Building a startup is very much about attracting the right people who can contribute expertise and effort over time, ensuring the business grows big enough and strong enough to survive.
Entrepreneurs often don't have the financial muscle to fund the resources and people needed to succeed, so they need to be creative in their approach.
You can, for example, finance operations with a consultancy model, where you hire out expertise on an hourly basis. This can bring in money quickly, but often makes it difficult to prioritize product development. If this is not handled well, the original idea and the long-term vision often have to give way to short-term earnings targets. Furthermore, this can compromise the long-term potential and scalability of the business.
Two other, more focused, approaches may be to raise money from investors or to get one or more pilot customers to cover part of the development costs. These methods are often referred to as "venture building" and "bootstrapping".
Regardless of which direction you choose, you should strive to have a good vision and well-thought-out mission that resonates with the people you want to hire and with those who already work in the company.
Unless you manage to create intrinsic motivation through belief in and ownership of the vision and what you want to achieve together as a company, it is difficult to compensate for this with extrinsic motivation and incentives.
A good vision that resonates contributes to increased motivation and can also lead to candidates moderating their salary expectations somewhat, in favor of being involved in something rewarding and socially beneficial.
Smart people are sought-after and often have more choices in the labor market, and are aware of their own value. Competitive conditions are therefore essential for hiring them.
When liquidity in the company is low, it can be challenging to offer competitive conditions if salary is the only thing on offer. To supplement, or to a greater or lesser extent replace, salary - you can offer employees ownership. If things go well, ownership can represent great future value.
Overall, there are two ways to give employees ownership:
Depending on the phase of the company and the existing ownership structure, you also need to consider whether to print new shares for the purpose, or whether you can sell some of the existing shares.
We assist with advice on designing effective and motivating employee programs if desired.
By offering a combination of salary and shares, startups can compete with large companies for the best people.
Employees feel a greater commitment to contributing to the company's goals of growth and development and are more loyal to the company.
To ensure that this effect persists and that there is a fair exchange of ownership, we at Unlisted generally recommend that shares and options have a vesting period. This ensures better commitment to the company compared to giving shares/options without vesting and reduces the risk for the company by avoiding "dead capital" to a greater extent.
Offering a share and option program can lead to more engaged and motivated employees, but there is no denying that it entails some extra administration for management, especially as the company grows and more employees join the program.
You can reduce some of the extra work through a well-designed program, but to keep the administrative burden low even as the number of employees increases, you need a good system to follow up and manage the shareholder book and the program.
