Skip to content

#HighGrowthMatters Spotlight: Head of Research Ryan Denny Shares Advice for Creating a Compensation Program that Scales

| Dec 1, 2022 6:00:00 AM | By

This interview with Ryan Denny, Head of Research at Friends & Family Capital, explores compensation & salary range trends, retention, and economic uncertainty.

This conversation has been lightly edited for clarity and concision.


Tell me about your background and what led you to Friends & Family Capital.

I’ve known one of the founding partners of Friends & Family Capital, Colin Anderson, since I was a freshman in college. Before Friends & Family Capital, he was the CFO of Palantir, so he actually recruited me to be his first finance hire there.

I started building out the FP&A function and team at Palantir, which at the time included compensation analysis, like salaries, bonuses, equity, and over time, that became a larger and larger portion of my day to day responsibility as the company grew. It eventually got to the point where I couldn’t run both FP&A and compensation, so I had to choose.

This was honestly a turning point in my career because I could have chosen to run a team and have status and people reporting to me. I did away with all that and said, "I'll just be an army of one. I want to get my hands dirty and learn about comp." And the rest is history. Compensation is now in my bones. I also worked at Nutanix, which is a public 6,000 person company. So I've seen both the private and the public side.

And then how I ended up at Friends & Family Capital is Colin, once again, reached out while I was at Nutanix and said, "Hey, I want to get the band back together. Do you want to be our fourth employee?" Normally I'm more risk averse than to join a four person company, but in this case it was an obvious yes. I'm no longer running compensation on the day to day, but we definitely like to help our portfolio companies think through compensation as they grow. I attend OpenComp’s webinars regularly to stay current and on trends, so it's very much a passion of mine.


What trends are you seeing in your space when it comes to people related topics?

Absolutely. Excited to highlight a few. Of note, when it comes to compensation, each situation is obviously different. Even down to the individual, company, state, country, industry level. For this entire conversation, I am sticking at a 30,000 foot level, and would encourage folks to check details of their specific situation before implementing anything discussed here.

What I've noticed globally is that legislative bodies are getting a lot more interested in compensation and benefits and making sure that employer practices are fair and transparent. We first started to see this in the UK and Europe with some gender wage gap reporting requirements. This was probably several years ago at this point, but it’s now starting to percolate throughout the rest of the system.

Now, NYC and Colorado (and California and Washington as of Jan. 1, 2023) have passed mandatory salary range laws. If you go to Indeed and look up a salary range, say a role like a controller in San Francisco, you’ll see job listings, but they won’t tell you how much they’ll pay you. In Denver, every single listing has to show a minimum and maximum salary range. This wasn’t the case a year or two ago.
Now, you're also seeing retirement plan mandates. About half of the states in the United States either have active or pending legislation requiring, usually companies with five or more employees, that they offer retirement plans or have employees participate in the state provided plans. And you're seeing startups like Guideline and Human Interest pop up to address this challenge.

I expect to see a lot more of this around the world as more governments, at the state, local, and national level, start to see what others are doing and maybe want a piece of the pie. The great example with the retirement plans is there were a couple of early movers and then all of a sudden every other state is saying, "I want to provide this kind of thing. I also want to look good for my constituents."

Don't be surprised if the dominoes start to fall with salary ranges, too. Colorado and NYC are your leaders. Now predicting the future is notoriously difficult and never perfect, nevertheless I wouldn't be surprised if half the country in five years time has requirements, maybe even the whole country.


What’s a top challenge you’re noticing across the board when it comes to compensation?

At Friends & Family Capital, we’re focused on investing in private companies and typically they’re at the growth stage or earlier stage emerging leaders. In the traditional sense, startups don't typically pay “competitive” salaries from a cash perspective. A lot of it's going to be equity based. It's usually stock options and you're thinking in terms of basis points of your company and not so much in terms of a dollar value of an RSU.

Up until recently, I’ve felt like small growth companies have been very underserved by compensation solutions. That's another trend though I am seeing, is that in the last few years, we've seen a lot of new entrants into the compensation space, OpenComp being one of them, as a great data provider. We're also seeing platforms that help run better compensation reviews for smaller companies that may not have the resources to run something like Workday.

I also think there's less institutional teaching or understanding at smaller companies as far as helping them establish mature compensation practices. They aren’t sure of the right time to implement job levels, when it’s the right time to switch from options to RSUs, or how their cash and equity mix should evolve as they scale.

That’s where I think solutions like OpenComp come in and say, "Well, we now have a consortium of different startups that have your size or have been on the same journey in the last few years, and so we now have a data set that you can leverage." I think it's a very exciting space to watch, and I love keeping my eye on compensation solution providers that are starting to scratch this itch that for years have been neglected.


From your perspective, how important are the people who work at your portfolio companies, and what role does compensation play in motivating them?

People are your most important asset. That sounds cliche, but let’s use OpenComp as an example at about 50 or so employees. That means that in many teams and roles, you've only got one person doing that function. So if you get the wrong person in that role, that whole function is going to stagnate and each subsequent person you eventually do hire into the role is going to learn from that first person. They're setting the example, the tone at the top.

So making poor hires in early roles that build out their own teams their way can at best push your growth out a couple years as far as the revenue you want to achieve, and at worst, it could sink your company. So people are extremely important.

