July 27, 2022
By deploying an effective equity compensation strategy, a Colorado-based startup was able to save on costs and motivate team members during challenging economic times.
It’s not an easy time for all companies and businesses right now. There are indicators that we are headed towards a recession. The “Everything Bubble,” as some people call it, looks like it’s about to pop (if it hasn’t already).
Startups, in particular, have it particularly hard. Raising capital during these times is extremely difficult and the funds could run low while the burn rate remains the same.
But when people want to build something, they are going to make it happen. For early-stage startups, recruiting, retaining and incentivizing the right team members is the key to success. Moreover, it’s during these challenging times when having a good company culture is crucial to survival.
Upstock believes that companies can develop a strong culture by motivating team members through the power of equity rewards. When people are given a stake in something, they tend to care about it. They want to see it improve, develop and prosper. The formation of an ownership mindset occurs as a result.
And so, we set out to test our theory by reaching out to one of Upstock’s notable customers.
Sholder is a mental health care startup based in Denver, Colorado who is building a platform to connect their trained professionals or “Sholders” to the people who need their assistance and guidance. Their team of Sholders serve as an empathetic ear to “Sharers” who wish to seek support and confide personal matters.
As an early-stage startup, Sholder is faced with the usual challenge of balancing the founder’s concerns and interest with that of workers and other team members, especially in terms of financial incentives. That is, founders and owners want to save cash while workers and team members want to be adequately paid.
Our hypothesis is that a company with a good equity compensation structure will be able to easily address both “competing” interests. In fact, equity compensation blurs the line of these two different interests and instead unites them into one common goal: the success of the company.
Thus, we worked with Sholder to come up with an equity plan that is aligned with their vision, mission, and needs.
With a good equity system in place, founders are able to offer an ownership stake in the business to recruit and retain excellent individuals to their team. In doing so, they are able to conserve funds and ensure the growth of the company even during economic winters.
On the other hand, workers who understand the true value of equity are more than happy to accept it even if that would mean they would be paid a little less cash. They know that equity is more valuable in the long run if the company succeeds.
This way, a common interest between the founders or owners and their team members develops and worker-company alignment takes place.
We prepared a list of survey questions to Sholder’s team and asked them about how they understood and perceived their equity plans. Based on their responses, Sholder’s team felt more motivated and engaged with their work. Rett Kearbey, Shoulder’s CEO and founder, observed that team members felt a “stronger sense of pride and ownership,” because of their ownership stake in the company.
Heidi, Head of Sholder’s Learning and Development, agreed with this observation, noting that receiving equity makes you “feel like you are part of the company in a more meaningful way than just getting paid.” She also believes that “equity is meaningful in the long run”
Carol, who works as Sholder’s Finance and Operations Manager, mentioned that she wished other startups used a tool like Upstock to “help leverage pay when cash is tight” adding that it “would help with motivation and morale.”
Other team members at Sholder echoed similar sentiments. Chris, Sholder’s Growth Coordinator, feels that having equity in the company has made him “think longer term and stay engaged at a deeper personal level.”
Upstock’s equity system was able to provide tangible benefits to Sholder’s team. With a good equity compensation structure in place, we saw improvements and positive effects in the following key areas:
We believe that this was made possible not just by high-quality equity plans, but also by effective plan communication which ensures that workers and team members are aware of the value of what they are receiving. Upstock’s visual dashboard, for example, allows workers to see how their work contributes to the success of the company
If you want to know more about how you could make equity compensation work for your company too, we’d be glad to assist you. Feel free to reach out and let us know how we can help!