HUMAN CAPITAL IN THE

NEW ECONOMY – BENCHMARKS

AND BEST PRACTICES 2019
A Talent Management Study
in Venture Funded Startups
TABLE OF CONTENTS
FOREWORD 2

EXECUTIVE SUMMARY 3

WHO PARTICIPATED IN THIS STUDY? 5

HOW ARE FUNDED STARTUPS STRUCTURED? 7

How are companies structured by seniority? 8

Which functions dominate the startup work force? 9

Is there enough diversity in startups? 10

HOW DO STARTUPS HIRE TALENT? 11

Which factors attract talent in different functions? 12

Where do startups hire from? 13

Which channels of recruitment do startups use? 15

How long does it take to recruit? 17

How much of an increment is appropriate during recruiting? 18

HOW DO STARTUPS REWARD TALENT? 19

What’s the amount of variable compensation needed to drive performance? 20

What’s the appropriate quantum of compensation and annual salary revision? 21

How to compensate for the long term – ESOPs? 22

HOW DO STARTUPS MANAGE AND RETAIN TALENT? 25

What are the benchmarks in training frequency and duration?. 26

How frequently is performance measured? 27

Why does talent leave startups? 28

ABOUT TRIFECTA CAPITAL 30

FOREWORD
2

At Trifecta Capital, our long-term mission is to respective verticals and we value their
support the creation of large and enduring new contribution towards the start-up eco-system.
economy businesses in India. We hope to Notably, 60% of the respondents are Trifecta
achieve this by being the preferred provider of Capital portfolio companies.
venture debt for emerging businesses as well as
leveraging our industry knowledge and network The aggregate data and insights presented here
of relationships. Generating independent will hopefully help Founders benchmark their
insights and sharing these with the eco-system Human Capital practices with their peers in a
is just another way for us to contribute to the meaningful and actionable way.
new economy. We are very excited to bring to
you ‘Human Capital in the New Economy - We hope you find this report valuable!
Benchmarks and Best Practices 2019’.

This report is an effort towards establishing

benchmarks and identifying best practices
around attracting, retaining and rewarding
talent gleaned from 45 high quality, funded
startups across Venture and Growth stages. All Rahul Khanna Nilesh Kothari Aakash Goel
respondents are significant players in their Partners, Trifecta Capital
EXECUTIVE SUMMARY
3

Companies of the new economy are growing rapidly – driven by capital infusions leading to growth
in Technology, Operations, Sales, Customer Service and Front-end delivery functions. Broadly,
startups have enhanced their understanding of issues related to Human Capital that are attendant
to hyper-growth, however, there are varied and numerous nuances across sectors, stages, functions
and scale.

Funded startups, almost without exception, are using technology as an enabler to improve all aspects
of business, from front end user experience to back end supply chain. But the nature of funded
startups in India still necessitates heavy reliance on Sales and Operations employees. The percentage
of technical employees steadily declines by stage. Technology as a proportion of total organization
declines from 24.1% to 5.3% from Series A to Growth stages.

Diversity in startup workforce gets better as companies raise more financing. There is 22% women
participation on average across startups.

While paucity of talent is a perennial problem, a large proportion of startups are able to recruit senior
talent within 6 months. A staggering 80% of startups prefer to recruit talent from other startups
because of a familiarity with the startup culture and domain experience. However, this has also led to
increased competition for talent, and consequent joining increments to promising candidates.

Talent crunch is more pronounced in the Technology function – with higher expected compensations
and long lead times to close. 3 out of 4 companies report an increment greater than 20% for hiring
technical talent. 2 out of 3 tech openings take longer than 2 months to fill.

Tech talent is attracted by interesting work, while sales team members join primarily for pay and
growth potential. Operations employees join a firm for greater responsibility.

Referrals, personal networks and Linkedin continue to play an important role in senior hiring across
stages of business. 52% of all senior hires are sourced through referrals or Linkedin. 1 out of 4
candidates across all hiring gets recruited through referrals.

Startups are using sophisticated compensation mechanisms – a combination of variable pay along
with ESOPs is now common practice. Founders have excelled at articulating the proposition of ESOPs
to attracting senior talent, while prospective talent is positively pre-disposed to seeking it. 70% of
B2B startups have an ESOP pool larger than 7.5%, as compared to ~40% of all startups.
While competition among startups for talent is a challenge, companies have generally kept attrition at
4
respectable levels. Most companies see attrition rates between 10-20% annually. ~14% of all hires in
funded startups leave in first 6 months.

