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2008 Compensation & Entrepreneurship Report in Information Technology

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Data in this report produced in collaboration with Professor Noam Wasserman of Harvard Business School

2008

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Interview

Founders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 2008 Compensation and Entrepreneurship Report in Information Technology

Summary of Results . . . . . . . . . . . . . . . . . . . . . . .4

Letter to the Industry . . . . . . . . . . . . . . . . . . . . . .3 About the Sponsors . . . . . . . . . . . . . . . . . . . . . . .67
Data in this report produced in collaboration with Professor Noam Wasserman of Harvard Business School. For more information on his work, please see founderresearch.blogspot.com. Carlos A. Riva, President & CEO – Verenium . . . . . . . . . . . . . . .18 Clinton W. Bybee, Co-founder and Managing Director – ARCH Venture Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 President/Chief Operating Officer . . . . . . . . . . . . . . . . . . . . . . . .28

Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Chief Technology Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

Head of Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

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TABLE OF CONTENTS

1

Head of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

Head of Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

Head of Business Development . . . . . . . . . . . . . . . . . . . . . . . . . .52

Head of Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

Head of Professional Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64

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Our continuing inspiration for this survey is to respond to our clients’ requests for better access to reliable, comparable compensation data to assist them in the critical decisions involved in attracting, motivating and retaining key executives at private companies. Over the years we have been able to present the correlation between executive compensation and a number of variables, including financing stage, company size both in terms of revenue and headcount, founder/non-founder status, industry segment, and geography. We have also been able to provide a number of analytics on how an organization evolves with additional financing, Boards of Directors compensation and make-up, and a granular view at company equity plans.

Lastly, we would like to express our gratitude to Associate Professor Noam Wasserman of the Harvard Business School who, in addition to utilizing the data for his own research (more at http://founderresearch.blogspot.com), continues to contribute greatly to our publication.

We are pleased to present the 2008 edition of our Compensation and Entrepreneurship Report in Technology. This Report, our ninth annual version, includes summaries and analysis of compensation data collected from more than 340 private companies located throughout the country in the following six industry segments: Software; Communications; Hardware, Semiconductors and Electronics; Services, Consulting and Integration; Community, Content and Information Providers; and a new category in 2008, Clean Technology. The survey data was collected between April and June of 2008.

Our survey has evolved over the years based on input received directly from the industry, and our hope is to continuously improve our data so that we can best serve the needs of our clients in the Technology industry. In that regard, we encourage readers of this publication to submit comments and suggestions to help us most efficiently and accurately present the compensation dynamics of the market. Suggestions and comments should be directed to Mike DiPierro of J. Robert Scott (mike.dipierro@fmr.com).

The Report also includes interviews with Carlos Riva, a serial entrepreneur, who describes his experience as a founder and leader of multiple organizations, and Clint Bybee, a prominent venture capitalist in the Advanced Materials sector.

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LETTER TO THE INDUSTRY

3

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Headcount by Number of Full Time Employees (FTEs)

• The 2008 report provides aggregated results of the data as well as a deeper examination of the population by a number of perspectives, including: financing stage, founder status, geography, headcount and company revenue.

Demographics of Respondent Population Financing Rounds Founder Status

• This survey of executive compensation in privately held Technology companies was conducted between April and June of 2008. The questionnaire resulted in 342 complete responses with data from over 1,600 executives in a wide cross section of industry sectors, geographies and stages of development.

• Companies are divided between those that have received one or fewer financing rounds, two or three rounds of financing, and those that have raised four or more rounds. As in previous year’s editions the detailed breakdown by financing round shows a concentration of respondent companies at the early stages of development, though there was a slight uptick in the percentage of organizations having raised three rounds.

SUMMARY OF RESULTS

B

Head of Technology/CTO

1-20

Head of Engineering 21-40 41-75 76+

President/ COO

CEO

CFO

• 31% of the executive population this year were founders of their company, up slightly from 28% of the population in our 2007 edition.

