It has been a difficult few weeks for many in tech. We’ve seen layoffs, anxiety, longer fundraising processes, and reports of slower growth have already started emerging.
Markets move in cycles, and there is some truth to the theory that corrections are important for industries after a long bull run. More fiscal discipline and cost control are always good muscles to build.
But these arguments don’t ease founders’ worries. Keeping customers happy while maintaining the pace of growth suddenly seems like a more difficult tightrope to walk. And that’s before we get to the impact on team members.
It’s reasonable to assume that if you’re feeling anxious about the coming months, your team is too. So what tools do founders have to keep the team engaged and motivated in a bear market?
We spend a lot of time talking to scaling companies about equity and share ownership. Equity can help founders deliver on these objectives while keeping the team motivated and engaged.
So what are the key tasks when it comes to talking about equity?
Right now, founders need to communicate clearly and confidently with the team; they need to reward top performers; and they need to tune out some of the day-to-day and keep focused on the long term.
Clearly explain what new market conditions might mean for equity stakes
- It’s a founder’s or CEO’s job to have the hard conversations. Many companies are confronting lower valuations and multiples. However, bad news also means a chance to win trust within the team by being transparent and honest. Not being candid with the team about the consequences for the value of their equity stakes will only damage credibility further down the line.
Reward your top performers with refresher grants
- It’s still a candidate’s market out there. This is your chance to incentivize high-performing team members by committing to reward their continued development. Can you speed up vesting or issue bonus stock awards? For long-serving team members nearing the end of their vesting periods, you should consider offering refresher grants to make sure they don’t feel their ‘journey’ with you has come to a natural end.
Make room for a long-term view
- Anxiety naturally draws people towards the short term. And of course, it’s right to focus on the immediate challenges. But it is more vital than ever to keep focused on the long term while you and your executive team get through the day-to-day. It’s the founder’s or CEO’s responsibility to understand what the world will look like on the other side of the downturn, and how your company can evolve to meet a changed technology landscape. Equity is the most important component when it comes to aligning all stakeholders around a long-term goal. Companies with an equity plan that everyone understands, and that fairly rewards everyone who contributes to the business’s goals and mission, are well placed to retain a strong team, grow market share while competitors realign, and emerge stronger.
It’s important to remember that few people join a startup because they want an easy ride. Tech attracts great people from all kinds of industries and backgrounds because overcoming challenges and tough times is exciting, fulfilling work.
People will learn an incredible amount by working through a tougher macroeconomic environment in the next couple of years. When better times return (because they will), your team will be closer-knit and more motivated to succeed than ever.
To make sure your team stick together and keep hustling, give them the support they need. Equity is meant to be a powerful lever and incentive: use it like that.
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