Learning and development is not an after-thought but an integral part of the employee lifecycle. 55%
companies train their employees 2 or more times per year. Most funded startups run an annual or
semi-annual cycle for appraisals.

The following pages capture detailed insights and data along with relevant benchmarks on best
practices along these dimensions.
COVERAGE - WHO PARTICIPATED
5

IN THIS STUDY?
% Respondents (by Sectors of New Economy)
45 companies across 5 sectors of the new
economy and across Series A, Series B and
16% Growth Stages of funding participated in
22%
this survey.
18%

18% 27%
Issues related to attracting, retaining and
rewarding talent, while seemingly common to
all companies, can manifest vastly differently
B2B/ENTERPRISE FINTECH MARKETPLACES across different sectors and across different
VERTICAL ECOMMERCE / BRANDS CONSUMER SERVICES organizational scales.

% Respondents (by Funding Stage) With this study our aim is to bring out the
differences, whether large or nuanced, on
20% issues pertinent to people and talent,
unequivocally the core asset involved in
building an enduring company.
42% 38%

SERIES A SERIES B GROWTH

Talent Size by Sector in the Respondent set

These 45 companies represent 49,161

employees across functions as diverse as
Technology, Sales, Operations, Customer
Marketplace
Service, Logistics, HR, Finance etc. (10163)

This study is focused on 3 key functions -

Technology, Sales and Operations - the
predominant contributors to the talent pool of
Vertical Ecomerce/ Fintech
new economy businesses. Brands (27437) (2917)
Consumer
Average no. of employees in Series A and Series Services
(5942)
B funded companies is 165 and 465 B2B/
Enterprise
respectively. Growth stage companies have (2702)
2184 employees on average.
COVERAGE - WHO PARTICIPATED 6

IN THIS STUDY?
B2B/Enterprise Consumer Fintech Marketplace Vertical
Services E-Commerce

We sincerely thank the above companies who participated in this survey in order to contribute
knowledge back to the venture capital ecosystem. In case you are also interested in
participating in future surveys/research studies that Trifecta Capital undertakes for the
benefit of the ecosystem, please do drop an email to any of the following email IDs:

• [email protected]
• [email protected]
• [email protected]
ORGANISATIONAL
7

STRUCTURE
 8

HOW ARE COMPANIES

STRUCTURED BY SENIORITY?

Expectedly so, startups become more pyramidal as they grow from Series A to Series B and
Growth stages.
In early funding stages like Series A, a startup is till trying to attract a bench of high quality L1 and
L2 people and overinvesting in talent ahead of scale – this leads to a ‘fat middle’. As the company
starts to grow and accrue more frontline delivery, operations, customer service, mid/junior level
engineering and technology staff – the organizational structure starts to assume a more
pyramidal shape.

% Employees across levels (by stage)

SENIOR 20.7 13.6 12.4

60.6
58.2

41.7 28.1 26.9

28.1

MID - LEVEL
26.9
13.6

12.4

JUNIOR 37.7 58.2 60.6

SERIES A SERIES B GROWTH

Vertical E-commerce and Marketplace

% of Employees (by sector by stage)
Businesses have ~68% junior level
100%
9.7

employees comprised of front end

14.9

9.4
19.5

16.0

90%
delivery and customer service
VERTICLE ECOMMERCE/BRNADS

80%
37.1

22.8

22.8
28.5
36.8

70%
organizations.
CONSUMER SERVICES

60%
B2B/ENTERPRISE

MARKETPLACE

50%
FINTECH

40% In comparison, B2B/Enterprise, Consumer

30%
Services and FinTech businesses have to
67.9

67.9
56.6
46.9
43.8

20%
10% invest in product development, engineering
0%
and marketing which are relatively less
JUNIOR MID-LEVEL SENIOR
people intensive functions.

We have defined Senior level employees as >10 years experience; Mid-level employees – 5-10 years experience & Junior level employees <5 years experience
 9

WHICH FUNCTIONS DOMINATE

THE STARTUP WORKFORCE?

% of Employees Vertical E-commerce requires more sales

staff in the Series B stages, but as scale
16.7% 18.0% 26.7%
builds the organizational bulk shifts
44.2% 41.7% towards operations.
54.7%

15.0% 26.0% Technology grows from 2% to 9% from

13.2%
24.1% 14.3%
5.3%
Series B to growth stage, underscoring
SERIES A SERIES B GROWTH that companies are continually striving to
TECHNOLOGY SALES OPERATIONS OTHER FUNCTIONS improve operating leverage by introducing
technology where possible – be it backend
The nature of funded startups in India
supply chain, front-end logistics or
necessitates heavy reliance on Sales and
customer experience.
Operations employees. The percentage of
technical employees steadily declines
by stage.

