they were with young companies that were acquired into the big company. So, they’ve ‘done their time,’ their handcuffs are off and they have the entrepreneurial itch to do something young. It’s rare that you have an entrepreneurial executive who gets acquired into a big company and who stays. Meanwhile, getting the Cisco lifer to join a startup doesn’t really work. The person probably doesn’t have the risk tolerance for a startup, and it’s too big a risk for a startup to bring aboard someone who hasn’t done something entrepreneurial before.

Q: Where are most of the job opportunities right now in terms of sector?

A: I’m still seeing a ton on the consumer [Internet] side, but also a lot on the enterprise side. It’s probably half and half, [though] the East Coast is still much more heavily focused on consumer and media types of things. The West Coast is more balanced.

Q: Can you share some salary ranges with us?

A: I’d rather not, but it’s safe to say that for executives, everything is north of a hundred [thousand] and some [jobs pay] less or more than two hundred thousand, depending on the role. Also, a lot of times with executives, you have to get creative. Some are willing to forgo cash for equity; others have a higher cash burn and so are willing to forgo some equity.

Q: You work with a lot of venture-backed startups. Do you have any insight into what’s happening at angel-backed startups and how competitive they’ve become for executive talent?

A: We work with some of the angel firms. We’re willing to be flexible with our fee structure, too. Sometimes we’ll take little cash because we can take stock for our fees. But I do work with companies that are three founders and kind of an idea, and it’s very busy. It’s busy across the board.

Q: So busy that there’s a shortage of executives, or not so much?

A: There are plenty of executives, but there’s always a shortage of the good ones.