Jess, it's amazing to have you here. Thank you for joining us for the inaugural interview of the FNDN Series. To start, can you share a bit about your background and your role at Airtree?

Great to be here kicking this off. My background is a bit of a whirlwind, but let's do a whistle stop tour of the last 20 years. I started as a chemical engineer in the oil and gas industry, which was quite the adventure. Along the way, I had an ecological awakening and pursued a master’s in sustainability education. I loved the academic approach—developing research questions, collecting data, and generating insights.

This passion led me to a PhD in organisational behaviour. Although I loved the research and teaching aspects, the pace of change was slow. After seven years in academia, I stumbled into the tech startup world, working with edtech companies like Go1 and Faethm AI. 

Now, at Airtree, I have a front-row seat to the best up-and-coming tech companies in Australia and New Zealand. As Head of People, I enable our high-performing team and support our portfolio companies in developing their people strategies and navigating scaling.

That’s an incredible journey! Having experienced both startups and now VC, what stands out to you as the key differences in compensation practices?

The methodologies are quite similar—we use frameworks, benchmarking, salary bands, and performance to inform compensation decisions. The primary differences lie in the industries we source benchmarks from and the incentive mechanisms. For example, in VC, we use carried interest, which benefits employees from the long-term success of the funds, whereas startups use employee shares. These vehicles have different structures and mechanics, requiring distinct understanding and communication.

‍Carried Interest is a fascinating one—can you explain that more for those unfamiliar with it?

Absolutely. Carried interest is a way for employees in VC to benefit from the success of the funds. Our job is to find and grow the best companies on behalf of our limited partners. When these investments succeed, a slice of the returns are distributed across the team. Unlike employee equity in startups, which is tied to company shares, carried interest involves returns from multiple funds over time, making it a long-term investment.

‍Fascinating. Shifting focus to startups, what are the critical things a Head of People should consider regarding compensation practices?

Compensation is one of the hardest topics in the People portfolio due to its interconnected factors—benchmarking, talent retention, performance, budget, fairness, competitiveness, transparency, comprehensiveness, compliance, and flexibility are all things that need to be considered. 

Heads of People should start with the basics: pay equity, competitive market rates, regular salary reviews, and legal compliance. Over time, layering in more maturity, such as flexibility to accommodate diverse employee needs, alignment with performance, and a comprehensive total rewards package.

‍What are some things startups do well regarding compensation?

Startups that compete well in compensation often excel in a few areas:

Cultural drivers: Successful startups are great at clearly articulating an exciting prospect aligned with candidates’ values, and using this as a big incentive in the attraction and retention of talent.

Employee share ownership program (ESOP): Offering employee shares aligns interests with the company’s success and provides financial upside.

Creative perks: While we’re past ping pong tables, successful companies are embracing unique benefits that reflect their company culture.

Performance-based compensation: Tying compensation increases to individual and company performance metrics creates a compelling value proposition. Especially because those joining startups typically do so because of the allure of faster progression.

‍And what about common stumbling blocks?

Early-stage decisions can happen quickly without much process, leading to misalignment with frameworks and challenges for the team further down the line.

Promising roles, titles, and salaries should be avoided as everything changes rapidly in successful startups. Ensuring buy-in from founders and the executive team for established frameworks is crucial for smooth transitions and scaling.

‍What trends or patterns have you observed in compensation practices among some of the startups in Airtree’s portfolio or the industry in general?

Two notable trends are flexible compensation models and a total rewards approach. 

Some startups are experimenting with "choose your own adventure" models, allowing employees to adjust their cash/equity mix. However, this complexity requires careful administration, and fairness in how it’s applied needs to be a consideration.

The total rewards approach includes comprehensive benefits packages—mental health support, financial wellness programs, and flexible time off. Companies doing this well are looking at how they can be holistic and ensure these programs are both valuable and utilised.

If you’re the Head of People at a VC-backed startup, what are some key ways you can look to your VC for support with your compensation practices?

VCs can be invaluable in helping develop foundational frameworks for robust compensation practices. This includes things like job level frameworks, salary banding, and especially the development of an ESOP. Developing an ESOP can be particularly complex, requiring a system that remains effective over a long period of time—so seeking help here is always a great idea.

How are startup compensation practices viewed in the eyes of a VC?

In software companies, salaries usually make up the biggest line item on the balance sheet. It’s also the primary lever for attracting and retaining great talent, making compensation an incredibly important topic. For founders, understanding and controlling this cost, while knowing what competitive compensation looks like, is a critical part of their job.

Looking ahead, how do you see compensation practices evolving in the startup ecosystem?

In light of the current market conditions, we might see more startups offering higher equity and lower cash salaries to preserve runway, with increased use of performance-based bonuses tied to milestones or funding events. There will likely be a continued emphasis on equity, with more frequent grants and a focus on total rewards.

‍What key advice would you give to a Head of People to help them become more capable in wielding compensation for their organisation?

It’s easier to build and iterate good compensation practice from day one rather than reverse engineering it later. Embed it into the DNA of your people strategy. Also, develop a strong relationship with founders and the executive team, presenting initiatives with a commercial lens, focusing on ROI and retention.

‍Any final words of advice?

The Head of People role can be lonely, especially in early-stage companies. Find your people—peers and sounding boards in the community—to bounce ideas off and inform your decisions. Having that network is invaluable.

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