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Powered by Battery  |  January 27, 2020
The Waiting Game: Keeping Startup Talent Happy When an Exit is Still a Ways Off

The trend of venture-backed companies taking longer to exit, either through an IPO or a sale to another company, is well-established at this point. A decade to exit is the new normal and has been for quite a while.

This slow-exit trend, plus a tech workforce more interested in work-life balance today, are both exerting changes on startup culture and forcing CEOs to adapt. Today’s tech workers expect customized, flexible benefits and are not willing to accept lower pay, longer hours and zero benefits for the possibility of a big payout later. Startup life isn’t a sprint anymore; it’s a marathon. So startup employers must create company cultures that are sustainable over the long term as exits take longer to achieve.

How exactly can your company keep employees engaged when an exit may be a decade away? And what kind of perks should startup employees look for as they wait it out? Here are four great ideas.

1. Startups should have their employees’ financial backs.

While most Americans say they feel confident about their ability to make big financial decisions, only two in five actually have a monthly budget, according to the National Foundation for Credit Counseling. The potential for a big payout when a startup goes public or gets acquired makes financial planning tricky even for the savviest among us. Startups who help their employees wrap their minds around their money and optimize that payout for them can generate true loyalty.

Startups should set up what’s called a ‘double trigger’ for their Restricted Stock Units (RSUs). It sounds (and is) pretty technical, so you’ll want to discuss this with your financial advisor. The basic idea is to structure RSUs so that employees don’t get hit with a tax bill until they’re in a position to sell some shares. Companies can also set up relationships with secondary markets to give employees an opportunity to sell some of their shares before an exit.

Giving employees free access to financial planners or tax advisors will help people plan for the future, both near- and long-term. This is a truly valuable perk that reminds employees of the long game while addressing a need that even educated workers often don’t feel confident they have covered.

And of course, every startup should audit their compensation policies periodically to avoid creating resentment among employees. Stock options and compensation packages will never be exactly equal, but every company needs to have a clear policy in place and evaluate it regularly to make sure it feels fair to all.

2. Flexibility is the new normal.

Flexible hours, letting people work from home, unlimited PTO—the big players in Silicon Valley are setting the bar high when it comes to flexibility at work. These kinds of perks are incredibly valuable to workers, particularly the millennial workers who now comprise the majority of the workforce. In one recent survey, 75% of millennials said they believe the workplace should be “flexible and fluid.”

The good news is that, unlike a six-figure salary, a flexible workplace doesn’t cost an employer much at all. In fact, letting employees work remotely makes them more productive, reduces turnover, and can even save you money on office space. It’s worth rethinking how your office is structured and how your teams work together to make these perks widely available.

3. Startup employees want, and now expect, a life outside of work.

A long wait to exit means people won’t want to keep their lives and personal milestones endlessly on hold. Progressive parental-leave and caregiver-leave policies show employees their employer understands they have lives and responsibilities outside of work. These kinds of work-life balance issues are particularly important to millennials. And paid leave policies are quite cost-effective compared to the cost of employee turnover.

Startups that want to go even further can create sabbatical policies, allowing long-term employees to take a few months off to pursue personal projects or cross things off their bucket lists. A sabbatical policy is great for encouraging employees to stick around, cultivating gratitude and loyalty, and making people feel like they don’t have to choose between work and their dreams. Some startups could also consider a version of Google’s famous 20% time policy, which allows employees to work on side projects for a set amount of time per week or per month. Many companies have found that encouraging this kind of “positive slacking” generates great ideas that pay off for the business in the long run.

4. Startups should help employees grow their careers for the long haul.

The slow-exit cycle can make employees fear they’re not progressing in their lives or careers. Employers can do a lot to fight the FOMO that makes people eye other jobs. For example, more and more companies now offer coaching to a wide range of employees, even individual contributors. This makes employees feel valued, encourages them to stick around, and potentially pays off as your employees become better, more confident leaders.

Of course, you don’t necessarily have to pay for a coaching service to make this investment in your workers. Managers should also discuss career goals with their teams. Maybe you’ll find one team member wants to try public speaking and another wants to learn more about marketing. There will likely be easy and low-cost ways to expose them to experiences they’ll value. If employees feel like they can still grow where they work now, they’ll be much more patient with a long wait for an exit.

The information contained herein is based solely on the opinions of Powered by Battery and nothing should be construed as investment advice. This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity.

This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and is for educational purposes. The anecdotal examples throughout are intended for an audience of entrepreneurs in their attempt to build their businesses and not recommendations or endorsements of any particular business.

Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy or completeness and cannot be guaranteed. Battery Ventures has no obligation to update, modify or amend the content of this post nor notify its readers in the event that any information, opinion, projection, forecast or estimate included, changes or subsequently becomes inaccurate.

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