2023 Crypto Salary Report: How to Calculate Salary, Equity, and Tokens?

By Zackary Skelly and Chris Ahsing

Compiled by: Frank, Foresight News

cryptocurrencyThe industry is developing rapidly, but industry salary data is very scarce, especially comprehensive analytical data, which may become a key stumbling block for crypto startups seeking strategic growth. Therefore, the annual salary survey conducted in this report is to fill this gap.

In short, this report will provide a more granular dataset on crypto salaries and hopefully provide a clear picture of salary trends in the crypto industry in a way that is easy to understand and useful to anyone setting, negotiating, or trying to understand salaries (whether it’s hiring teams, candidates, or industry observers).

Demographic information records

The analysis in this report is based on a survey of 49 portfolio companies conducted in 2023. Based on available data, the overall trends are presented. While further research with a larger sample size will help confirm these trends, we suggest interpreting the survey results based on the listed respondent response rates and the following points:

• Role: Cryptography Engineering is a role focused on protocols orBlockchainDevelopment engineers, "marketing" includes sales, marketing and business development, and compensation reflects total target income including commissions;

• Reporting Methodology: We asked companies to select a preset salary range among employees at different seniority levels so that we report the average minimum and maximum salary range. However, for founder compensation, we used the median value based on free responses in the survey;

• Founder shareholding: The founder's compensation is mainly for the equity owned / Tokenpercentage, and no distinction is made between the two;

• “International” definition: “International” refers to companies that are not located in the United States.

• Definition of “non-traditional”: Companies that receive non-traditional financing have either publiclyTokenSales, either DAO;

• Rounding: Some figures (e.g., demographic information) may have very small errors due to rounding;

Salary, equity and token compensation ranges

Here are the salary, equity, and token compensation ranges for different employee roles, broken down by U.S. and international companies: software engineer, crypto engineer, product manager, product designer, and marketer.

Compared to international companies, the U.S. has higher compensation for almost all roles and seniority levels. On average, U.S. companies have roughly 13% higher compensation and about 30% higher equity and token incentive programs.

Some interesting data and outliers:

• Equity and token programs for product designers at international companies are closer to U.S. data than for other positions;

• Product manager positions at international companies have significantly higher equity compensation across the hierarchy, which is unique among all positions;

• Executive/director level salaries and equity in marketing departments at international companies are higher than similar positions at U.S. companies;

Observations on robustness and reliability:

• Observations on compensation: The data shows that compensation for different roles and seniority levels is generally reliable, especially for comparing U.S. and international markets;

• Observations on equity and tokens: While data on equity is relatively reliable in the U.S., data on token compensation may be more reliable, especially for international data and at lower seniority levels;

Founder Salary

As expected, founder compensation increases as companies raise more funding, while equity/token ownership ratio decreases, likely due to stake dilution.Most founders report being paid below average before their Series B round.

The lack of international data at the seed, B, and C stages makes it difficult to compare founders of U.S. and international companies. However, it is interesting to note thatWhen comparing seed and Series A rounds, U.S. founders typically receive slightly higher compensation, but significantly higher equity ownership, especially at the seed stage.

Cost of Living Adjustment and Methodology

Most companies do not adjust salaries based on cost of living (COL).

Among companies that have adapted, we’ve seen two common approaches:

• Adjust based on local market prices (a very popular approach);

• Or within a tiered geographic framework. With this approach, a company first determines a salary benchmark from a specific location (usually a very competitive area) and then adjusts each person's offer by a certain percentage based on geographic tier (sometimes determined using a radius from a major metropolitan area). This is intended to balance internal pay equity with external competitiveness across different regions.

Companies that do not adjust compensation based on cost of living, and who generally view their compensation as strictly tied to the value someone creates for the company, regardless of where they are located, will continue to have a competitive advantage in terms of hiring speed and attracting top talent. That being said, we always encourage companies to consider the most sustainable way to build a high-performing team within their budget.

