In the early days of our startup, we were unable to pay market wages to our employees. Instead, we allotted heavy profits interest units to those employees, and we were all bonded together via our ownership and desire to make the most out of nothing.
Profits interest units are not worth anything until there is an exit event of some sort, like an IPO or an acquisition.
Yet our goal is not to find an exit. That’s just something that happens if the conditions are right. Our goal is to create the best business in our space, delivering tremendous value to our customers, employees, and partners.
Lately, I have been thinking a lot about our early employees that are stuck with the company through those low wage days and are still with us today. Those employees deserve rewards for sticking with the company through those early tough times. They should not have to wait to receive those rewards until an exit event, especially because exit events are not something that are planned.
So we have decided to start spinning out cash to those early employees from our profits in proportion to the profits interest units they received and the amount of pay cut they took to stick with our company. I personally am deeply grateful that they joined me in taking a small salary to make our business successful. I am happy we are now in a position to start bringing more compensation to the table for our people.
What are your thoughts on compensating early employees? How do you reward loyalty in your startup?