Although 2024 was a rollercoaster for private and venture-backed companies, conditions were trending upward as we headed into the new year.
The Federal Reserve slashed interest rates three consecutive times in the fourth quarter, venture funding increased slightly from 2023, and 72% of North American CFOs surveyed by Deloitte predicted a better economy in 2025.
For many companies that avoided IPO discussions in 2024, liquidity now feels within reach as they begin to consider an IPO as part of a 12-to-18-month plan.
These are all signs of a more favorable marketplace, which allows companies to focus on growth and opportunity rather than stretching runway or working through layoffs and hiring freezes.
Things are looking up, but there’s no guarantee. Just look at the recent market shakeup from AI startup DeepSeek — things will shift quickly.
But despite the general positivity coming into the year, we can’t ignore the lingering uncertainty about the economy and its effects on the tech industry. Many of our clients want to know, are we really past the rocky times? Or will it be another year where companies must do more with less?
No matter which way the market and economy turn, it’s always a good idea to check your compensation plan to make sure it’s performing at its best. Here are three tips to help your company stay agile and resilient in 2025.
Understand Where You’re Getting the Biggest ROI
Make sure you have a strong handle on the elements of your compensation plan so you know where you can adjust, if necessary.
Start by evaluating base salary, incentives, and equity vehicles, and revisit your goals for each. Where are you seeing the strongest return on investment? For example:
- If your merit budget was designed for retention, are you seeing those results?
- For annual incentives, are your plans self-funding, and are they effectively rewarding performance?
- Are you using equity grants wisely — motivating high performers in critical roles while considering both vested and unvested equity to avoid non-productive burn rate and little return equity overhang?
Once you’ve identified the areas where you’re seeing the most value, decide what elements you can trim or adjust to ensure your compensation package remains sustainable.
Finally, follow up by measuring whether your changes delivered the desired outcomes.
Use Reliable Compensation Benchmark Data
If you aim to design your compensation program around competitive market data and a target market position, be aware that not all compensation data is reliable.
Only use high-quality data that accurately represents the market you’re targeting. Make sure it includes companies of similar size, industry, funding stage, locations, and other factors relevant to your business.
How can you tell high-quality data from data to avoid?
Bad data is typically free. This kind of data is often crowdsourced, unverified, and compares roles by title only. It fails to consider variations in duties, required experience, and job levels across companies. Worse, it’s usually managed by engineers and data scientists without compensation experience.
In contrast, high-quality data is evaluated and refined by compensation professionals who understand the complexities. Yes, this level of diligence comes at a cost. But when you pay for data, you’re paying for experts who prioritize data integrity, analyze trends year over year and quarter over quarter, and recognize that compensation benchmarking is both an art and a science.
Don’t Treat Equity Like Cash
When cash is tight and companies are conscious of their runway, they tend to lean heavily on equity to attract and retain talent. But even in uncertain times, it’s important to grant equity thoughtfully. If you’re a private company, don’t treat equity like cash.
Unlike annual incentives that are based on company performance, individual performance, or both in the previous year, equity is about someone’s expected future contribution to the company and should be used to drive loyalty and retention.
When employees don’t understand their equity grants, companies just grant them more, putting their equity pools at risk. Instead, invest in educating employees about equity and the potential value of their awards.
Bring it back to ROI — mindfully grant and communicate about your equity program and you’ll get more value from it.
Building a Compensation Community
At Sequoia, we believe community is key to building a sustainable compensation database. To see the latest compensation data from our community of tech companies, download Sequoia’s 2025 Compensation and Equity Trends Report.
And if you’re curious about how your compensation plan measures up, our compensation experts are ready to benchmark your strategy against our latest data.