The Birth of a New Industry: “CompTech”
CompTech is finally here
2019: my first surprise encounter with compensation
I have always been a personal finance nerd.
Mega Backdoor Roth IRA conversions, ISOs vs. NSOs, the best kept credit card secrets, you name it.
These hidden tricks of the fintech world were my bread and butter topics for an endless number of passionate lunchtime debates.
So, it was no surprise that in October 2019, I found myself running around the streets of San Francisco with a friend attempting to sell a “Mint 2.0” style app to any customer who would listen. Unfortunately, companies told me they weren’t interested in “yet another PFM app.”
But, they said we were close:
“Matt, it’s pretty close to something that really pisses us off. None of our employees understand their stock options. Can you help?”
The next day, powered by a strong cup of black coffee and a tingle of excitement, I sent a blind email note to 200 tech executives. 100 VPs of People and 100 VPs of Finance. No product, no company, no idea what to expect. Just a simple proposition that startup employees were confused about their compensation.
“Stock options are confusing and stressful. Agree? Lament to me about your frustrations for 30 mins. And maybe, just maybe, I can help…”
Funnily enough, this moment was ground zero for “CompTech.”
58 calls booked in 24 hours
A week later, I looked at the stats. I couldn’t believe what my eyes were seeing in HubSpot. 58 scheduled calls from 200 blind emails.
This was the first magical sign of a deep, suppressed energy in the field of compensation. I was officially intrigued. What could have elicited such an energetic market response?
Turns out that the emotional pit of customer pain was markedly deeper than just the simple problem of “stock options are confusing.”
Across all 58 conversations, it became abundantly clear that compensation was stuck in the dark ages.
Companies were spending painful days (sometimes weeks!) each year pulling data from their disparate HR systems just to be able to participate in old-school compensation surveys hosted in spreadsheets that become outdated the moment they were submitted.
Then, another set of archaic spreadsheets were being used to run painfully manual merit cycles.
And the end result? Candidates and employees alike were left bewildered about their total comp.
2020: the cataclysmic cries of Covid compensation complaints
By the time we announced our Series A in late 2020, the labor market was in a state of disarray and anxiety.
Let’s not forget about the roller coaster that had just left us gasping for air...
First came the abrupt global Covid lockdown of March. Sequoia called it The Black Swan of 2020. Shortly thereafter, the public markets crashed and we endured the largest rounds of concentrated layoffs since The Great Depression. Unemployment rates peaked at 14.8% in April.
And then...the markets quickly recovered, VC activity came roaring back, and we re-entered a surprising hiring frenzy.
But it was different this time. Compensation wasn’t the same.
By the time Summer of 2020 rolled around, remote work was a norm rather than an exception to the rule. What did that mean for companies? A stressful list of questions with no right answers. For example:
Should companies pay employees based on an individual’s output, independent of geography? Or should compensation be adjusted to a localized cost of living?
All companies had a different philosophical take, but there was one common denominator.
Everyone was talking about compensation with an unprecedented frequency and fury.
People suddenly cared more than ever about compensation, and spreadsheet-driven comp surveys were still glaringly stuck to 2019 data.
But still no “CompTech”. Not yet.
2021: the birth of a new industry
We have made it to Summer 2021. We are teetering against the end of a Covid lockdown era.
And compensation is now a topic of discussion at Board meetings for every company in the world. The Great Resignation is a real threat to companies as we enter the most competitive labor market the world has ever seen.
But it is no longer only the problems of the ecosystem that are at the forefront of discussions. To our unbridled delight, we have entered a new wave of compensation innovation fueled by companies, VCs, and organizations of all stages and sizes.
At last, our cries of a broken compensation ecosystem are being taken seriously.
Over the last 7 months, north of $100M (and counting!) of Venture Capital financing has been directed towards compensation tools that address a variety of compensation-related pain points.
And so, it is no surprise that over the past month, several industry leaders and publications have reached out to me with independent proclamations of a term I had never heard used before this summer...
We are no longer stuck in the “Compensation Dark Ages”.
A light has been turned on, and a new era of innovation has abruptly begun.
Welcome to the birth of a new industry.