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I’ve been thinking about information on salaries ever since Gary, Christina, and Leland’s SVA Class on Entrepreneurial Design. On that Saturday, I met with Rachel, a designer and student who was building a project around the Wage Gap. She wanted to help empower employees, especially designers, to get fairly compensated.
The current wage gap has two sides to it, the companies providing the compensation and the individuals asking for the compensation. Some companies have a compensation range and then rely on employee negotiations to set salaries. Other companies, which now includes Reddit, decide on the compensation and do not take negotiation from the employee into consideration.
Given these two scenarios, the wage gap still exists because employees aren’t negotiating to their potential salary or companies are not determining pay fairly.
As an individual, it’s hard to know where you net out. Should you try to negotiate for more money? What is the fair market value of your time? If you are returning to the workforce from school or home, what should your salary expectation be? There are a lot of questions but not a ton of great resources to get clear answers on the topic.
Thankfully, Rachel has taken this on as her mission for Let’s Talk About Pay. She’s created a resource dedicated to opening up the compensation questions in order to create more transparency and confidence for those entering the workforce. If this is a topic you care about, I’d encourage you to participate:
I admire Rachel’s work and look forward to seeing the discussion continue. Fair wage is important and should be a conversation with more transparency.
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A great developer I know started building an app and now has more traction than he expected. He’s trying to figure out how to sustain the development by expanding his team. Cash strapped to pay salaries, he’s considering raising money to continue expansion of the app.
We’ve been going back and forth on how to navigate terms for an early stage fundraise so I thought I’d share some of those ideas here.
Equation to calculate valuation:
1) How much of the business are you willing to give up? Typically 10-20% in a seed round, but can be less if you need less money.
2) How much money do you need to get you through the next 12-18 months? or to prove the next big milestone so you can fundraise for your next round. You may be able to get profitable off of one fundraise, but if not, think ahead for how much money you need to buy you the time you need to prove progress.
3) Valuation is this equation : Valuation = money you need /% you’re willing to give up.
If it’s $75k / 12% = $625,000 valuation, $700,000 post money
If it’s 100k / 10% = $1M valuation, 1.1M post money.
Determining if it’s a fair valuation:
1) Valuations are usually based on the future value of the company after you take this money. So the company may not be worth $700,000 today but with $75k of capital, you’ll be able to get it to that value.
2) How do you determine the value if you don’t have revenue to base the ‘worth’ off of? This is the tricky part. Danny Crichton provides a deep analysis in his “Complete Quantitative Guide To Judging Your Startup” (thanks to Stash for sharing) but even with lots of data, it’s still up to the investor. Serial investors or institutions should have a rough benchmark of traction, potential and growth that they can make an offer on valuation.
Don’t forget the big picture
From my VC & entrepreneurship experience, early stage valuations are more of an art than a science. A few things to remember when doing the fundraising dance:
- You can always raise less money. For example, if you only need $50k to get to your next milestone, take the $50k in January and use that money to build the business. By August you may have great traction, revenue or engagement metrics that place a higher valuation on the company. You may decide to raise $250 - $1M at that point.
If you raised more money earlier, you may have sold equity at a higher cost than you needed to. In this example, if the valuation on your company was $500k in January, if you raised $50k you’d be selling 10% of equity. If you tried to raise $250k in January, you’d be selling 50% of your equity, not a good idea.
- You might not need venture capital now. There are ways to bootstrap, find alternative sources of capital and further prove your idea today. Mark Suster does a great job covering this point here. Many alternatives cost zero equity.
- Think about your future rounds. Fundraising isn’t just about the capital you raise today, it’s potentially a piece of a longer path. The valuation, capital and time that you negotiate for now will impact your next fundraise. If your valuation is too high now, it’ll be more difficult to negotiate a higher valuation down the road. If your burn is too high for the amount you raise, you may not have enough time to grow the business. The early investors you work with may not be willing or able to invest in future rounds. This will impact your strategy for your next raise.
- Keep your cap table clean. If you have a messy foundation, it gets harder with each round to clean it up. Make sure equity is properly allocated, accounted for and setup with vesting schedules to keep team members and advisors properly engaged. Equity may seem cheap early on, but it feels much more expensive once you start selling it to investors. I’ve made this mistake in the past and it’s an expensive one to learn.
- Valuation is set by the person writing the check. You may want a certain price, but it’s only possible if the market is willing to pay it. This is a negotiation, so figure out what the market wants. There are tradeoffs between “easy money” and “smart money” so don’t forget to evaluate what you’re getting in return from the investors.
