Over the last decade, we've seen a dramatic shift in the way people work. The concept of a traditional workplace has evolved from a physical office to a remote one. The average tenure of a tech employee has reduced from three years to 18 months, and with the current downturn, it's expected to shrink even further. With the end of the zero interest rate environment, companies are now more focused on managing their operational expenses. This means that employers want to limit salaries, benefits, and become even more reliant on AI-powered tools. They also want more flexibility in their OPEX, meaning more contingent labor.

In this ever-evolving landscape, Deel has positioned itself to be a big winner. This HR startup helps companies to manage their global hiring, payroll, and compliance from one centralized platform. They enable businesses to hire and onboard contractors and freelancers in 150 countries, taking care of all the compliance, payments, and tax obligations. As the world moves towards more contingent labor, Deel's platform provides a one-stop-shop solution for businesses that want to hire globally.

However, this shift to contingent labor could be bad news for knowledge workers. They could find themselves squeezed with fewer benefits, intermittent work, and fewer stock options. The truth is, being a contractor isn't all bad, but traditional staffing firms (and Deel) are often poor employers. Contractors are not really part of a team, and their benefits and salaries impact the bottom line for shareholders in these companies. Ultimately, the onus of staying employed falls on the worker.

The market is moving towards a dynamic team, with a small contingent of highly valuable persistent employees and an army of contractors that employers can dial up and down. This will shake out in two ways: Most knowledge workers will either be employed by a few large contingent employers that are driven by delivering shareholder value, or they will be organized into worker-owned staffing coops driven by delivering value to coop-members (workers).

Deel is tapped into all of these changes and will be a big winner in the move towards more contingent labor. They, along with other traditional staffing firms that leverage new tools, will play a significant role in shaping the future of work. However, it remains to be seen if this shift towards a more dynamic team will be good or bad for knowledge workers. The future of work is here, and we must adapt to it.

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48% of tech workers are now remote, so I know the prospect, as a long time remote employee, of going onsite to an office for 4-5 days a week for 8+ hours isn't what you want to hear, but that's not the only or even the most important workplace trend that will unfold as we exit the current downturn.

#1 Growth companies will be mostly onsite

There are a few things going on with growth companies and I say growth companies because companies that are looking to grow quickly and are expected to make venture returns have unique timing challenges. Speed of execution is the only true advantage for a startup. It really is everything until you capture a market or manage to become cash flow positive. The move to remote during Covid highlighted to a lot of founders and managers the challenges in aligning and driving teams when they are 100% remote. Talking to other founders, many commented that remote work is lonely and startups are hard. Success is harder to see and celebrate, while failures are all too obvious. This, I believe, is leading to burnout where team members either quit for a break or leave for another company just for a sense of change. This is not tenable for a startup where the team needs to be bought in, executing, and connected with one another on vision.

Not all growth companies are the same, and some products and teams are uniquely situated to operate remotely, which I believe is a competitive advantage, but the vast majority of products and teams will need to colocate their talent in either one or a set of offices to keep execution speed up and the team bought in.

#2 Growth companies are going to add less headcount

Cheap capital allowed growth companies to solve their challenges through more people. This led to large teams and drove up compensation across functions as the talent pool was limited. Going forward, growth companies will be onsite AND they will be smaller teams. Growth companies will leverage more tools going forward, either APIs for their core product or productivity tools to leverage the team they have (think GPT applications). Expensive capital will force growth companies to be more thoughtful about what they are adding to their operating expenses and will solve problems first through tools and only when necessary by growing the team.

#3 Contractors and services will be the new normal

Startups are already starting to rely on service companies for recruiting and finance. Going forward, I think it will be abnormal to build full HR/Finance functions, instead hiring heads of these departments (or key personnel necessary for the business) and then rely on outside services and products to take care of the reporting and fungible, non-strategic work. For instance, a HR function in the future might be just a few people even at a large startup, with those in-house people managing a host of service providers and contractors to make their function work.