% of Employees
Technology as a proportion of the total (by stage, Vertical E-commerce)
organization declines drastically from
24.1% at Series A to 5.3% at Growth stage 26%
but companies accrue more overheads
49%
(increasing from 19% to 27%).
Unlike tech companies in the US (e.g. 29% 52%

of US startup employees are in tech1 v/s 7% 14%

in India), Indian startups are in business 2% 9%

SERIES B GROWTH
sectors where adding staff in sales/ops is
critical to the business model. TECHNOLOGY SALES OPERATIONS

1) Namely dataset of 20,000+ profiles, 2014 – referenced in Quartz. Namely is an HR/payroll solutions provider
IS THERE ENOUGH DIVERSITY 10

IN STARTUPS?
% of Women in funded startups There is 22% women
participation on average
22% amongst the 45 companies
surveyed.

The participation of women in the funded

78%
startup ecosystem, at 22% mirrors trends seen
in the West – US startups also report lower
women participation (26%) than the broader
WOMEN MEN economy. Larger Indian companies do better
on this front. 1,2,3

The absence of concrete steps to remedy the

situation can lead to exclusion of a key
27%

30%

26%

22%

category of talent for startups. This demands

the attention and focus of senior leaders
LABOUR FORCE IT/ITES TECH SURVEYED across the ecosystem.
(INDIA) (INDIA) STARTUPS (US) STARTUPS

Diversity gets
Diversity gets better as companies raise
more financing.

better as Participation of women increases by 2-4%

from Series A to Series B/ Growth stages.
companies raise Focused interviews reveal deep rooted

more financing.
cultural reasons, as certain functions in India
are more acceptable to hiring women than

% Women by Funding Stage others viz. customer service, design, HR.

Typically companies add talent to these
functions at later stages of their journey.
SERIES A 19.9%

SERIES B 23.8% However, as companies grow even more,

especially in vertical e-commerce sector,
GROWTH 22.1%
diversity can take a hit, as a large part of their
16.0% 18.0% 20.0% 22.0% 24.0% 26.0% work force consists of front end delivery
teams which largely comprise of men.
1) World Bank fact sheet – 2018 | 2) NASSCOM Women in Technology – 2017 | 3) Namely dataset of 20,000+ profiles, 2014 – referenced in Quartz.
HIRING TALENT
11
WHICH FACTORS ATTRACT TALENT? 12

Ranked attractiveness of value propositions for hiring talent –

by function
INTERESTING WORK

SMALL TEAMS CULTURE

PAY RESPONSIBILITY

GROWTH POTENTIAL

TECH SALE OPS

Tech talent is attracted by interesting work, while sales team

members join primarily for pay and growth potential. Operations
employees join a firm for greater responsibility.

In order to attract good technical talent, companies will have to find ways to define their roles and
responsibilities to create a challenging atmosphere. Further, it is important to re-iterate the
purpose of the company regularly, especially to the technical teams who often do not fully
understand how their work contributes to the overall objectives of the business. Further, given
the deep networks which exists among technical talent in startup hubs like Bengaluru and Delhi
NCR, ensuring effective execution of this has the additional benefit of ensuring that perception of
work at the company is strong in the ecosystem.

For sales and operations teams, a different approach is needed – ensuring that current and future
compensation and the career trajectory is communicated well. Under-indexing on pay in certain
companies can be mitigated with strong anecdotes and success stories of individuals who have
grown and shouldered larger responsibilities based on performance.
 80% of the respondents reported their
13
WHERE DO preference to hire from other startups as
against large corporations.

STARTUPS Entrepreneurial ability is a key expectation

HIRE FROM? from startup hires, especially at early stages of

a company’ journey. The dynamic nature of
work, a deeper understanding of the culture
and the ability to shoulder greater
%age Respondents who prefer hiring from startups responsibility are reasons for this preference.
over large corporations

However, on the flip side, as startups focus on

SERIES A 89% hiring from each other, the competition for
talent increases and wage hikes on joining are
SERIES B 82% commonplace. (See Section on ‘Compensation’)

GROWTH 74%
AVG. – 80%

3 out of 4 candidates are hired from

referrals, agencies and portals–broadly
%age of candidates hired from each source
split equally between the three.