For answers to many frequently asked questions, Mark Suster has shared a Raising Venture Capital guide here.
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This post is the third in our “Lessons from the USV Diversity Summit” series. In December, USV hosted our first Diversity Summit. Below are some of the most helpful insights we gathered about how to take action.
If you’re just joining the conversation, you can find previous posts Part I: “Lessons from the diversity summit” here and Part II: “How to start talking to your team about diversity” here.
Take inventory
If you want your company to embrace diversity, the first step is transforming your corporate culture. Your first step is assessing what the current culture is like.
What exactly does culture mean? People sometimes use the word “culture” to refer to company perks like game rooms, free lunches, or vacation days. And while those benefits certainly have an effect on teams, they aren’t themselves culture. Culture is about how your team communicates.
At its core, your company’s culture requires three things: its mission, its vision, and its values. What problem does your company solve? How does it solve it? And upon what values do you base the decisions you make?
The mission, vision, and values are unique to each company, and each will no doubt be rewritten, revised, and revisited many times over the lifetime of the business, all the while shaping and influencing the culture of the company.
So to make sure that your corporate culture is welcoming toward diversity, you need to revisit your mission, vision, and values to assess how you’re communicating them to the people you employ, serve, and represent.
Beware of inadvertently sending messages that conflict with your values
Start by conducting an “external culture audit” to get a picture of how your company presents itself to the outside world. Imagine you’re a consultant and you’ve been asked to evaluate the company’s corporate culture from an outsider’s point of view. First, visit your company’s website and consider what messages are being sent by your landing page, job postings, careers page, and social media accounts.
Now, the most important step: Are there conflicts or inconsistencies between your company’s stated mission and the way it comes across online? Does your company’s Twitter feed accurately reflect the mission, vision, and values of the company, or is it filled with off-color jokes? Does your company’s digital presence successfully reflect the values you want to celebrate?
A lot of well-intentioned companies inadvertently deter the most diverse candidates not because they don’t care about diversity, but because they fail to control the subtle messages being sent by their public-facing materials. Last year, for example, I did an external culture audit for one of our portfolio companies. I found a lot of conflicts between how the company viewed itself and how it was presenting itself to the outside world. Conflicts will inevitably creep in, so be vigilant and make sure to get feedback to ensure the company’s voice aligns with its values.
Values-Messaging Conflict: The Case of RunKeeper
In a comment on a previous diversity posts, Emil pointed out that RunKeeper, a company that makes an awesome fitness app, may be sending mixed messages to its users. RunKeeper is not a USV portfolio company, but I’m a big fan of their product and I’ve heard only good things about their team. Let’s take a look at their website, one page at a time, and consider where there may be an unintended conflict in their messaging.
As you can see above, RunKeeper clearly states its core values, addressing the issue of inclusiveness directly.
(link: UX Job Description)
I love these candid job descriptions. It’s easy to get a sense of the fun, lighthearted tone of the company. There are some inconsistencies, however. The job post doesn’t list the core values, but there are some hints about what it takes to fit in. So the question is this: If you’re not into The X-Files and arguing about beer, can you still work there? Would you think twice about applying? What if you’re not into TV, but you’re a fantastic UX Designer? Would you still apply?
There’s no doubt that teams within companies have their own idiosyncratic ways of getting along with each other, and I have no doubt that the above description really does capture the kinds of personalities that make up the UX team at RunKeeper. And it makes sense that they’d look for someone with a similar personality who’d fit in easily.
But the problem with a job listing that describes what the people on the team are like—and subtly demands that anyone applying fit that same mold—is that it creates a bias against people from different backgrounds, excluding people who don’t fit the profile of the existing team. The message is, “This is what our team is like, and we want to hire someone just like us.” But if you want to increase diversity, that’s not the message you want to be sending. What you should be saying is, “We’re an inclusive environment looking for top talent, and we want to welcome you to our team no matter what your background is.”
How to align your messaging with your values
The good news is that there are straightforward ways to communicate your company culture by speaking about the things you value, not just the things you do.
Take Simulmedia, an advertising technology company. Simulmedia has been thoughtful about making sure the job descriptions on its website include the company’s mission, vision, values, and culture. The same language is used consistently on every job description. (Yes, they’re hiring).
The thoughtfulness of the language in these descriptions subtly reinforces the idea that Simulmedia values hard work and play, but it’s through multiple mediums and the emphasis is on team or individual perks: “While we work ‘startup hard’ we also believe in letting loose via Happy Hours, team activities, and an unlimited vacation policy.”