In the longer term, the reliance on contractors and service providers will expand to strategic functions.  The current agencies and independent contractors are not well suited for plug and play product development, but there will be an opportunity here and new companies will fill the void as startups look to manage their opex across growth spikes and product development cycles.

The benefit to startups using contractors and services is that they can expand and contract to meet the needs of the business, without having to rely on costly hiring and lay-off cycles.

#4 Remote work will be mostly contract work

This pairs well with item #3. Where do we go with remote work? I don't think companies will make drastic changes to their policies, but as they experience execution challenges they will hire onsite and slowly move away from their remote workers. As these remote workers roll off, they will want to stay remote, and will be able to pick up contract work either through an agency or independently. Companies will be more willing to take on a remote contractor that has a different cost structure when on contract, than allowing full time members to remain remote.

As stated above, half of the tech workforce is remote. I don't think that will change. The relationship with the entity that employees you will. Less full time, more contractors working remotely.

Summary

These are big changes that will not unfold overnight. We still have a lot of layoffs coming and a lot of insolvent tech companies will go under as they fail to raise additional capital. The companies that can figure out remote while not sacrificing execution speed will be at a distinct advantage, as access to top talent will be a strength. However, most companies will build colocated teams augmented by tools, services and contractors to be successful.  As we come out of this downturn we'll see these trends unfold.

While change is hard, there is a lot of opportunity in this shifting dynamic. There is a world where the gold standard of being a full time employee will have competition with a new way of working; persistent remote contract work. The opportunity is in unlocking the power of a fungible, easily accessible talent resources that startups will need but is also serving the needs of top talent that wants to work remote, but have the same benefits and opportunity as a full time employee.

I left Triplebyte last week after almost 2 years of transitioning the company from a Hired-clone agency model to a Linkedin competitor: The Linkedin for Engineers. It was a great experience and I got a chance to work with passionate people on a problem that I deeply cared about.

Leaving Triplebyte was both sad and invigorating. When I began exploring options in the market, I realized that things had changed. Back in 2019, when I joined Triplebyte, it felt like talent communities were in the decline.  Many of the top competitors in the space had struggled, pivoted, or shutdown. Triplebyte was one of the few companies able to raise a good deal of capital to keep the dream alive of finding everyone, or at least engineers, a job that they loved.

This go around it was like a new world. Talent communities of every stripe had popped up. This confirmed what I knew deep down that this was an important problem and community was the way to solve it.

With that said, most of these companies are pretty early in their journeys. I know that they are facing problems: problems that I had faced. Problems that others in the business have been facing and solving over the last 10 years. Ultimately, I could only go to one company yet I wanted to stay in connection with the great folks I met through my job exploration.

That's why, today, I am announcing the creation of our own community; A community for Talent Market Makers. This is a place for talent marketplace leaders to congregate and learn from each other to solve the thorny problems that every talent marketplace faces.

This community has been deeply influenced by the Retied from Hired alumni community that has existed on Slack since 2015, when we had our first regrettable attrition. Retired has been a wonderful place for past colleagues to connect, share what they are up to, find new opportunity and feel like they are still a part of a culture that for many felt was the pinnacle of their careers.

Talent Market Makers is different. It is for the operator, and for that I have learned from the Operator's Guild, another great community that spans organizations and allows for those in the field to lean on others to find resources, solve problems and connect with peers they would have otherwise never met.

My vision for Talent Market Makers is to create a tight knit community like Retired oriented at solving real problems in talent marketplaces like the Operator's Guild does for predominately SaaS companies.

If this sounds like you, head over to TalentMarketMakers.com and sign up. We are currently admitting anyone that has prior operating experience (even if it was in the past) in a talent or labor marketplace. Looking forward to seeing you there.

Marketplaces are very much alive, especially those that intersect talent and opportunity. Venture Firm NfX has a nice breakdown of the modern mature marketplace, which they call a "Market Network". Here is their blogpost on the topic.