• Companies with 20 or fewer FTEs again make up more approximately one-third of the population. This year’s survey included an increased number of mid-sized companies in the 41-75 FTE range, 25% of respondents, up from 20% in 2007.

• CTOs and CEOs were the most frequent founders of their companies, comprised of 58% and 56% founders respectively. In total number, the CEO is the most frequent founder.

Headcount by Number of Full-Time Employees (FTEs)
115 49 64 81 20 86 60 36

Pre-money and 1 Institutional Round 191 137

78

Financing Rounds
78 2 www.compstudy.com
2007

KEY:

88 3

2008

190

129

43 4

102

Founder/Non5 or more rounds 55 153

Founder Status
23 California 184

111

2008 Compensation & Entrepreneurship Report in Information Technology New England 25 64 MidAtlantic 47
NonFounder

KEY:

Geography
16

12%

16%

7%

10%

6%

123

Business Segment
49% 29 85 3

Midwest

Founder

CleanTech

IT Services/Consulting/ Systems Integration

Computer Hardware/ Semiconductors/ Electronics Content/ Information Provider

Software

53

West

49

Founder

Non-Founder 9

South

48

52

Geography

Business Segment

• California and New England dominate the population of companies, closely mirroring venture capital funding trends and similar to our previous editions.

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SUMMARY OF RESULTS

Communications

PreRevenue

74

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Human Resources

Head of Sales

Company Revenue
Up to $5M 140

• Software companies again were the most common segment comprising just under half of the respondents. Computer Hardware, Semiconductor, Electronics companies were next largest with 16% of the response. A CleanTech category was added in 2008 and drew 6% of the responding population.

• Survey respondents continue to lean heavily toward early stage revenue companies with 62% of participating companies generating less than $5 million, compared to 64% last year.
$5 – 10M 52 $10 – 20M 39 $20M+ 37

Company Revenue

California New England Mid-Atlantic Midwest West South

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This data compares 2008 compensation date with compensation data for 2007 non-founding executives. 2007 figures are represented with both actual bonus received and total unachieved target bonus for the year. 2008 bonus figures indicate at-plan target amounts.

• Within prior year bonus figures, we have distinguished between actual received and target amounts. Breaking the bonus apart in this way demonstrates that on average executives earned approximately two-thirds of their target incentive compensation in 2007, nearly identical to the figure from 2006.

Cash Compensation – 2007 and 2008

• Average base salary across all positions increased overall at a steady 4.7% rate from 2007 to 2008, repeating closely the rise in 2006-2007 base salary from last year’s edition, 4.6%.

13% 30%

43%

31% 32%

4%

Head of Technology/CTO

• The Head of Human Resources and CFO saw the largest percentage increases in base salary, 7.2% and 5.2%, respectively, year over year.

SUMMARY OF RESULTS

B

• Overall bonus targets as a percentage of base salary did not change materially from 2007 to 2008. There was a slight decrease in target bonus for the Head of Sales, dropping from 63% of base salary in 2007 to 59% in 2008.
10% 18% 29% 14% 18% 34%

Bonus as a Percentage of Base Salary – 2007 and 2008
15% 9% 24% 19% 44% 74% 59% 83% 11% 19% 70% 84% 29% 20% 21% 68% CFO CFO

226 236

29 69

KEY:

102

2007 2007 2007 7

178 183

55

Unachieved Target Bonus Actual Bonus Received Base Salary 58 157 165 10 28 49

www.compstudy.com

Total Cash Compensation
162 170 23 30 2008 2008 57 Target Bonus Base Salary 156 163 14 24 39

