Startups may scale back top gun packages as they set sights on profit

Singapore

IN THE fierce competition for talent, how do unicorns like Grab and Razer lure top guns away from more established businesses? With "offers they cannot refuse".

In return for the risks of working for a startup, these senior hires are often given packages that include generous sign-on bonuses and equity packages that align their longer-term interests with that of the employer's.

But as these high-growth startups hoist themselves onto a path towards profitability, compensation packages may be less generous for such future hires.

Grant Torrens, regional director of Hays in Singapore, confirmed the growing trend of highly qualified individuals moving from large corporates or senior government positions to explore new pastures in promising private companies.

In addition to the compensation packages, there are also intangibles to tempt these candidates.

"Such individuals spend decades in large enterprises and are often lured by exciting employer branding that promises a refreshing work culture and lucrative possibilities," Mr Torrens told The Business Times.

David Leong, managing director of PeopleWorldwide Consulting, adds: "In cases like Grab, these are heavily invested unicorns with an astronomical valuation and unlikely to offer start-up salaries for their senior positions."

Instead, they are likely comparable to market pegs with generous sign-on bonuses and share options as incentives to draw them from a relatively secure career to one with a higher level of risk, HR consultants said.

One huge draw - even in smaller scale startups - is the premium access to equity, Mr Torrens said.

"The magic in the offer comes from positioning the great potential in the 'future value' of their involvement compared with the current 'present value'," said Mr Leong.

These bigger startups - especially those flush with venture capital money - usually spare no expense to snare top executives, viewing them as a necessary investment to get ahead in a competitive field.

"Senior hires get as much, or more, for a whole rewards package. Once you reach Series B or C (fund-raising), while these hires expect more risk, they typically don't take a pay cut at that level," an HR consultant familiar with startups' recruitment told BT on the condition of anonymity. "I'm willing to bet that the overall package is more risky, but also more attractive."

The risk comes mainly from the stock options component of their compensation package, which depends on factors such as business valuation, investor confidence and the likelihood of an exit event such as a public listing.

Of late, there has been a string of big names that have moved from the establishment to join Singapore-based fintechs and startups.

Grab appeared to have snagged the most headline-grabbing names; among them were ex-GIC chief economist Leslie Teo - now head of data science, policy and data initiatives; former top Visa honcho Ooi Huey Tyng who is now managing director of GrabPay, and previous Singapore Tourism Board chief Lionel Yeo, appointed as adviser to Grab's CEO.

Senior executives from GIC seem to be particularly sought-after, too. Aside from Grab's Mr Teo, Razer secured ex-GIC president Lim Siong Guan as its board adviser, and fintech startup TranSwap snatched former GIC senior vice-president of technology Gary Tan as chief technology officer.

Grab declined comment when contacted by BT. Razer did not respond to queries by press time.

Meanwhile, digital securities startup iStox just this month said it would hire UBS managing director Choo Oi Yee to be its chief commercial officer. iStox also just hired former Monetary Authority of Singapore (MAS) deputy director Lim Mei Shern as its head of compliance.

Despite the clout these heavyweights bring, consultants generally do not believe they are recruited as status symbols.

Instead, the startups are paying a premium for networks, expertise and experience - seen as vital if they want to be sustainable, said HR consultants.

"Getting the correct brains and talents to drive businesses on the path to profitability must be ranked high and these must be in safe hands who have demonstrable skills and experience to drive businesses and operations," said Mr Leong.

"They must be people who can bring profits to the table."

He noted that startups also tend to attract talent over from regulators as a "safe bet" on compliance.

The post of a board adviser is also an increasingly popular option. These advisers are usually retained on a fee and have varying levels of engagement, depending on the startup.

This comes as many startup founders are relatively young, so advice from established and trusted figures is invaluable.

But with most top positions filled at many startups, the compensation packages for future hires may be less generous.

This is attributed to the more stable state of the company in the later stage compared to the beginning when there is a lot more uncertainty, said the consultants. Earlier big-name hires face higher risk which had to be compensated for accordingly.

Na Boon Chong, managing director and partner, Human Capital Solutions, South-east Asia at Aon, pointed out that startups are more selective in who they hire during the early stage, where every employee counts. But this changes when the team grows from 10 employees, to 100, to 1,000.

"Up to a certain point, each individual becomes less critical on his or her merit," he added.

Dangling premium pay packages to attract top talent is also not sustainable in the long run, said Mr Torrens.

"The continuous hiring of highly skilled technical professionals and the rising wages needed to keep them on board and away from competitors have put immense pressure on emerging tech companies," he noted.

To be sure, there are no clear signs of reckless spending where staffing is concerned. Notably, Grab employees take budget flights to get to countries in the region.

And even as startups grow to a certain size and are able to pay for senior executives, being part of something revolutionary may be a bigger draw than the pay package.

According to TranSwap's Gary Tan, it is this possibility of shaping the future of the industry that led him to jump ship from the secure environment at GIC.

"The founders have shown me the 'unicorn potential' of their platform and how I can play a pivotal role in shaping the future of FX payments," he told BT. "The most important factor is my belief that I would be able to contribute significantly with my knowledge and experience, taking TranSwap to the next level."

But even as he said that his decision to join the fintech was not "purely about salary or initial return", consultants noted that selling a dream alone is usually not quite enough to get senior staff to take the plunge.

It has to be a combination of various factors, ranging from the pragmatic to the aspirational.

"Call me cynical... " said the HR consultant who declined to be named. "The dream is exciting to sell to senior talent, but at the end of the day, they still want a remuneration package that makes sense to them."