Essentially, a Market Network has three components: Community, Marketplace and Tools. They feed off of each other and maximize the value of network effects, creating a great market opportunity and defensible mote.

Many of these Market Network have Talent as a key component of at least one of the marketplace dynamics they are looking to monetize and add value for both the community and their customers.

One key miss in many of these marketplaces, is in how to think about their big P "Product". In many software firms, where many of these founders come from, software is the product. Things that are human-heavy get lumped into an "other" bucket, sometimes living in a revenue function but most of the time silo'd into ops.

This is a mistake. Revenue is revenue and all companies that have paying B2B customers need to host those functions under one leader focused on B2B. Ops stuff doesn't belong in that org, even thought structurally those teams share some of the same challenges.

So where does Ops live in a Talent Marketplace? It's product. It's product all the way down from sign-up flow to successful transaction, including all of the humans that may be in the process.

Many product managers may be reticent to take on large human teams even if they are integral to the product experience. Talent Marketplaces need to find PMs that are willing to own Ops orgs and are committed (goaled) in achieving increasing marketplace success, NPS and efficiency across both software and human touches.

By integrating the Product and Ops orgs into a single structure, the big P "Product" will better be able to achieve scale and unit economics that make sense for the business and in doing so create an integrated product experience that will drive higher NPS, retention and word of mouth for their talent community.

Product at a software firm can be focused on software. But product in a Talent Marketplace, where value resides in transactions, connections or hires, needs to have purview over both the in-software experience as well as the human touches necessary for the marketplace.

Make sure this is baked in early. Only once a marketplace is scaled and the minimal set of necessary human components have been identified and codified into process can a B2C customer support or success org be split off from product and run separately.

The classic Silicon Valley success story starts at the seed-stage. A few people, in a garage in Palo Alto or unheated warehouse in Soma, working on ramen wages and dreams of a big equity pay out. It's part of the lore and part of the appeal of tech and startups generally.

The hard truth is that joining a seed-stage company is almost never a good idea financially speaking. I think the risk that founders take in starting a company is typically well compensated for, but the same cannot be said for early employees.

With that said, there are a lot of other reasons to join a seed-stage company, but equity needs to be fixed to ensure early-stage companies have access to all the talent they need.

Look: I don't want to be the Series B, recruitment tech exec ragging on seed-stage startups. I know how hard it is to hire great people at any stage, but especially at the seed stage.  The goal of this post is to start a conversation on how seed-stage startups, as a whole, need to think about seed-stage employee equity compensation. Seed-stage companies lack cash and need equity to be a motivator for talent. We need to fix it and make it compelling again.

Here are the problems with treating seed-stage equity the same way we treat equity at all other stages of startup growth:

1. Grants are too small: Even 1% of equity at the seed-stage will get heavily diluted before there is an exit. Moreover, the risk at seed-stage, where product market fit is still a pipe dream requires much higher equity compensation for the founding team.
2. Vesting doesn't make sense: It is very rare for a startup that is successful to have the same need for the generalist talent from their seed stage at the Series B+ stage. 4 years to vest just does not make sense for early employees and does not accurately recognize their valuable early contributions. Moreover a 1 year cliff also does not line up with early contributions by employees in the early days, some of whom may not make it the full year for reasons out of their control.
3. 3-months to execute options post-termination is too short
4. 10-year time period to execute options, whether employed or not, is also too short.
5. Executing large grants of equity is costly and risky for employees
6. Onerous terms to liquidate your equity: Some companies don't allow for individual secondary sales. You can only sell some of your shares if the company's board allows it, which is arbitrary.
7. On top of product and execution risk, there is corporate oversight risk when the board only consists of founders or where the board is defacto controlled by only the founders.