40%

84%

Executives Eligible for
68% 84% 58% 79%

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Technology/CTO

Head of Human Resources

Head of Sales

Head of Engineering

President/ COO

CEO

CFO

Head of Technology/CTO

Head of Engineering

President/ COO

CEO

Head of Engineering 10% 14% 24% 23% 9% 29%

President/ COO

CEO

– 2007 and 2008
160 167 30 70 98 18 30

Bonus – 2007 and 2008
73% 25% 29% 23% 23% 90% 13% 12% 12% 63% 68% 160 166 91% 48

2008 Compensation & Entrepreneurship Report in Information Technology 157 165 82% 31 33 66 105 113 85% 11 15 28 13 33

20% 32% 12% 36%

70%

20% 13% 13% 53%

Where Companies Locate Talent
77% 22% 15% 19% 45% 73% 27% 15% 16% 42% 90% 24% 19% 15% 42%

148 156

45

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SUMMARY OF RESULTS
143 2-6

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Technology/CTO

Head of Human Resources

Head of Sales

Head of Engineering

President/ COO

CEO

CFO

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Human Resources

Head of Sales

0-1

27

Company Age (Years)
19% 17% 26% 38% 6-10 114 Other

7

22% 16% 12% 51%

21% 14% 14% 50%

Referred by Other Executive Referred by CEO

Referred by Investor

10+

58

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Human Resources

Head of Sales

8

Head of Technology/CTO

Head of Engineering

President/ COO

CEO

CFO

Head of Technology/CTO

• The average CEO severance package is 7.4 months. The CEO, President/COO and CFO each have a median severance of 6 months, while the rest of the non-founding positions surveyed have a median severance of 3 months.

Head of Technology/CTO

6.00

7.40

Head of Engineering

President/ COO

CEO

CFO

Head of Engineering 6.00 7.19 6.00 5.44 3.00 4.68 3.00

President/ COO

CEO

CFO

• Incentive Stock Options continue to be the most common form of equity granted in the companies surveyed, accounting for 47% of the aggregate equity given. 58% of respondent companies rely on stock options as the sole equity vehicle. This figure is down significantly, however, from our 2007 report where 82% of companies utilized options.

Equity/Option Grants at Time of Hire Equity Holdings Severance Packages

• At the average, the non-founding CEO receives a 5.40% grant to join the company, as expected, the highest of the positions surveyed. • Outside the CEO and President/COO, the non-founder Head of Technology holds the next highest average equity percentage at 1.53%. • 64% of non-founder CEOs have a severance package, down slightly from 67% in our previous survey. Between approximately one-quarter to one-third of the remaining management team has a severance package. • The combined 10 positions surveyed in this report hold on average 15.68% of the company, down from 17.13% in our 2007 edition.

SUMMARY OF RESULTS

B

5.00 5.10

5.40 5.76

1.00 1.50

KEY:

2.58 2.88

www.compstudy.com
Median

1.00 1.01 0.90 0.94

Equity/Option Grants at Time
Average

Severance Packages (Median
1.00 1.53 1.00 4.85 1.41

1.00 1.19

Equity Holdings
1.00 1.32

Median Vs. Average (%)
1.00 1.00 1.21 3.00 1.20 0.90 0.91 0.90 0.92 3.00 3.92

of Hire Median Vs. Average (%) and Average in # of months)
4.33 3.00 1.00 1.23

2008 Compensation & Entrepreneurship Report in Information Technology 0.06 0.24 0.10 0.27 3.00 0.40 0.30

1.00 1.05

0.60 0.75

1%

2008
3%

13%

7%

A

4.82

3.90

3.00 2.89

64%

41%

Executives with Severance Package
4% 4% 4% 14% 4% 8% 64% Only Restricted Stock Only Common Stock Both Options None Stock and Options

2007
7%

14%

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Human Resources

Head of Sales

8%

SUMMARY OF RESULTS

Equity Vehicles Used
47% None

Only Incentive Stock Options

Only Incentive Stock Options Only Common Stock Both Options Both Stock Stock and Options Only Restricted Stock

Only Non-Qualified Stock Options

Only Non-Qualified Stock Options

9

34%

27%

25%

33%

30%

26%

19%

17%

Head of Professional Services

Head of Business Development

Head of Sales

Head of Marketing

Head of Human Resources

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Technology/CTO

Head of Human Resources

Head of Sales

Head of Engineering

President/ COO

CEO

CFO

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Human Resources

Head of Sales

10

• Founding CTOs see a dramatic effect on equity holding as financing rounds increase, decreasing from 17.1% in companies with one or fewer rounds raised to 7.49% in those with 2-3 rounds of financing.