In terms of motivating and retaining them, obviously compensation is a big one and for typically early stage companies, they’re “cash poor” in the traditional sense. People join these companies because there are other levers you can pull. One obvious one is equity. Typically, what I see in the equity world is that earlier on in a company's life cycle, options are a far better motivator than RSUs. The difference being that options by definition are worthless on day one because their strike price is supposed to be what the option is worth today, what the company is worth per share. So the only way to get any value is to grow the company. So that attracts builders, types of people that are interested in building a company. They accept that it's worthless today because they know they can help build it into something huge. They believe in the mission, they believe in the growth story.

As a company matures and reaches a higher private valuation, you often see the flip to RSUs. The positive for employees here is that you have certainty in your compensation day one, albeit with ownership of less equity. A negative for the company is that this shift in risk and reward can, I believe, sometimes attract people who are more comfortable keeping things at the same level or slightly larger because RSUs are inherently worth something today. There is no strike price. So whatever the stock price is times your units, that's how much value you're vesting per year.

So options tend to be a great way to attract people that just want to build and they're motivated by your mission. And then mission, that's another thing that I think is a huge motivator early on. This is more subjective. So people can disagree on what a company's potential is from a growth potential, but at the end of the day, once it reaches that point, it's all math. That's what your options are worth.


We know that Q1 tends to bring a lot of movement in the talent market. What advice are you giving to your portfolio companies as they look to retain employees?

I think it's transparency, and I don't mean pay range transparency, I mean transparency around your company’s growth story and goals. As we’ve mentioned, salaries aren’t likely going to be the lever that retains talent at early stage companies. That means employees need to be convinced that their equity is going to be worth a possibly life changing amount one day and they need to believe your company’s story.

Part of this is an art rather than a science of understanding your story over the next several years and how you’re going to get there. Each employee needs to buy in early on in the company’s life that the reason they’re working long hours for arguably reduced market cash compensation and the reason they’re not going to Google or Meta or wherever for much higher cash is because they believe your company is going places. So if you're not doing that, that's table stakes to keep people at your company.
I also think there’s an employee-level story of who they are as individuals, and what their growth story is within the wider company growth story. If you’re a larger company, maybe you do have job levels and you’re able to help people understand what level they’re currently at and what their promotion track looks like.

If you’re at an earlier stage, this might look a little different. I like this analogy I used to use at Palantir when thinking about folks that are leading a team or near the top of their department, which is to imagine we’re on an island that’s rising up out of the ocean. I don’t expect them to climb higher on the island, they’re already pretty near the top. But the point is that it’s growing and they’re now going to be responsible for overseeing all this land beneath them. They don’t really have to go anywhere, just stand there, do their job, and if we’re all doing it correctly, the island is becoming a mountain rising out of the ocean. So don't expect promotions, we can't promise them those. But what they have to believe is that this is a growth machine and that maybe today they have one direct report and then five years from now they might have a hundred. So they need to be bought in both from the company's story of evaluation, but also either promotion track or why they’re going to have a lot more responsibility in five years than they do right now just by staying put and doing their job.

And I think as an employer, if you nail both the macro company growth story and the micro personal growth story, I don’t see why they wouldn’t retain somebody. If they’re truly bought in, then that is as much of a handcuff as you can put on somebody to keep them around.


What advice are you giving to your portfolio companies as we continue to navigate uncertainty in the tech market?

Uncertainty is affecting everybody right now. It's not like it's singling any specific company out and I'd actually point out that just a few weeks ago, Elon Musk shot a note out to his Twitter employees that he plans to let go up to half of them and they have 7,500 employees. So that's 3,000, 4,000 people that are pretty talented and tech savvy that are about to be out in the market looking for work. Similar announcements have recently come from Meta, Stripe, and Snap.

So it cuts both ways. This uncertainty now means that you have all these people you can go out and start to recruit that are probably pretty ticked off and ready to roll up their sleeves and prove that they are really worth something. So there's a lot of opportunity to be had in uncertainty. But sure, uncertainty is going to mean a rocking ship as you go through this ocean. Not always going to be puppies and rainbows.

I think being transparent about not only your goals and your successes with your employees, but also sharing where you're falling short. Be honest and direct and share that information quickly, say, "Hey, we fell short in these areas this quarter, we're not thrilled about it but I think we can recover by executing on these things." Also ask your employees input, "What do you think we should be doing to recover from this?" You'd be surprised what answers you get when you ask your ground troops that are closer to the problems what should be done.

And lastly, I will say that we're noticing markets right now are starting to reward profitability and cash flows as much as growth, and they're starting to scrutinize high cash burn a bit more. So being mindful of your monthly burn and your remaining months of liquidity I think is more important now than it was a year ago.

This also might mean you do need to raise more money and it's not at a higher valuation like you were used to a year or so ago. You might need to extend a round and take in money at the same valuation as you did six months, nine months ago, even a whole year. But this is happening all over the public markets, too, it's not a shameful thing. If you need money, you need money and you might need to be more creative about the terms you're willing to offer than you were maybe nine months or a year ago.


About Friends & Family Capital:

Friends & Family Capital is a venture capital firm that backs entrepreneurs that transform big markets. The firm’s founding partners helped scale Palantir to $20 Billion (CFO from 2011 to 2017) and jointly backed over 20 Unicorn startups. Friends & Family Capital invests in business models that produce long-term and defensible compounding growth and cash flow. Core investments include Airtable, Anduril, Facebook, Figure, Flexport, Gusto, Mosaic, Palantir, Robinhood, SpaceX, and Verkada. For more information, please see




Lexie Sirak is a Senior Campaigns Coordinator at OpenComp and previously worked at JPMorgan Chase & Co. She pens the monthly High Growth Matters Spotlights. Connect with her on LinkedIn here.