Let's think of a rosy case: You picked the right seed-stage company! You raise an A and have some product market fit. You've just been diluted 20% and maybe just hit your cliff for your first 25% of equity. Your role changes, now you aren't a generalist but need to be shoe horned into sales or customer success. Series B comes around, yeah!  More dilution, another 20%. Now the new VP of Revenue needs to hire true sales people. Specialists. That isn't you. You get laid off in a strategic around of lay-offs. You now have 3-months to execute your options. Lets say you did get a big grant, maybe its 20-50k you need to lay out to buy your options. What do you do? Moreover, if you do hang on, most companies wont have an exit for at least 7 years. That's the mean, some (like the most successful) might not have an exit for 10+ years. You are going to need to execute your shares before there is liquidity.

Right off the bat, even if you happen to pick a winner, which is hard to do at the seed stage, there are a bunch of compounding factors that limit your ability to capitalize on the success of the company.

First, I don't think equity compensation is totally broken.  I think the way things are work pretty well for some Series A and most all Series B+ companies. I don't think at those stages things are really broken. Those companies also tend to pay much better than seed stage companies, so the equity is less of a factor. You have less risk because you are being paid real money as a base salary.

Second, I'm not a lawyer. I'm not even really a HR professional. Changing the way things are done will be hard and very costly for individual companies. We need what YC did with the SAFE: An open source, legally vetted set of documents for seed stage specific equity.

Finally, to riff-off of the first point: The ideas below are perhaps only ideas valid for your first employees. Those you hired right after seed up until you are raising or have raised a Series A. We need to solve for the very early risk-reward imbalance, not for all employees ever hired by the company. What I propose is a special set of terms just to attract top talent to the seed stage and reward them appropriately.

Solving for the size of grants:

A standard equity pool at the seed stage is maybe 7-10% of the company and it is almost never full utilized. You need space on the cap table to hire people, so blowing all of your equity is rarely sensible. A few folks will get 1%, most will get less than a .5%.

First proposal: Double the size of the initial equity grant pool and, likewise, double the average grant size for early stage employees.

VCs have to get on board with this to make it happen. In effect, it means less equity for founders and for the early VCs, but by creating materially larger grants, you will increase the ability to land top talent, while preserving cash, and increasing the chance of execution success. That is worth the cost.

Solving for vesting:

Early stage employees are living in a fast developing ecosystem. Every day matters. What happens in the first year, determines whether the company can raise another round and be successful. Equity should vest according to the value the employee is delivering at the crucial time they are delivering it.

Second proposal: Seed-stage employees should cliff at 6-months and grants should be vesting over 2 years.

VCs and founders will have to agree to larger grants that vest earlier which means more real equity will be going out the door. As with the first point, this will create better incentives for those first employees to join, de-risk the chance that future growth will limit their ability to stay at the company and earn their full grant.

Time to execute options post-employment:

The standard 3-months to execute options post-termination means that many employees will have a short window usually at still an early, risky stage of the company to execute their options.  Executing options takes real cash and is a real investment with real risk.

Third proposal: All seed stage equity grants should have a minimum of 7-years to execute their options regardless of whether they are employed or not.

This has already become fashionable at top companies in the YC network. It should be standard for at least all seed stage grants.

Time to execute options:

We have already seen some companies, like AIRBNB and Palantir, take a long time to reach a liquidity event with some employees who are still with the company reaching the 10-year mark on their initial equity grants.

Fourth proposal: Seed stage employees should be guaranteed a secondary sale after 5 years or have their initial grant reissued in full for another 10 years.

The above companies did right and were able to offer a secondary sale to early employees before their grants expired. It should be baked in early to communicate clearly to employees that their early stage grants will have a chance to be valuable if the company is successful but requires additional time for an exit. There are legal considerations that could be solved here (ISOs have a legal requirement of 10-years maximum to be executed). In lieu of government action, startups should be creative so that these arcane rules don't impact their early employees.

Executing equity options cost real money:

If you are early and you got a large equity options grant, you still need to fork over the strike price to take possession of the common shares.

