Peter Walker, the Head of Insights at Carta, has spent the last three years building a team that analyses data from over 50,000 startups, offering critical insights into hiring, equity, and valuation trends. With a background rooted in early-stage startups and firsthand experience as a founder, Peter brings a unique understanding of the challenges and rewards of startup compensation. In this conversation, he shares essential strategies for building equitable and transparent pay frameworks that align with startup culture, both in the US and globally.

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How would you define a successful equity program in a startup?

A successful equity program is built on intentional decisions about who receives equity and why. It begins with defining whether equity will be available to all employees or only certain groups. Clear reasoning behind these decisions is essential because employees will be aware of who does and does not receive equity. 

Beyond granting ownership in the company, it’s also about education — helping employees understand the mechanics of equity, from vesting schedules to exercising options, so they can fully appreciate the value of their equity.

It’s vital that founders and leaders step up as equity educators. When they do, it creates a “halo effect” where employees not only feel incentivised but also truly informed about what ownership means for them. This goes a long way toward positioning equity as a real motivator rather than just an abstract benefit. 

What are some of the biggest challenges startups face when offering equity, especially globally?

When issuing equity internationally, there are often legal, regulatory, and cultural barriers to consider. Some countries make it difficult for startups to offer equity due to tax implications or administrative hurdles, and in some cases, employees might not value equity as highly if they haven’t seen high-profile success stories in their region. For example, equity might be a familiar concept in the US, but less so in countries where it’s uncommon for startups to IPO or be acquired.

Companies need to educate both potential and existing employees on the potential of equity as part of total compensation, especially when hiring globally. It helps if there’s a cultural precedent or example of someone achieving success through stock options. This is why a large IPO, like Canva in Australia, could be transformative in helping Australian employees see equity as a real opportunity.

How has the downturn in the startup economy affected employee equity?

Economic shifts have led to more layoffs and longer timelines to liquidity events, like IPOs, leaving some employees hesitant to exercise their options. We’ve observed that around 30% of startup employees exercise their options before they lapse, highlighting how startups are viewed as a bet rather than a guaranteed payout. Employees typically let their options expire when they aren’t confident in the company’s future, or are facing personal financial barriers, like the cash needed to exercise.

In times like these, many employees prefer negotiating for cash over equity. However, some startups have tried creative solutions to support liquidity, such as early exercise programs that allow employees to exercise options sooner, starting the clock on capital gains. Others are extending post-termination exercise windows to ease the pressure on employees leaving the company.

What role should Heads of People play in managing and communicating equity programs?

Heads of People play two essential roles in managing equity: establishing the company’s compensation philosophy and leading equity communication. They work closely with finance teams to define how and when equity is distributed, aligning these decisions with company goals and hiring plans. They also communicate with employees about how equity works, how it aligns with the company’s mission, and how it might grow in value.

Communication is particularly crucial, as it helps employees see themselves as part-owners, not just employees. Heads of People need to balance legal clarity with accessible language that explains the value of equity in a relatable way. In times of uncertainty, transparency from both the Head of People and founders builds trust and reassures employees about where the company stands. Equally, in growth periods, communicating wins, funding rounds, or valuation changes can energise employees by showing them how their ownership stake aligns with the company’s success.

What’s one prediction you have for the future of startup hiring and compensation?

With startup hiring currently down, I expect demand will return but in new forms. Startups may begin to focus less on scaling large sales or support teams and more on roles in automation and technology that drive efficiency. We may see fewer traditional hires and more growth in fractional or AI-assisted roles, where smaller teams can leverage technology to cover more ground.

These changes are likely to reshape compensation too, as startups will continue to compete for specialised talent in technical areas, even if they’re offering fewer positions overall. As hiring and compensation evolve, I think we’ll see creative solutions emerge in response to both the economy and advancements in automation.

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