Fintech firms hire mostly from agencies FINTECH 14% 34% 29%

and portals – referrals are lower in this VERTICAL

ECOMMERCE / 19% 17% 38%
segment while 2 out of 3 candidates in BRANDS

fintech come from agencies. The use of CONSUMER

SERVICES 22% 29% 23%
LinkedIn is also markedly higher in
Fintech firms. B2B/
30% 21% 23%
ENTERPRISE

B2B/ Enterprise segments rely more on MARKETPLACE 29% 28% 24%

referrals – as a tight community of B2B

23% 26% 27%
software engineers provides a rich source TOTAL

of talent.
0%

20%

40%

60%

80%

100%

REFERRALS AGENCIES PORTALS LINKEDIN

CAMPUS JOB ADS OTHERS

WHERE DO STARTUPS HIRE 14

TECH TALENT FROM?

Ranked preference of hiring sources for tech talent

STARTUPS

IT SERVICE PRODUCT COMPANIES

(TCS/INFOSYS ETC.) (ADOBE/SAP ETC.)

LARGE TECH COMPANIES FRESHERS FROM

(GOOGLE/MICROSOFT ETC.) REPUTED CAMPUSES

GROWTH SERIES B SERIES A TOTAL

Marked preference for Campus Hiring in early stages.

Early Stage companies find it difficult to recruit a large number of experienced techies from
MNCs, whether Product Companies like Adobe, SAP, etc. or from the tech biggies like Google,
Facebook, Microsoft, etc. Theoretical complexity (often an indicator of how exciting a tech job is
to a young professional) is also lower in startups, while there is a greater emphasis on rapid
iterations and product releases. This skillset is available either in other startups or can be found in
readily moldable quality candidates from reputed campuses.

As companies scale, the demands on the technology function change, with fewer iterations and a
deeper focus on uptime, latency and scalability of the product. This work is more suited to
candidates with a strong experiential and practical background – candidates who have seen other
large tech organizations and can appreciate the issues involved. Thus, importance of candidates
from MNC tech firms gradually goes up in the later stages of a company’s journey.

However, all companies still find that the best source of tech candidates is other startups.
WHICH CHANNELS OF 15

RECRUITMENT DO STARTUPS USE?

Early stage companies rely on external agencies until they have
built internal resources to tap other channels for hiring effectively.

%age of candidates hired from each source A Series A company has typically not built its

SERIES A 22% 35% 19% 9% 14% 1%

internal capabilities for a hiring engine at
scale. Their reliance on agencies to fill
positions, as well as a preference for campus
SERIES B 19% 29% 28% 14% 5% 3%
hiring, points to this trend.

GROWTH 24% 24% 24% 13% 6% 9% As the company grows over further rounds of
funding, internal hiring resources are
strengthened and the importance of job
TOTAL 22% 28% 24% 13% 7% 5%
portals increases, as does LinkedIn due to an
0% 20% 40% 60% 80% 100%
increase in organization size and
REFERRALS AGENCIES PORTALS LINKEDIN
consequently the widening of networks.
CAMPUS JOB ADS OTHERS

Networks are critical for Junior level hiring is a very different issue

effective senior level hiring. faced by companies. Timelines and number of

candidates are critical, especially for rapidly
52% of senior candidates are
scaling startups. Most companies have
sourced through referrals or
tackled this issue by extensive use of portals
LinkedIn., as compared to and job ads.
41% for mid level and 27%
for junior candidates. %age of candidates hired from each source
– by seniority
While agencies are also important for
senior hiring, the importance of the SENIOR 36% 31% 10% 16% 6%

personal networks of the founders and

current senior team cannot be overstated.
MID LEVEL 26% 29% 25% 15% 2%
Hiring a senior professional can often be a
make-or-break decision for a startup,
and the added comfort level of a referral JUNIOR
21% 27% 32% 6% 10%
/ LinkedIn connection can aid the
0% 20% 40% 60% 80% 100%
transition process.
REFERRALS AGENCIES PORTALS LINKEDIN

CAMPUS JOB ADS OTHERS

WHICH CHANNELS OF 16
4

RECRUITMENT DO STARTUPS
USE? (2/2)
%age of senior candidates hired from each More than 90% of early stage
source – by funding stage senior hires are sourced from
personal referrals or from
agencies.
SERIES A 49% 42% 6%