Fifth proposal: Companies should provide a vesting bonus to account for the cost of executing their shares as well as for the tax consequences of the share execution to employees who make it to the end of their grant or who are terminated before the end of their grant in good standing with the company.

The tax costs are real money, but the cost to execute the shares goes right back into the coffers of the company when they are executed. Some employees will choose not to execute and just take the cash, in effect getting the 409a valuation of their shares as compensation for their early contribution. In those cases, the company still gets the equity back which will likely be more valuable than the cash bonus.

No right to sell equity on the open market:

Many companies do not allow their employees to sell their equity outside of board sanctioned secondary sales. This means that early employees are forced to have material wealth locked up in equity they have no control over.

Sixth proposal: All seed stage employees should be allowed to sell their equity at-will with limited and previously enumerated limitations of who they cannot sell to (like a competitor).

I get that the board and C-level want to have clean cap table, but I think this completely disregards the needs of the early employee to realize value from their earlier forgone wages. Perhaps this consideration is only for early employees to limit the impact on the cap table (which will likely be just 10-20 folks), but allowing for employees to actively seek buyers for their equity will greatly increase the perceived value of early-stage equity.

Adequate board oversight:

Early companies typically have informal boards, which can impair the fiduciary responsibility of the board to ensure the company is being run with appropriate oversight.

Seventh proposal: Early stage companies should have balanced boards made up of 50% founders and 50% current employees or investors.

Boards are tricky and can slow down execution. At the early stage, there are benefits to having few people being able to make decisions and move quickly. With that said, boards need to provide oversight and in lieu of external board seats that constitute at least 50% of the voting board members, early boards should be augmented with senior non-founder employees with 1-2 year term limits.

There are implications to all of the above and some things may literally not be possible. Going with the kitchen sink will have consequences that are unforeseen and could cause issues with the viability of the company. With that said, seed-stage equity needs to change. Seed-stage employees are foregoing cash compensation and taking on serious risk for the privilege of joining something new.  They need to be more adequately compensated with better equity terms, while being modestly de-risked.

If we can change seed-stage equity grants, will have access to better talent and more startups will be successful. More early-stage employees will be able to leave and start their own companies creating fertile ground for more innovation. It needs to happen or else the FAANGs and other behemoths will suck up the best and leave founders with only the scraps, when what they need most in the early days is the best to succeed.

We can fix this. I needs to be fixed.

The people in every organization I have been in have had some recalcitrance to saying what is on their mind - especially publicly.  Tools like TinyPulse and Lattice try to create ways to give feedback anonymously, and that is useful. All feedback is useful. But feedback is most useful when it is vocalized face to face.  Then a conversation can happen. The more people in your organization speaking their minds the better the decision making.

Why do people fear speaking their mind?

There is absolutely a power dynamic at play. That is something management needs to be good about acknowledging in order to create a transparent, risk-taking culture and I wont get into that in this post (though it is very important). Beyond that, and the crux of this post, is a misunderstanding of what the expectations are for folks in the decision-making phase vs the execution phase.

So why are some employees celebrated for being contrarian and others are seen as renegades? It comes down to when the employee is pushing back and then ultimately in how that manifests in their execution. Understanding when decisions are being made and when they have already been made (and it is now time to execute) is key to understanding the distinction.

Before going forward, I want to state, that differentiating decision making and execution is a skill and knowing how to be a persistent contrarian in decision-making processes is a super power. It is not necessarily intuitive. So while the concepts can seem easy, in practice they can be tricky to apply, but learning these skills is a must for management and other strategic roles.

Decision Making

First, let's talk decision making. Making decisions is very important, especially for small companies. In a small company, changing tack is pretty easy, but hesitation is deadly (as I blogged about a while ago in "Does your organization make decisions?"). In all organizations, decisions need to be made in order to move forward, but startups specifically need to make decisions more than they need to make the right decisions; if that makes sense.

Decisions can be big or small. Top to bottom or bottoms-up. They can be the color of a button or the purpose of your organization. All of these decisions need to be made, with the bigger the decision typically having a longer decision making cycle and often require more people to be involved.

