New crypto hires more likely to receive equity than tokens, reveals Variant and USV survey

New hires in crypto are more likely to receive equity than tokens, according to a new survey by venture capital firms Variant and Union Square Ventures.

In an effort to better understand what trends may have emerged during 2023, a year significantly impacted by a market downturn, the two crypto firms polled companies belonging to their investment portfolios.

Drawing from input gathered by speaking to employees at 32 web3 startups, the survey revealed a series of job-related takeaways including: the majority of respondents said the bear market didn’t impact hiring plans; engineers dominate headcount and are better compensated than peers; and companies’ staff are becoming increasingly diversified geographically.

While Variant and USV’s survey paints a fairly optimistic picture, many crypto firms laid off large chunks of their workforce in 2023. High-profile blockchain companies like Binance, Coinbase, Dapper Labs, OpenSea and Chainalysis all laid off staff during the year.

But based on Variant and USV’s report, the hiring and compensation front in 2023 was not all doom and gloom. "The data we’ve gathered suggest that crypto companies didn’t spend 2023 bemoaning the bear market," the survey's co-authors Tom Dils, Calder Zwerling and Matt Cynamon wrote. "Rather, they have used market limitations to further decentralize their operations, experiment with new compensation models, and grow their ranks of engineers."

Here are some of the key takeaways from the survey:

Equity compensation gains popularity

Unlike in the past, when crypto companies tended to compensate employees with tokens instead of equity, now the reversal is true, according to Variant and USV’s survey.

"In 2023 … new hires were three times more likely to receive equity than tokens," the report said. From 2013 to 2018 employees commonly received token compensation, with equity compensation nonexistent, the report also said.

Variant and USV shied away from describing the new compensation method as a trend, but the survey did note the change as significant. "While it may be too early to describe this as a trend, the data suggests that startups are experimenting with new incentive mechanisms that may be less reliant on tokens than in previous crypto market cycles," the report said.

Competition and pay

"Approximately 50% of survey respondents say they compete almost entirely with other crypto startups for new hires," whereas 25% said they compete primarily with web2 organizations, according to the survey. "This suggests that during a bear market, it’s easier to recruit from within web3 than attract first-timers to join the crypto space," it added.

Not surprisingly, with crypto still rapidly developing and becoming increasing integrated, engineers dominate headcount at the surveyed startups, accounting for 50% of staff. The engineers also tend to be paid better than in-house colleagues and their professional peers working outside crypto, according to Variant and USV. "Senior-level web3 engineers earn a 23% premium, and early-career engineers earn 27% more than their counterparts in the general market," the survey said.

Variant and USV also found that generally speaking, when compared to engineering staff, startups carry much fewer marketing and sales professionals. "The relative lack of sales-focused roles is a reminder that web3 is still in its early building phase," wrote the survey’s authors.

Going beyond the US

While 70% of the startups surveyed are headquartered in North America, more than half of employees are located outside the U.S., the report said. Companies retaining workforce outside of the U.S. is nothing new in crypto, but in the last few years the scope of geographic disbursement has increased, the survey found.

Fifty-six percent "of employees hired in 2020 or before 2020 are based in the U.S. But for employees hired in the past three years (2021-2023)," that number fell to 46%, according to the report.