Series A companies rely largely on personal

SERIES B 35% 28% 11% 16% 9% networks of the founders for senior hires.
However, while networks stay important as
the company scales, these networks also need
GROWTH 31% 29% 14% 21% 5%
to widen to source effective candidates. While
0% 20% 40% 60% 80% 100% personal referrals stay important, LinkedIn
grows in importance as it allows Founders
REFERRALS AGENCIES PORTALS LINKEDIN access to a larger network, and a more
CAMPUS JOB ADS OTHERS scalable way to access talent.
 HOW LONG DOES IT TAKE 17

TO RECRUIT?
%age of candidates hired over different 3 out of 4 senior hires are made
timelines – by seniority
over a time line extending more
SENIOR
24% 40% 36% than three months

Senior hiring at a startup is a long, deliberative

MID LEVEL 87% 13%
process – and it typically takes 3-4 months to
close a vacancy. On the other hand, junior level
JUNIOR 100% positions are invariably closed within 60 days.
0% 20% 40% 60% 80% 100%

<=90 DAYS 91-120 DAYS 120-180 DAYS

%age of senior candidates hired over different

Senior skillsets in specific timelines – by sector
domains like enterprise B2B/
10% 50% 40%
businesses or fintech, are ENTERPRISE

difficult to find. ~90% of senior

13% 38% 50%
candidates in these domains
FINTECH

take more than 3 months to CONSUMER

25% 50% 25%
hire.
SERVICES

Along with functional responsibilities in most VERTICAL

ECOMMERCE/ 38% 25% 38%
startups, senior hiring in specific sectors also BRANDS

demands deep domain expertise, and skillsets

MARKETPLACE 43% 29% 29%
are not as fungible. Hence, B2B and Fintech
sectors find it even more difficult to close a 0% 20% 40% 60% 80% 100%

senior vacancy in a timely manner. <=90 DAYS 91-120 DAYS 121-180 DAYS

%age of candidates hired over different 2 out of 3 tech openings take longer than
timelines – by function 2 months to fill.

OPERATIONS 91% 7% 2%
Most companies have identified sources to
hire sales and ops talent at a rapid pace,
SALES 87% 13% closing ~90% of openings in 2 months or less.
However, domain expertise is required in tech,
and limited sources of talent (primarily other
TECH 33% 47% 16% 4%
startups) leads to a situation where most
0% 20% 40% 60% 80% 100% companies struggle to find the right talent
<=90 DAYS 61-90 DAYS 91-120 DAYS >120 DAYS
within 2 months.
HOW MUCH OF AN INCREMENT IS 18

APPROPRIATE DURING RECRUITING?

%age of companies offering a increment more than 20% – by function

TECH SALES OPS

76% 42% 33%

3 out of 4 companies report an increment greater than 20% for

hiring technical talent.
The common difficulty in getting the right technical talent has repercussions not only on the
timeline for closing a position, but also on the size of the ‘carrot’, with increments on joining
frequently reported to be more than 30%.

A 20% increment is the bare expectation of all good candidates in the technical field. The limited
pool of talent (primarily sourced from other startups), and the closed networks (through which
young candidates have excellent information on pay scales at different companies), both
contribute to this.

Sales and Ops talent rarely command the same premium when changing jobs. 58% of sales talent
and 67% of ops talent change their jobs for an increment less than 20%.

Further, across the board, we observe that companies which take more time to hire also have to
give bigger increments, with some respondents reporting increments of even 40% to attract talent.
REWARDING TALENT
19
HOW MUCH VARIABLE 20

COMPENSATION IS NEEDED TO
DRIVE PERFORMANCE?
Variable Comp as % of Fixed – by function Variable component in Sales
7% 9% teams (expectedly) is higher
than Technology and Operations
2% 4%
44%

40% 40%
18%
teams. Nearly 27% of startups
17% pay a variable of 30% or more to
51%
47% 22% their sales people.
In comparison, variable compensation of
TECHNOLOGY OPERATIONS SALES
Technology and Operations employees is
<10% 10%-15% 16%-20% >20%

generally lower than 15%.

Within the Sales function, Marketplace and Variable Comp of Sales as % of Fixed
B2B/Enterprise businesses have the highest skew in – by sector
favour of variable compensation. 70%
of
respondent marketplaces pay 30%+ 8%
17%
13%
25%
25%
30%

variable compensation to their sales 13% 71%

teams. 42%
63%
38%
30%

In comparison, variable compensation of Technology 0%

20%
and Operations employees is generally lower than 33% 25% 20%
29%

0%
15%. As we will discuss in the ESOP section, stock CONSUMER FINTECH VERTICA B2B/ MARKETPLACE
SERVICE ECOMMERCE ENTERPRISE
based compensation has caught-up in the startup BRANDS

eco-system and is an established way to compensate <10% 10%-15% 21%-30% >30%

tech talent for the long term.