Organizational Structure by Financing Round Equity by Financing Round
• For just 33% of those companies in the latest financing stages, the founding CEO remains in control.

• 96% of companies surveyed from the earliest stage of financing reported a CEO, with 79% of those CEOs being founders of their companies. This is a slight increase from last year’s edition where 92% of companies in the earliest stage of financing were led by a CEO and two-thirds were founders. • In companies having raised one or fewer rounds the average founding CEO holds nearly one-third of the company’s fullydiluted equity. After 2 rounds of financing, this reduces to an average of approximately 18%. • The CFO is the most frequent addition as a company moves from one or fewer rounds raised to two to three rounds. Just 30% of companies at the earliest stage have a CFO, jumping to 66% at companies with 2-3 rounds raised.

FOUNDERS

B

17% 79%

KEY:
CEO

17.00 36 95

37% 58%

22.05

63% 33%

2007 2007 2007

15%

26%

Target Bonus Not Received Actual Bonus Received Base Salary 14% 11% 10% 15.43 29% 26% 58% CFO

190 197

88

180 191

9.00 27 86

President/ COO

Organizational Structure by Financing
www.compstudy.com 4% 8% 4% 2.00 24 38 3.24 74% 26% 38% 42% 6.00 20 56 2008 2008 Head of Technology/ CTO 8.91 27%

Equity Holdings
38% 31% 32% 6% Head of Engineering 4.60 31 50 6.22 49 45% 16% 55% 5% 52

Target Bonus Base Salary

108

154 159

42

156 165

Cash Compensa
154 161

1 or fewer

Head of Technology/CTO

Head of Engineering

President/ COO

CEO

CFO

Head of Technology/CTO

CEO

Head of Engineering

President/ COO

CFO

1 or fewer

1 or fewer

1 or fewer

1 or fewer

4 or more

4 or more

4 or more

4 or more

4 or more

2-3

2-3

2-3

2-3

2-3

Round (Founder and Non-Founder) – Founders
35% 9% 8% 2% 3.00 47 83 Head of Sales 7.45 77 49% 78% 15% 4% 10% 5% Head of Marketing 2.50 12 43 7.19 43 38% 49% 25th percentile 15%

2008 Compensation & Entrepreneurship Report in Information Technology 4% 7% 4.00 23% Median 35% 14% Mean
Founder

KEY:

tion – Founders
166 170

Head of Business Development

KEY:

KEY:

150 159

155 166

11 54

6.31 50

Median

10% 17% 16% 1% 1% 1% Head of Human Resources 0.30 6.20 10

75th percentile

NonFounder

Average

Head of Professional Services 2.20

8% 15% 21% 3% 1% 4% 7.23 60

107 112

148 160

43 64

Founder Head of Technology/CTO – Equity by Financing Round
2-3 ≤1 4+ ≤1
2.00 2.00 3.00 3.00 4.55 8.00 5.00 5.94 4.00 6.00 7.49 8.25 10.00 15.00 17.10 22.32

Founder President/COO – Equity by Financing Round

Founder CEO – Equity by Financing Round
2-3 2-3

A
≤1 4+

4+

5.40 2.50

7.10

6.00

10.00

FOUNDERS

9.00

13.03

1 or fewer

1 or fewer

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Human Resources

Head of Sales

Head of Professional Services

Head of Marketing

Head of Business Development

Head of Human Resources

Head of Sales

1 or fewer

1 or fewer

1 or fewer

4 or more

4 or more

4 or more

4 or more

4 or more

2-3

2-3

2-3

2-3

2-3

15.63

16.00

18.60

11.21

18.13

22.00

18.00

30.00

22.00

24.18

31.51

40.00

11

33.00

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He is a board member of Impinj, Innovalight, Cambrios Technologies, Xtera Communications, Nitronex and Aveso. Mr. Bybee is an organizing member of the Texas Venture Capital Association and currently serves as its first President.