The team may also decide not to make a cost of living adjustment for reasons of fairness in overall purchasing power between different parts of the world; not everyone living in a high cost of living area can afford to give up their lives and move to a cheaper place to benefit from the cost difference.

We assume that we will see more of a middle ground in the future, where some companies will shift from cost of living to labor cost adjustments, which you can think of like this:

• Cost of living: “We will adjust your salary based on local market rates in your area”;

• Labor costs: “We will adjust your salary based on the demand for your position in your area”;

For example, some remote areas of Texas may have a lower cost of living, but since petroleum engineers are in high demand there, this would drive up the salaries for those positions.

There isn’t enough industry data out there to easily adopt labor cost adjustments (especially in crypto, such as demand for protocol engineers in a specific city/country). However, many compensation experts and data providers are considering this model, and we do think teams can benchmark and adjust for more standardized/generic roles.

Having real-time salary and hiring demand data is key, and it can be helpful to supplement it with data available in the market and salary data you collect from candidates. We may explore trends related to this in our next salary survey, although we haven’t seen many teams take this approach yet.

In summary, we expect recruitment strategies to differ depending on the role: e.g.If you are hiring for a non-differentiated engineering role (e.g., a general front-end engineer), you will pay this candidate an adjusted salary; however, if you are hiring for a globally competitive differentiated role (e.g., a Solidity engineer), you may want to pay strictly based on the value of their work.

Ultimately, this comes down to the hiring dilemma we often discuss: speed, cost, and quality. At any given time, you may only be able to optimize two of these three factors.

When it comes to adjusting for cost of living, both U.S. and international companies show similar proportions, though international companies are slightly more likely to adjust using the local market rate approach.

Of all the companies surveyed, 75% recruited outside the United States, regardless of size, stage or financing.

U.S. companies that recruit only domestically are less likely to adjust for cost of living—perhaps a potential statement about the competitiveness of the U.S. hiring market and the relative stability of cost of living compared to international locations. For U.S. companies that recruit internationally, it’s a 50/50 split.

All internationally located companies hire outside the U.S., and most do not adjust for cost of living.

Companies tend to hire less outside the U.S. at later funding stages, however, it’s worth noting that the majority of respondents for this particular analysis were based in the U.S.

While most companies adjust for local market rates, infrastructure firms (which all recruit internationally and are among the largest and best-resourced companies in the survey) are most likely to use a more intensive, stratified geographic approach.

There’s a clear trend here: most companies won’t adjust for cost of living in their early stages, but as they mature, they become increasingly likely to do so.

Seed and pre-seed companies with 1-10 employees are less likely to adjust for cost of living, which allows them to be more competitive in hiring becauseBuilding a solid core team at this time will have a profound impact throughout the company's life cycle.

Additionally, they may lack the operational expertise or resources to deploy more complex compensation structures and budgeting strategies, and may not recruit in as many locations.

The increase in the likelihood of adjusting for cost of living is particularly pronounced over time when looking at company size.

Paying local market salaries is preferred at almost all company sizes, stages, and funding levels, suggesting its appeal as a fair, competitive cost-of-living adjustment approach (and the easiest approach other than temporarily dealing with “undefined”).

Be aware that once you decide which course of action to take, it is difficult to reverse a cost-of-living adjustment decision and maintain fairness, and doing so can impact employee morale, perceptions of fairness, and your company’s brand.

Payment method (legal currency andcryptocurrency)

In most cases, companies pay salaries in fiat currency.

International companies are at the forefront when it comes to paying with cryptocurrencies, such as USDC, especially when it comes to paying international employees. Regardless of location, U.S. companies are more likely to pay contractors with cryptocurrencies than employees; they are also more likely to pay international employees with cryptocurrencies, regardless of whether they are employees or contractors.

Companies often use cryptocurrency payments internationally to simplify cross-border transactions, mitigate exchange rate fluctuations, and/or take advantage of tax benefits in certain jurisdictions.rightXiaobai NavigationCryptocurrency payments are also useful for companies with employees spread across regions with limited banking infrastructure or that require privacy, such as companies with anonymous contributors.