As the organization scales,

Variable Comp of Sales as % of
dispersion among performance
Fixed – by stage
starts to appear with increasing
22% 24% 32%
variance in the variable
33% 18%
11%
compensation paid to sales
35% 32%
people. A company is likely to hire
33%
seasoned and expensive sales professionals
24% 26%
11% to position the company for the next phase
SERIES A SERIES B GROWTH
of growth - increasing the dispersion in
<10% 10%-20% 21%-30% >30%
variable compensation.
WHAT IS THE APPROPRIATE 21

QUANTUM OF COMPENSATION
AND ANNUAL SALARY REVISION?
10-15% annual revisions of Vertical E-commerce and
compensation are common FinTech pay the most to
and seem to be part of the Senior employees. ~38% of
dominant culture among the senior employees get paid
funded startup ecosystem. more than Rs. 75 Lakh p.a.
However, it is noteworthy
that 27% of the startups On the other hand, none of the companies

implement an annual in the B2B/enterprise sector who were

part of this survey paid more than Rs. 75
increment greater than 15%
Lakh to senior employees. This is indicative
of more severe competition for talent in
Funded startups are known to be
the Consumer Internet space compared to
excellent paymasters, since they have to
B2B/Enterprise Software.
compete with established brand names
and large corporates for quality talent. A
Further, the presence of experienced
high annual salary revision is driven by
financial services professionals in senior
their need to retain talent.
roles within fintech businesses is also a
leading factor for higher compensation in
this sector.
% Annual Increment (by sector)
0% 0% Compensation Ranges (Senior Employees)
10% 8% 13%
25% 14%
20% 17% 0% 0% 0% 0%
25% 13%
40% 14% 25% 38%
25%
63% 86%
58%
60% 25%
63% 57% 50%
38%
60%
17%
10% 13%
0% 38%
B2B/ CONSUMER
VERTICAL 29% 25% 25%
FINTECH ECOMMERCE/ MARKETPLACE
ENTERPRISE SERVICES
BRANDS
VERTICAL
B2B/ CONSUMER
ECOMMERCE/ FINTECH
<10% 10%-15% 16%-20% >20% ENTERPRISE MARKETPLACE SERVICES
BRANDS

RS. 30-50 LAC RS. 51-75 LAC RS. 76 LAC- 1 CR >RS. 1 CR

For the purpose of this study, we have defined Senior level employees as >10 years experience; Mid-level employees – 5-10 years experience &
Junior level employees <5 years experience.
 22
HOW TO COMPENSATEFOR THE
LONG TERM – ESOP? (1/3)
More than 50% of Series A %age of companies with ESOP pool
startups have an ESOP pool shareholding – by stage

larger than 7.5%, as

compared to ~30% of SERIES A 33% 11% 33% 22%
growth stage startups.
SERIES B 24% 29% 35% 12%
As companies grow and raise multiple
rounds of institutional funding, the
pressure on the amount to be set aside for GROWTH 37% 32% 21% 11%
employees increases. The presence of
0% 20% 40% 60% 80% 100%
multiple equity investors on the cap table
<=5% <=5.1%-7.5% 7.6%-10% >10%
who usually have a target ownership in of total shareholding in ESOP pool

mind while investing, leads to a gradual

erosion in the size of the ESOP pool.

Growth stage companies ensure wide ESOP value allocated across seniority levels
participation (~80% of companies report – by stage
more than 5% of staff is eligible). However,
this wider participation does not lead to
SERIES A 73% 21% 6%
meaningful shareholding, as more than
70% is still held by senior employees.
SERIES B 66% 23% 11%
%age of companies reporting proportion of
employees eligible for ESOPs
GROWTH 72% 20% 7%

SERIES A 44% 22% 33% 0% 20% 40% 60% 80% 100%

SENIOR MID JUNIOR

SERIES B 6% 35% 24% 35%

GROWTH 5% 16% 42% 37%

0% 20% 40% 60% 80% 100%

<=1% 1.1% - 5% 5.1% - 10% >10%

of employees eligible for ESOPs

HOW TO COMPENSATE FOR THE 23

LONG TERM – ESOP? (2/3)

%age of companies with ESOP pool 70% of B2B startups have an
shareholding – by sector ESOP pool larger than 7.5%,
MARKETPLACE 14% 57% 14% 14%
as compared to ~40% of all
startups.
VERTICAL
ECOMMERCE/ 63% 25% 13%
BRANDS
B2B companies encourage aligned goals
FINTECH 25% 38% 38% for their employee base, as they have
larger ESOP pools, more employees who
CONSUMER
33% 17% 33% 17% are eligible for ESOP as well as a wider
SERVICES
sharing of the value between senior, mid
B2B/
ENTERPRISE
20% 10% 40% 30% level and junior staff.

