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04.4

Competing For & Compensating Talent

There is a wide variance in the level of average founder compensation at every funding round stage between Europe and the US, both in terms of base salary and incentive pay.

Founder base salary and incentives by Funding Round stage in 50th percentile by region

Legend

  • Base Salary (Europe)
  • Base Salary (US)
  • Incentive Pay (Europe)
  • Incentive Pay (US)
Note:
Incentive pay is cash bonus or incentive, which is not related to equity or equity value.

While there are differences in average pay between European and US founders, the average level of founder equity by funding round stage is closely aligned from Series A onwards.

Founder equity by funding round stage in 50th percentile by region

Legend

  • Europe
  • US
Note:
Advanced-HR’s compensation report details founder’s cash and equity pay as reported by participating private, venture-backed companies. Equity data is displayed as a percentage of fully diluted shares. Equity not related to salary nor incentives.

European tech companies have historically either chosen not to use or have not been able to use stock options as an incentive tool for employees in the same way as has been standard in the US Advanced-HR's latest data suggests that there is positive change afoot in Europe. Based on their latest employee ownership report, the average level of employee ownership by funding round stage in Europe is broadly in line with levels in the US.

Employee ownership by funding round stage in 50th percentile by region

Legend

  • Executives (Europe)
  • Executives (US)
  • Staff + Other (Europe)
  • Staff + Other (US)
  • Unissued (Europe)
  • Unissued (US)
Note:
This details equity held by executive-level employees, staff-level employees and remaining unissued options. It excludes Founder’s Shares and equity allocations displayed as a percentage of fully diluted shares. Equity not related to salary nor incentives

A positive effect of awareness-building campaigns, led in part by strong arguments from Europe's leading VCs, is evident in a reported increase in employee awareness of stock options as a form of compensation. This increased awareness is most prevalent in larger companies of 100 employees or more.

Founders' view on change in employees awareness of stock options as form of compensation by company size

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  • Increase
  • No change
  • Decrease
Note:
Respondents stating 'Not able to comment' filtered out. Founder respondents only.

A majority of European founders of larger companies of 100+ employees report an increase in employee awareness of stock options.

Stock option awareness

56%
of founders of European private tech start-up or scale-ups with more than 100 employees report an increase in employee awareness of stock options as a form of compensation

As Europe's tech ecosystem continues to evolve and mature, it is helping to drive greater access to talent that has built significant and relevant prior experience at other startups or scaleups. This is especially true for the region's more scaled startups with 55% of founders of companies with more than 100 employees reporting an increase in this talent trend.

% change in founders' view on change in candidates with significant prior startup/scaleup experience joining the industry by company size (past 12m)

Legend

  • Increase
  • No change
  • Decrease
Note:
Respondents stating 'Not able to comment' filtered out. Founder respondents only.

The impetus for founders to ensure they have designed competitive incentives mechanisms to attract talent is underpinned by the growing level of competition for talent in the European tech ecosystem. Founders from all regions, though at varying levels, report increased levels of competition from both global tech giants, as well as homegrown local startups that are playing in the same talent pool.

Founders' view on change in competition for talent from global tech giants and local startups, by subregion

Legend

  • Tech giants, Increase
  • Local startups, Increase
  • Tech giants, No change
  • Local startups, No change
  • Tech giants, Decrease
  • Local startups, Decrease
Note:
Respondents stating 'Not able to comment' filtered out. Founder respondents only

More than half of European founders are seeing increased competition for talent from global tech companies

Competition for talent

54%
of European founders have experienced an increase or significant increase in competition for talent from global tech companies in the past 12 months

The effect of increased competition for talent plays out in different ways, including salary inflation, greater employee churn and more difficulty in filling roles. On the last point, for example, the number of job postings for 'software engineer' roles that prove hard to fill has increased in every European country for which data is available, except Denmark.

Share of software engineer job postings that are hard to fill

Legend

  • 2018
  • 2017
Note:
Hard to fill is defined as % of 'software engineer' job postings on the Indeed site(s) for more than 60 days.

There is talent in Europe but it’s in demand, especially when it comes to people who have been there and done it already.

The biggest challenge is finding high-quality talent. There is talent in Europe but it’s in demand, especially when it comes to people who have been there and done it already. This is a younger ecosystem than Silicon Valley and it’s not easy to hire people who have been able to implement, say, groundbreaking new AI techniques that scale a B2C solution so it can conquer the world - they are in short supply! So you have to always look not only for people who will help you now, but also for those who will be what you need in several months’ time.

Tugce Bulut

Streetbees

The extent to which it has become harder to fill software engineer job postings in Europe varies at the country level. The UK has, by some margin, experienced the largest overall increase in the share of jobs that have become hard to fill.

Change in % of software engineer job postings that are hard to fill, 2018 versus 2017

Legend

  • YoY change (%)
Note:
% change in % of software engineer jobs that are hard to fill in 2018 versus 2017 by country. Hard to fill is defined as % of 'software engineer' job postings on the Indeed site(s) for more than 60 days.