Global Startups Enter a New Era of Executive Compensation | Mercer 2019

Global Startups Enter a New Era of Executive Compensation | Mercer

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Global Startups Enter a New Era of Executive Compensation
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Global Startups Enter a New Era of Executive Compensation
Calendar03 十月 2019

For decades, any conversation involving startups and executive compensation conjured images of Silicon Valley and shiny office buildings full of technology virtuosos working for innovative companies striving to be the next billion-dollar unicorn. Now, a new era of global startups is taking root in previously unexpected regions around the world.

In fact, recent research reveals that $893 million was invested in 366 startups throughout the Middle East and North Africa. That number represents a $214 million increase from 2017, which saw $679 million in startup investments.1

Similarly, startups are increasing in Southeast Asia, largely driven by "SEA turtles" — locally born residents who studied and worked overseas (mostly in the West, in places like Silicon Valley) and are returning home to launch their own startup companies. The region has experienced a major inflection point, with VC investors in Southeast Asia investing over $7.8 billion across 327 deals.2

There's one key component all these startups need, however: leadership. But attracting and retaining executive-level talent and management teams can be a major challenge for these burgeoning startup hotbeds, especially when it comes to compensation.

Corporate Investors Are Changing Executive Compensation

Many of the world's most recognizable startups were launched by charismatic, individual founding partners, such as Jeff Bezos, Jack Ma and Mark Zuckerberg. However, the rise of these luminaries and their compelling stories do not mirror the new era of startups blossoming around the world.

In the Middle East and North Africa (MENA), for example, investment companies are providing the initial financial backing needed to launch startups. These investment companies are there from day one to ensure the startups have the capital needed to secure subsequent rounds of funding. Additionally, the executives of these startups are not the original founders and, therefore, desire different compensation models to secure their continued loyalty, creativity and commitment.

Acquiring top C-level talent for startups can be a daunting task, as the risk level is high for businesses that do not have a proven track record — or any record at all. Traditionally, western-based startups have fashioned executive compensation packages around medium- to long-term benchmarks predicated on the company's expected growth, but triangulating growth models, investment strategies and executive payment packages can be a complicated and tenuous proposition.

Since most global startups today are built around investment companies instead of inspirational individual founders, these companies must be diligent when determining how or how much to pay the executives — who can ultimately mean the difference between success and failure.

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