So write a list of the values you want to convey in your own company’s job listings. Check out how other companies communicate their culture.
Another great example is SoundCloud. They recently published a new jobs page. They discussed the project at the Diversity Summit and I think they successfully delivered a more inclusive and very SoundCloud experience. The took the extra step to use their platform to talk about the company culture by share audio recordings from employees.
The internal culture audit
After the external culture audit comes the internal culture audit, which can be more challenging. Running a business means communicating all day long, which often means that speed gets prioritized over thoughtfulness.
To conduct the internal audit, keep your company’s mission, vision, and values in mind as you consider these questions:
Do your answers align with your mission, vision, and values, or do they conflict?
Ask your colleagues the same questions. Are their answers the same as yours or different? Where are there conflicts, are they coming from a subset of employees who are dissatisfied? Are they the same or different? Explore the disconnect and see if the company culture is evenly distributed.
Right fit your mission, vision, and values
The purpose of the internal and external culture audits is to understand what the company truly is and believes. The audits will signal whether the company is acting in alignment with it’s values.
If you want to make your company more diverse, you need to say so explicitly in your official statement of values. The only way things will change is if you’re new values are actually recognized. If not, it’s time to revise the way business is done.
Most mission, vision, and values come from senior leadership, so it’s important to include top managers in your list of findings and recommendations. Keep the team small for the first version, opening up the process to feedback from the wider team in time.
Your company’s mission shouldn’t change very often, but its description can fluctuate, especially given how fast companies today grow and change. During my time at USV, I’ve always been able to get a read on the health of an organization by asking various employees to explain what the company does. If their answers vary widely—like if one employee says, “We’re a Facebook app that books flights” while another says, “We improve travel with social recommendations”—there’s a disconnect. It’s a signal that communication of the mission is getting muddy.
Inclusion is a practice, not a statement
Values may need closer inspection too. Is the behavior of your employees consistent with your company’s core values? Almost every company has a stated value that captures the importance of diversity. The problem with diversity is not with the values companies have, but with the execution. Inclusion is a practice, not a statement.
Although not in the USV portfolio, BufferApp came up as a great example of a company living its values. Buffer values “defaulting to transparency,” which they embody by publishing a full transparency report that includes real-time revenues, salaries, and equity. The value they place on transparency is demonstrated with visible behavior.
Our summit attendees celebrated Buffer, but most were not in a hurry to implement this kind of transparency at their own companies. Values are important, but can overlap at the edges. The best way to navigate values that seem at odds is to provide more context or multiple values. AMEE balances the trade-offs between transparency and privacy, values that can seem at odds, in their principles and values: “We have 5 main values that guide our decisions: Open, Honest, Transparent, Simple, and Respectful of Individual Privacy.”
Companies need to live the mission, vision, and values they set forth. If they don’t, they should change either the values or the corporate culture so they align. Diversity initiatives need to be part of the company’s values. Revising the company’s values statement is only useful if the company lives in accordance with them.
Putting values into practice
Once the vision is laid out, it’s time to put it into practice. Small changes add up to make a difference. Companies in our portfolio have had success printing posters with the company’s values and hanging them in every conference room. The posters get referenced during difficult discussions, helping ground the conversation in what the company values and not just what one individual believes.
A company’s mission, vision, and values should also be posted on its website, included when onboarding new employees, shared at the beginning of town hall meetings, and compared against employee 360s performance reviews. Consistency is best complemented with feedback loops. Whether it’s surveys or informal asks, find ways to get feedback from customers, clients, and candidates on how you’re performing against your values. Values are a tool to help set a standard across the organization of what’s expected, celebrated, and prioritized. They have the biggest impact when they are part of the everyday communication of the company.
Distributed diversity initiatives
Once you’ve made sure your mission, vision and values are in alignment, it’s time to start implementing diversity initiatives. In our summit, the most often-mentioned way to start is to create three small working groups to tackle different issues and set a budget.
The working groups should focus on increasing diversity in three areas: internal, external, and recruiting. The most common reaction is to push all implementation to HR. Don’t do this. Do not make diversity only an HR issue.
Return Path, an email deliverability company, found success breaking diversity initiatives into three internal working groups: Retention, Recruitment, and Communication. They saw even more progress when people from cross-functional teams participated.
Tumblr took a similar approach. Instead of making diversity an initiative siloed within HR, they have cross-functional working groups. There are members of the HR team, but the team is not limited to it.