TOTAL
31% 27% 29% 13% Marketplace companies are also observed
to score highly on the size of pool, number
0% 20% 40% 60% 80% 100%
of employees eligible and the portion of
<=5% 5.1%-7.5% 7.6%-10% >10%
of total shareholding in ESOP pool value shared.

%age of companies reporting ESOP value allocated across seniority

proportion of employees eligible levels – by sector
for ESOPs – by sector

MARKETPLACE 14% 14% 71% MARKETPLACE 64% 26%

VERTICAL VERTICAL
ECOMMERCE/ 50% 38% 13% ECOMMERCE/ 78% 18%
BRANDS BRANDS

FINTECH 13% 25% 38% 25% FINTECH 72% 21%

CONSUMER CONSUMER
SERVICES
8% 25% 33% 33% SERVICES
76% 16%

B2B/ B2B/
ENTERPRISE
30% 30% 40% ENTERPRISE
60% 27%

TOTAL
4% 29% 31% 36% TOTAL
70% 21%

0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%

<=1% 1.1% - 5% 5.1% - 10% >10% SENIOR MID JUNIOR

of employees eligible for ESOPs
HOW TO COMPENSATE FOR THE 24

LONG TERM – ESOP? (3/3)

%age of companies with ESOP value > 30% of Series A startups
creation greater than 5X annual salary expect to create value
– by stage
through ESOPs which will
accrue to more than 5 times
SERIES A 22.2% 44.4% 33.3% the salary

As companies mature, the future multiple

SERIES B 29.4% 47.1% 11.8% 11.8%
expected on their valuation reduces as the
cost of equity also climbs down pursuant
GROWTH 42.1% 36.8% 5.3% 15.8% to a reduction in perceived risk.

0% 20% 40% 60% 80% 100%

On an average, we noticed that ESOP
1 - 2X 3 - 5X 6 - 7X >7X
value creation by Growth stage startups is
3.9x, Series B is 4.1x & Series A is 4.3x
times annual salary.

This also has an impact on talent, with

Series A companies promising and
expecting a high multiple on ESOPs.

The challenge faced in matching senior

compensation (see section on
‘Compensation’) is mitigated by this
promised growth, and is a key tool to
attract leadership hires.
MANAGING AND
25

RETAINING TALENT
WHAT ARE THE BENCHMARKS 26

IN TRAINING FREQUENCY AND

DURATION?
Learning and Development
has become an important
part of the startup
eco-system. <10% startups Training Duration (By sector)
responded that they do not
train their employees. On 25% 20% 13%
38%

the other hand ~50% of 25% 57%

40%

startups have a training of 4+ 25%

days in a year. 58%

30% 25%
14%
63%
17% 10% 29%
13%
Marketplace and FinTech businesses have CONSUMER
VERTICAL
B2B/ENTERPRISE ECOMMERCE / FINTECH MARKETPLACE
SERVICES
relatively longer training periods on an BRANDS

average, driven by complex business NEVER 1-3 DAYS 4-5 DAYS 6 OR MORE DAYS

models (e.g., understanding the nuances of

demand and supply side, regulatory and
domain knowledge requirements).

Training Frequency (By stage) 55% companies train their

employees 2 or more times
22%
per year.
37%
53%
33%
A salient point to note is that this does
16%
6% not vary significantly by the stage of the
33% 24% 37%
company, thus underscoring the
11% 18% 11% importance that even younger
SERIES A SERIES B GROWTH
companies place on employee training
NEVER ONCE A YEAR
and development.
TWICE A YEAR MORE THAN TWICE A YEAR
 27

HOW FREQUENTLY IS
PERFORMANCE MEASURED?
Appraisal Frequency per annum (By stage)

11% 6%

33% 50%
53%

56% 44%
41%

6%
SERIES A SERIES B GROWTH

NO FORMAL PROCESS 1X P.A. 2X P.A. 2X+ P.A.

Performance Appraisal and feedback is the cornerstone of

Development. Most funded startups run an annual or
semi-annual cycle for appraisals.

