For startups looking to go public – Policybazaar, Zomato, Flipkart, Nykaa, Grofers and Delhivery among others – and used to hiring for tech, product, and supply chain management roles, IPO prep means hiring decisions most founders have little to no experience in.
There aren’t many public-market-ready CFOs in the tech ecosystem in India as there are in the US or China, Shailendra Singh, managing director at VC firm Sequoia Capital, had told ET recently.
The VC firm has built a six people team in India, headed by Piyush Gupta, that is working with over a dozen of its portfolio companies to help them chart their public company journey.
“We are doing the hard work of building those skills, building the foundations, and helping our CFOs get up to speed and learn,” adds Singh.
Often companies put internal talent to the task instead of hiring externally. Case in point, Zomato, set to go public this year, promoted its head of corporate development, Akshant Goyal, to CFO position in November.
However, the market sentiment is often not in favour of new-age startups started by youngsters as they feel these founders haven’t done the “hard yards”. So you need to buy experienced talent to build trust,” says Amit Agarwal, managing partner, Stanton Chase India & Singapore.
Startups are willing to pay a premium to hire financial executives with prior experience of taking a company to an IPO, says Anshuman Das, managing partner at Longhouse Consulting, an executive search and advisory firm. But they also prefer someone who’s from a tech company. And that shrinks the talent pool considerably.
A CFO with IPO experience can command as much as a 50-100% premium, says Agarwal. The annual salary of a CFO could range from Rs 2 crore to 7 crore depending on the company’s valuation, while that of an investor relations manager could go up to Rs 2.5 crore if the startup is looking to list on the Indian stock market.
Salary figures quoted above are in addition to ESOPs offered by the company.
“The ESOPs component varies depending on the company’s valuation and the personnel’s seniority in the company,” says Anuj Roy, managing partner, Fidius Advisory.
“For instance, if the company is close to becoming a unicorn and the CXO has been there for 3-4 years, then the ESOP could be 8-10 times of their salary. For a new hire as a CXO, it can be 4x-5x their salary. That multiplier could go up to 10x for a company with $8-10 billion valuation.”
In relatively younger companies, the multipliers are lower, so CXOs are offered up to 1x-2x of their salary as ESOPs, adds Roy. “The quantum of ESOPs is also dependant on the strike price and vesting schedule,” he adds.
In one case, a newly hired executive who relocated from the US to an Indian startup, valued at more than $10 billion, got 15x their salary as ESOPs, says an executive search associate who did not want to be named.
For startups looking at a US-based IPO, they prefer to hire an investor relations manager who is in the US and understands that market well. “These managers, with prior IPO experience, can command anywhere between $1 million to $3 million in annual salary which includes ESOPs,” says Ashish Sanganeria, senior partner at Transearch, who also leads the talent advisory’s startup and tech hiring vertical.
Some startups are also struggling to rope in women on the board as it’s part of the compliance to have women board members.
Been there done that
In case startups plan to hire externally instead of allocating key roles internally, these hires should be made 12-18 months in advance, says Manish Agarwal, CEO of gaming platform Nazara Technologies that went public this March.
“I would recommend paying a premium to hire a project manager with a prior IPO experience. I stepped in as the project manager in our case and if I had to do things differently, I’d hire someone with prior IPO experience for this job,” he says.
People need to understand that the compliance levels are very different for a public company and set up processes accordingly, says Sanjeev Bikhchandani, cofounder of
(that owns Naukri.com and several other consumer-centric online platforms).
Bikhchandani helmed the company’s IPO back in 2006. “We had developed our own cloud-based ERP (enterprise resource planning) system that allocated the collections over the period of the subscription in line with our revenue recognition policy,” he recalls.
When prepping for the IPO, he was told to get a third party ERP system to audit the firm’s books to make sure there wasn’t any fudging of numbers. “It’s a small change, but took up a lot of time. Having processes in place helps recognise these things early on.”
Venkatraman Narayanan, managing director of Happiest Minds, the IT solutions provider that went public in September last year, says parachuting in for an IPO is not the right approach. “We were set up to think like a public limited company, in terms of disclosure norms, from day one.”