As entries into the crorepati club halves in startups, restructuring claims its new victims
NEW DELHI: For Indians, eight figure pay packages traditionally announced their entry into an exclusive club: This year, its membership more than halved at bulge-bracket startups, where packages are fast dropping a digit to the right.
Technical or operational leaders aren’t the sole victims of restructuring or diminished fund flows to the sector where CXO pay, too, is headed south. Search firms and venture capitalists such as Kalaari and Lightbox told ET that while the number of executives earning more than Rs 1 crore has fallen by as much as 50%, top functional leaders are also being hired at packages up to 40% lower than those of their predecessors. But some critical roles like chief executive officer and technology head continue to command a premium.
“There are clearly two trends at startups. One is that CXO salaries are falling and the other is that talent with crore-plus packages is shrinking by almost 50%,” GC Jayaprakash, executive director at headhunter RGF Executive Search, told ET.
Indian startups are now under pressure from investors to create sustainable and profitable business models. Funding to the sector is getting increasingly linked to the ability of startups to generate profits or provide a credible growth road map built on business viability.
Investor caution is, therefore, compelling more new-age companies to rein in fixed costs, capping hefty pay packages and right-sizing organisational pyramids.
Bengaluru-based search firm Longhouse Consulting said there were about 300 executives earning crore-plus salaries (all cash components) until a year ago. “Now this number has easily come down to less than 100,” said partner Ashish Sanganeria.
Latest headhunting data support the hypothesis. A month ago, RGF closed the search for a vice-president at one of the country’s largest ecommerce companies with a fixed compensation of Rs 1.2 crore.
That compares with the Rs 2 crore paid to his predecessor for leading the web applications division at the startup. “We see the total compensation pie for the top level coming down by at least half this year. As a result, ecommerce players and startups would spend only half of what they were spending for CXO talent,” said Sandeep Murthy, partner at Lightbox.
According to Anirban Gupta, a senior consultant at Aon Hewitt that tracks compensation and rewards for all sectors, there is a downward trend in the number of people with crore-plus salaries.
The next few months will see further moderation in CXO-level salaries: About six to 12 months ago, salaries between Rs 3 crore and Rs 6 crore in latestage companies were common. “We will definitely see fewer people at these salary levels in growth/late stage companies,” said Kalaari Capital partner Sumit Jain.
Companies are also looking at slimming down the organisation at the top to reverse the impact of initial over-hiring. “The current consolidation and cost-cutting would result in the number of millionaires in the ecommerce or startup sectors to come down by 50% in India,” said Venkat Shastry, the partner in charge at the Bengaluru office of Heidrick & Struggles. To be sure, critical technical talent will still be difficult and costly to hire.
“Niche technology talent would continue to be premium hires as there is a dearth of technocrats at the leadership level,” said Kiran Karnik, the former president of Nasscom and currently a director on the board of startup Aujas Networks.
Technical or operational leaders aren’t the sole victims of restructuring or diminished fund flows to the sector where CXO pay, too, is headed south. Search firms and venture capitalists such as Kalaari and Lightbox told ET that while the number of executives earning more than Rs 1 crore has fallen by as much as 50%, top functional leaders are also being hired at packages up to 40% lower than those of their predecessors. But some critical roles like chief executive officer and technology head continue to command a premium.
“There are clearly two trends at startups. One is that CXO salaries are falling and the other is that talent with crore-plus packages is shrinking by almost 50%,” GC Jayaprakash, executive director at headhunter RGF Executive Search, told ET.
Indian startups are now under pressure from investors to create sustainable and profitable business models. Funding to the sector is getting increasingly linked to the ability of startups to generate profits or provide a credible growth road map built on business viability.
Investor caution is, therefore, compelling more new-age companies to rein in fixed costs, capping hefty pay packages and right-sizing organisational pyramids.
Bengaluru-based search firm Longhouse Consulting said there were about 300 executives earning crore-plus salaries (all cash components) until a year ago. “Now this number has easily come down to less than 100,” said partner Ashish Sanganeria.
Latest headhunting data support the hypothesis. A month ago, RGF closed the search for a vice-president at one of the country’s largest ecommerce companies with a fixed compensation of Rs 1.2 crore.
That compares with the Rs 2 crore paid to his predecessor for leading the web applications division at the startup. “We see the total compensation pie for the top level coming down by at least half this year. As a result, ecommerce players and startups would spend only half of what they were spending for CXO talent,” said Sandeep Murthy, partner at Lightbox.
According to Anirban Gupta, a senior consultant at Aon Hewitt that tracks compensation and rewards for all sectors, there is a downward trend in the number of people with crore-plus salaries.
The next few months will see further moderation in CXO-level salaries: About six to 12 months ago, salaries between Rs 3 crore and Rs 6 crore in latestage companies were common. “We will definitely see fewer people at these salary levels in growth/late stage companies,” said Kalaari Capital partner Sumit Jain.
Companies are also looking at slimming down the organisation at the top to reverse the impact of initial over-hiring. “The current consolidation and cost-cutting would result in the number of millionaires in the ecommerce or startup sectors to come down by 50% in India,” said Venkat Shastry, the partner in charge at the Bengaluru office of Heidrick & Struggles. To be sure, critical technical talent will still be difficult and costly to hire.
“Niche technology talent would continue to be premium hires as there is a dearth of technocrats at the leadership level,” said Kiran Karnik, the former president of Nasscom and currently a director on the board of startup Aujas Networks.