Some Series A startups do more frequent appraisals (more than 2 times per annum) in
order to discover the right talent-company fit as well as the need to recalibrate
performance and growth expectations in a hypergrowth environment. With more scale
accruing companies usually settle at a semi-annual/annual appraisal cycle.
WHY DOES TALENT LEAVE (1/2)? 28

Most companies see attrition Range of Attrition (by sector)

rates between 10-20% annually.
10% 13%
10% 25% 27%
13%
43%
This compares favourably with global 13%
40% 38%
benchmarks in technology sectors – where
38% 45%
estimates of attrition range from 13% - 23%1, 2. 43%

40% 38%
25% 18%
9% 14%
Consumer Services and Marketplaces have VERTICAL
B2B/ CONSUMER
relatively higher attrition – driven by the ENTERPRISE
FINTECH ECOMMERCE/
BRANDS
SERVICES
MARKETPLACE

general overheating and increased competition <10% 10% - 15% 16% - 20% >20%

for talent in the Consumer Internet space.

Overall attrition is seen to increase with scale.

~14% of all hires in funded startups leave in first 6 months. This

early attrition can be caused by hiring mistakes or misaligned
expectations and are more pronounced during Series B and
Growth stages as the startup trades off hiring accuracy in favour
of hiring speed.

Marketplace businesses seem to have more pronounced early attrition driven by complex
business models and hypergrowth in the last 5 years.

Early Attrition (% Hires leaving in first 6 months)

25.0

16.0 16.6 17.0

15.0 15.0 15.0 14.3
9.9 11.0

5.0

1.0
VERTICAL
CONSUMER
B2B/ENTERPRISE FINTECH ECOMMERCE / MARKETPLACE
SERVICES
BRANDS

SERIES A SERIES B GROWTH

1) Hay Group - “Preparing for take off” Average attrition rate from 2013 – 2018 | 2) LinkedIn Job Seeker Trends 2015
WHY DOES TALENT LEAVE (2/2)? 29

Ranked reasons for attrition – by stage

COMPENSATION
Attrition in Fintech is driven
by long hours, while B2B
companies find it a challenge
to compete on brand.
UN-CHALLENGING HOURS

Anecdotal long hours in mature financial

services companies is also a challenge
BRAND ISSUES WITH
MANAGER faced by new-age fintech firms. As most
of these companies are led by founders
JOB SECURITY who have long experience in financial
GROWTH SERIES B SERIES A services, they have brought similar

Early Stage Attrition primarily working styles to their startups –

stems from Brand and long however the expectation of talent in

the startup ecosystem might not match
hours, while in later stages,
their expectations.
companies need to protect
against falling into a rut and Unlike consumer internet companies
ensure their employees are which are easily recognized, B2B
adequately challenged to avoid companies often find their brand
the fate of the same as a preferred recruiter needs
incumbents they set out more investment.
to disrupt.

Early stage companies often find themselves Ranked reasons for attrition – by sector
struggling with attrition as they are yet to
COMPENSATION
build a brand. While compensation is an
important factor across stages, later stage
companies also need to find ways to ensure UN-CHALLENGING HOURS

talent needs are planned well in order to drive

engagement across larger scale.
Issues with reporting managers become
significant at mid stages (Series B), as the BRAND
ISSUES WITH
MANAGER

organization transforms from a flat structure

to a pyramidal one. A large number of mid
JOB SECURITY
managers who are new to the role have
B2B/ENTERPRISE CONSUMER SERVICES FINTECH
to be adequately trained to manage and MARKETPLACE VERTICAL ECOMMERCE / BRANDS

resolve conflict
 30

ABOUT TRIFECTA CAPITAL

Trifecta Capital is India’s leading venture debt platform – investing actively from Fund-I
and Fund-II, it has an investible corpus of Rs. 2,500 Cr. It works closely with new economy
companies to create customised debt financing solutions that cater to various use cases
including working capital financing, capex funding, acquisition financing and special
situations. Trifecta Capital also leverages its’ investor network to create meaningful
collaboration opportunities for its portfolio companies. Trifecta Capital is backed by
India’s leading Banks, Insurance Companies, Endowments, DFIs and Family Offices. Since
2015, it has supported over forty-five companies including three Unicorns. Investee
companies include Big Basket, PaperBoat, Rivigo, UrbanClap, Box8, Livspace, Cure.Fit,
CarDekho, Pharmeasy, Ninjacart and several other market leading companies.