As cryptocurrency regulations and the legal distinction between employees and contractors continue to evolve, global payroll providers like Liquifi are simplifying adoption by building compliance into their services and natively supporting cryptocurrency transactions, and we wouldn’t be surprised to see this have an impact over time.

Possibility of company owning tokens

Of the companies in our portfolio that are strongly considering tokens, only 14% have explicitly stated that they will never launch a token.

International companies are more inclined to adopt tokens, have tokens or plan to launch them. While some companies are uncertain about future plans, none of them completely ruled out the possibility.

U.S. companies have had more diverse responses, likely given the regulatory environment, with fewer companies owning actual tokens, more teams hesitant about their plans, and even more choosing not to adopt tokens altogether.

Overall, infrastructure companies are leading the way in token adoption, with more than three-quarters of them either having a token in use or planning to launch one. These companies are likely to use tokens as base currencies (especially L1 and L2 Blockchain).

Gaming companies followed closely behind, highlighting the growing importance of tokens for in-game assets, currencies, rewards, incentives, gated content (special content that requires tokens to unlock), and occasionally governance. The DeFi space also stands out, with tokens tied to its governance, staking, and rewards business models.

Consumer-oriented companies showed initial interest, often integrating tokens into more traditional business models, while the “other” category saw a great deal of uncertainty.

While the data generally suggests that companies are more likely to plan and launch tokens as funding, stage, and size increase, these factors do not add up to a simple narrative.

Smaller startups, especially those at the seed stage, with funding between $1 million and $4.9 million, are interested in exploring tokenization, but few are launching tokens at this early stage. As companies grow in headcount and raise more funding, there is a clear uptick in token launches, especially at the Series A and B rounds.

Companies that raised $20-40 million are a special case where they are actively planning to launch a token, but none of them have actually launched a token. They are in the Seed, Series A, and Series B rounds.

For the largest companies, with more than $40 million raised and more than 100 employees, participation in token activity is significantly higher. An interesting counterexample is the hesitancy of Series C companies; they may be reflecting on how a token fits into an already mature product, or considering using a token in a new project/venture.

Relatedly, of all companies that raised more than $40 million (the highest funding range in the report), 75% are focused on infrastructure development, an area that is inherently capital-intensive and often integrates tokens into their products.

Token/Equity Compensation Plan

Companies typically offer compensation in one of several ways: salary plus equity, tokens, or a combination of the two. When planning compensation or evaluating offers, it is critical for founders and candidates to consider how the company will generate value and whether that value is reflected in tokens or equity.

Nearly half of the companies only give out equity as compensation. However, it is important to note that most of the companies that said they might launch a token in the future (but are not sure yet) currently only give out equity, while all projects with tokens in use give out tokens as part of compensation. It is important to consider that those companies that are uncertain may eventually change their minds.

We’ve seen other reports suggesting that fewer and fewer companies are offering tokens as compensation over time, and we were curious to see how this would pan out as we accumulated our own data.

There is a portion of both US and international companies that offer a combination of equity and tokens as compensation. Beyond that, however, preferences differ:More US companies only issue equity, more international companies only issue tokens(As mentioned before, international companies seem to be more gravitating toward tokens in general).

While infrastructure companies are the most likely to have or plan to launch tokens, most infrastructure companies only issue equity, rather than only tokens or a mix of the two.

The DeFi space (another area where tokens are more prevalent) follows a similar trend, though compensation approaches are slightly more balanced. Gaming companies show a strong preference for offering both equity and tokens,It is worth noting that no gaming company only offers tokens.

All consumer and other types of companies either don’t know if they will launch a token or ultimately plan not to, so it’s understandable that the vast majority of companies only offer equity.

Looking at factors such as funding amount, company stage, and company size, we note the following:

first,Early-stage startups primarily use equity incentives, but as companies receive more substantial seed funding, their compensation strategies will diversify.