As an employee, it is key to understand when the room is in a decision making phase. In this phase, it is incredibly valuable to be a voice of dissent, even as just a 'devil's advocate".  This input can help shape the decisions being made and help the organization make better decisions. This can be a super power for an employee and can quickly garner notice from the top of the organization and lead to promotions into management or other strategic roles.

Decisions need to be made. Decision-makers in a company are doing their best to make decisions with the data available to them. Often times these decisions are wrong.  It's important to keep prospective and know that the most important thing is that decisions are being made, communicated and executed on.

Communication

Without the right communication, nothing happens. The tricky thing about communication is that in the early days (when the organization is small) communicating decisions is pretty much free.  Decisions are made as a company, and context is easy to come by. As an organization grows, communication becomes more costly. It is not uncommon for decision-making to be the easy part and communicating the decision being the hard part (and requiring more time and effort to do well).

While working remotely, it makes sense to regularly document and share out decisions using Slack or email. Once you are back in an office, make sure to start putting rigor around communicating decisions whenever you add a layer of management.  Every layer of management will require additional effort to communicate decisions.

Execution

Once the decision is made, it is time to execute on that decision. With a lot of decisions being made, you will often need to "disagree and commit" which is an essential tool for any executive or strategic leader. Dissension is key in decision making but alignment in execution is 100% necessary for a functional organization. As organizations get larger it becomes more common than not for any given employee to be executing on decisions that they don't 100% agree with. That is okay and as organizations and remits grow, providing input into many decisions but deciding on few of them is to be expected.

When the organization is executing it is no longer productive to debate the decision that was already made. Down the road, once something has been tried, the decision-making window opens back up and a new path may be set, but while in the execution phase, not following through on the decision means that the decision was never attempted and the desired learning and output from that decision will be unlikely to materialize. With many folks in an organization, some executing and some not, the organization will flounder and eventually fail. This is the most common type of organizational dysfunction.

I want to note that within executive teams or leadership circles, it is not productive to harp on past decisions made by a colleague. Chronic poor decision making is noteworthy and should encourage exploration by leadership, but I want to caution against introducing conservative decision making or decision-making paralysis by persistently criticizing decisions already made. Disagree and commit means letting past decisions go and looking toward the present and future.

During the execution phase, the focus is on execution, driving alignment and learning.  Anyone in an organization can help in driving alignment. In organizations that have recently grown or where the team fabric is just being knit, there will be gaps in the communications of decisions. In this case, identifying these gaps, seeking answers and proactively sharing information on a decision will help drive alignment during the execution phase. This type of behavior is highly valuable. Also, while executing, think about feedback as objective reporting: Removing any priors, and focusing on dispassionate observation or "What am I witnessing right now?"  That will feed into future decision making.

Where relationships between employer and employee get fraught is in the Execution phase: A decision has been made, and for whatever reason, the individual is not able or willing to carryout that decision. Sometimes this is a failure to communicate, and assuming the best intentions of others is the best first course of action. But in cases where communication can be ruled out, then the individual is likely misaligned with the decision and by extension the organization. To an observer, this may appear as if their colleague is just voicing their dissent, but what is actually of concern is a lack of execution on a decision already made.

Many times, a failure to execute by an otherwise competent employee is a conscious or subconscious recognition that they no longer believe in what the organization is doing or the direction it is going in. To anyone experiencing this, that's okay! That happens all the time. If that's the case, talking through a way to exit is the best course of action for everyone involved.

Take Aways:

1. If your organization isn't making decisions, thats a red flag.
2. If there is a decision being made, speak freely.
3. When a decision is made, execute your face off regardless of whether you think it was the right decision.
4. Help drive alignment and provide observations (stated as facts) about what you are seeing during execution.
5. Repeat 2-4.

Hope this helps! Bring on the dissent and then let's all get down to executing.