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Global Nuances of Startup Compensation

I mentioned in a previous post how I'm an adviser to the folks behind the annual survey of startup executive compensation and how this year the survey is expanding to include China, India, Israel and the UK.  So for the past few weeks I've been talking to venture capitalists, entrepreneurs, CEOs and other industry participants in these countries and learning a ton about the local startup ecosystems.

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One thing that has surprised me is how prevalent the "American" model of entrepreneurship and venture capital is in these countries.  The notion of entrepreneurs starting companies and having substantial ownership then hiring employees who also have ownership in the company and then raising capital from outside investors is universal.  Of course, when it comes to compensation there are always things unique to the local business culture.  Some of the more interesting things I've learned include:

  1. Salaries in Israel are described monthly.  So instead of saying $120K per year, you'd say $10K per month (in Sheqels, of course).  And it's not always clear whether it is gross or net of taxes (you have to ask).
     
  2. In India and China there is no preferred stock.  This one really surprised me but apparently in India and China VCs don't get a different class of stock with special rights and privileges.  However, apparently it is not unusual for investors to demand side letters that confer much of the rights customary in a typical US preferred security, effectively creating a "synthetic preferred stock."  I wonder if these have been tested in any courts…anyone had personal insight into that?

  3. In India and the UK there seem to be two types of startups. There are the "Old School" type with a Managing Director and having limited equity ownership by management and employees and the "American style" startup run by a CEO and with compensation schemes that would be recognizable here in the US.  I'm still a little hazy on how to tell one type from the other.  Anyone have any color on this?

It will be really interesting to see how compensation compares across countries.  That's not what the survey is intended to do, but we should be able to compare a few things (like equity ownership).  I'm not aware of any comparable study like this in the US (let alone globally) so I suspect we'll learn a lot from the results.  The CompStudy survey will open up sometime next month at http://www.compstudy.com/ and will include surveys for China, India, Israel, UK and US each in IT and life sciences.  If you are interested in participating (or promoting) the survey please comment here or send me a private email.

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Categorised as: Entrepreneurship, Management, Startups, Venture Capital