At the Pre-Seed stage, we see that all companies only offer equity incentives (as mentioned before, all Pre-Seed companies surveyed did not know whether they wanted to launch a token). A few companies that raised $1 million to $4.9 million in seed rounds began to offer token incentives, but overall, they are still mainly equity-based incentives.

Companies that raised between $5 million and $19.9 million are typically still in the seed stage and have more than 10 employees. Overall, more companies are offering token incentives, and more often offering a mix of equity and tokens.

Second, as the number of employees grows, companies are often more inclined to offer both equity and token incentives.

The relationship between tokens and equity

Most companies offer tokens that are proportional to equity (which may indicate that they are using the "token ratio" calculation method described below).

U.S. and international companies show a balanced distribution of token-to-equity ratios, but with a slight preference for proportionality.

The preference for proportionality is also relatively balanced across company types, with infrastructure companies and "other" companies accounting for an equal share.

Smaller teams at an early stage (seed round, 1-10 employees) tend to be more likely to have a proportional split of equity and tokens (however, this trend is not consistent across all funding levels at early rounds).

As the firm grows, the preference for proportional relationships moderates, and no clear dominant strategy emerges.

Token calculation method

In a previous article, we researched and outlined the methods companies use to calculate the number of tokens issued to employees. This report is not intended to be a thorough exploration of the best methods, nor does it cover all methods.

That being said, the most common and well-defined methods we see are:

• Market value based: Teams with active tokens use this method to first determine the total dollar value they intend to offer to employees. Then, they calculate the number of tokens to be awarded based on the fair market value of the tokens at the time of calculation, grant, or vesting. In the mentioned article, we observed that most teams prefer this method because it is simple and easy to implement. However, we recommend using this method with caution, as the value of token grants can fluctuate wildly due to market fluctuations, resulting in discrepancies in the token market cap table. In this sense, tokens are somewhat similar to public stocks, but they lack the same protections and stability. It is not common for teams without active tokens to adopt this valuation method. Typically, we see them relying on verbal agreements to promise future tokens based on equity distribution ratios. Another method is to perform a market value calculation for the fully diluted value of future tokens locked up by the venture capital firm. Considering that the token price of the venture capital firm is fixed, this provides a fair basis for compensation before the token is publicly available (interestingly, we have not heard of any company doing this);

• Token Proportional: This approach attempts to mimic the way traditional startups calculate equity-based awards. It is the only approach that takes into account market volatility and mitigates employee pay inequities, while minimizing unnecessary token dilution and preserving asymmetric upside for employees. Effective use of the Token Proportional approach requires diligent planning, which should ideally begin at an early stage. In summary, you can use the same allocation ranges you use for equity and adjust based on the specifics of your tokens, ultimately awarding a fixed percentage of the pool of tokens;

“Other” approaches may include annual grants, performance-based bonus structures, sliding scales between equity and tokens, and indefinite approaches.

In summary, most companies use the “token ratio” approach.

There are obvious differences in geographical distribution.The US team prefers to use the "token ratio" method.

There are also differences in preferences for token calculation methods across industries: gaming and other types of companies prefer a “token ratio” approach, while infrastructure companies prefer a market value-based approach.

As financing sizes and amounts of funds raised increase, more and more companies are adopting a market value-based approach.

The “token ratio” method is mainly used by seed round companies and companies with financing amounts of less than $40 million. The market value-based calculation method is more popular starting from Series A, especially in companies with 21-50 employees, and more common in Series B and companies with more than 100 employees. It is worth noting thatCompanies that raised more than $40 million tended to use a balance of market value-based calculations and other less explicit methods.

We recommend that early-stage teams use a “token ratio” approach. While we intuitively understand why later-stage teams might prefer a market value-based approach (e.g., once a token price is established, its price may be less speculative and more data from time-weighted or volume-weighted averages may be available; or it may give them more flexibility with their remaining token reserves), we are working with teams to understand the reasons for this trend.

The article comes from the Internet:2023 Crypto Salary Report: How to Calculate Salary, Equity, and Tokens?

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