The same construct works for larger companies too. Morgan Stanley, for instance, has one diversity and inclusion council, but three sub-committees:
These sub-groups work best when they have a clear mission, support from senior leadership, and a dedicated budget to get things done. The council as a whole has a budget allocated to it, and the funds are split among the three sub-committees. Having a straightforward structure makes it easier for employees to pick up a project and run with it based on which sub-group they support.
Many startups are wary of setting a budget for diversity sub-committees. I asked Lisa Lee, Pandora’s Diversity Manager, how she suggests how highly cash-conscious startups should allocate funds. She advocates having a budget, “It’s important to do diversity work. You don’t need a massive budget. There are so many ways it can still be done. ” So whether it’s the cost of a team lunch or a team offsite, remember that making a financial commitment to get things done is a way to invest in change. Look for ways to put that money to work. We’ll cover those in the last two posts in this series.
Consistency and iteration
Diversity is never done. Adding it into the company culture requires time and constant evolution. But the earlier you start, the easier it will be to grow with your company.
Whether you’re an early-stage startup or a larger company, take inventory of your culture, build diversity into your values, organize teams to implement initiatives, and hold people accountable.
In our next post, we’ll explore more ideas on how to integrate diversity into your recruiting and onboarding processes.
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As one who can relate to falling into VC industry this post rings true. But think ‘network’ is impt enough to deserve own mention!‘Tis the season to hear from a number of ambitious undergraduate and grad students about job opportunities. I’ve gotten a lot of questions about finding a VC job, so I thought I’d share my thoughts here.
Here’s my story about getting into VC which wasn’t a straight line or an intentional job search. I’ve found that the story of ‘falling into VC’ is quite common so depending on the role you’re searching for, analyst, associate or a platform/community role, you may have different odds of finding a clear job posting.
Here are my thoughts on landing a job in VC:
1) Roles don’t come up frequently in VC. The best way to find out about them is to talk to many VC firms. At USV, we aren’t looking to add to our team unless someone leaves. (The analyst roles at USV are on 2 year rotations so those won’t open until summer of next year.)
2) Get technical. Having technical experience helps in the role and on analysis of other technology businesses. Whether you use Codecademy or an in person class, having this skill set is becoming a requirement for many VC jobs. I’d recommend building a small web app in Ruby or Python. You should be able to pick this up learning part time over 3 months. Even if you never write any code in your VC job, understanding the fundamentals of CS and development are a big plus.
3) Have a public opinion. Having a presence on the web is a great way to show your enthusiasm for tech and share your opinions. VCs anticipate getting it wrong at least 30% of the time, so don’t worry that you’ll get it right, just get your ideas out. Twitter is a great place to jump into conversations with other VCs. USV.com is an open place to share ideas too.
Blogs on Tumblr or Medium are a great way to pressure test your ideas. When you do interview for a role in VC, you’ll be able to point back to your thoughts over a long period of time, which is difficult to communicate in a 60 minute interview. Showing how you think will also be part of the application, that helps the firm understand whether you see the world the same way.
4) Jobs outside of VC that are like VC. There are more accelerators and incubators in every market world-wide. Roles at these organizations have a similar approach: find the best companies, work to help them grow and scale, apply a thesis to making investments (time, money or both) and build relationships with the tech ecosystem. It can be a great place to start or stay depending on which aspect of VC you’re most excited about.
5) Know the unique value that you bring to the table. I’m biased towards operators because I was an operator. There are people who get into VC who never work at a startup. Operational experience is not a requirement. When the question about what you bring to the table in terms of evaluating new companies or helping them grow, it helps if you have a skill set that can be put to work.
Expertise in an industry can be helpful, like working in medical research and then going to a fund that invests in that industry. If you’ve spent time in a particular area in your free time, like Joel at USV who’s become a thought leader in bitcoin after many hours hacking on, researching, and talking with the industry leaders. If you have operational experience in a growing field it would be valuable too, like Jonathan at USV who worked as a Product Manager at a mobile company, he understands many challenges on mobile that help guide our thesis there and support our mobile companies.
6) Network. The people you meet will have a big impact on what you bring to the table. From entrepreneurs to exchanges in the comments on blogs. Interacting with people is a huge part of the job so get out there or get online. Thanks to Justin Hall for the reminder.
Caveat on this advice, it’s based on my experience at USV. Other firms may have a different perspective, and even those may change as the industry continues to evolve. Don’t forget, with AngelList and Gust, accredited investors can setup their own syndicates even easier than ever before. If you can’t find the job, you may be able to make one.
Something to share?
I want to hear from you! I’d curious to hear your thoughts in the comments below or on Twitter if you’ve heard other advice.
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