ARCH VENTURE PARTNERS

Previously, Mr. Bybee worked with ARCH Development Corporation. He also managed a venture investment fund for the State of Illinois and was a production engineer with Amoco Corporation. Mr. Bybee holds an M.B.A. from the University of Chicago and a B.S. in Engineering from Texas A&M University.

Mr. Bybee has helped organize and finance numerous companies including MicroOptical Devices (acquired by EMCORE), Cambrios Technologies, Aveso, Innovalight, Intelligent Reasoning Systems (acquired by Photon Dynamics), Semprius, Nanosys, and Xtera Communications.

Clinton Bybee is a co-founder and Managing Director of ARCH Venture Partners. Mr. Bybee concentrates primarily on advanced materials, electronics, semiconductors, photonics, and infrastructure businesses.

CLINTON W. BYBEE

Co-founder and Managing Director

INTERVIEWS

B

Clint: Not at all! I went to the University of Chicago and when I arrived, there was a new group that had been formed about a year earlier called ARCH Development Corporation. It was formed by the Trustees of the University with a mission to commercialize technologies emanating from the University of Chicago and the Argonne National Laboratory, which the University operates for the Department of Energy. Aaron: How was that different from a technology transfer office?

Clint: It was set up differently. It was set up as a private company. ARCH Development Corp. was a not-for-profit, 501(c)3 company whose sole member was the University of Chicago. The trustees set it up that way because they wanted to be able to put the proper incentives in place and knew under a traditional academic structure it would be difficult to hire a real business person who could have some skin in the game. That was the innovative piece of ARCH Development Corp. It was set up with a high level mission to commercialize technology and included an incentive to start companies as the preferred means of commercialization.

Clint: I was an engineer. I studied engineering at Texas A&M and went to work as a production engineer with Amoco, which is now part of BP. I worked in the Permian Basin. Those were tough times in the oil business — rapidly declining oil prices, lay-offs, tough economic times. The good news for me was that with all the lay-offs, I suddenly found myself with a huge amount of responsibility. Even when you cut half of the engineers, you still have lots of operating challenges, and I received an exponential increase in responsibility. I left Amoco about three and a half years later. The lay-offs were regular and I had an opportunity to take a voluntary severance package that I planned so I could head off for business school while still getting paid. Aaron: Not a bad deal.

Aaron: How about starting with you walking me through your life before venture capital. What was your career before you got into the venture industry?

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Clint: Well, that led to the next problem. ARCH Development Corp. was not set up to be a venture capital firm; we were set up to start companies. So in many cases we were running the companies ourselves until we could get enough momentum where we could recruit professional managers. By the late ‘80s we had some companies going that needed real funding. There were some good venture funds in Chicago at the time, but when we would show up to talk to them about our companies, the idea of backing a raw startup with an incomplete or non-existent management team and technology that was not fully developed yet into a product was essentially a foreign notion to those guys.

Aaron: How did you get involved with ARCH Developmemt Corp. as a student? Aaron: Where did the funding come from? Clint: Exactly.

Aaron: So the idea was to find technology that could be spun out of Argonne into businesses?

Clint: They brought in Steve Lazarus who had been a senior executive at Baxter Laboratories. He was one of the key people involved in the American Hospital Supply-Baxter combination. Following the merger, Steve chose to retire from Baxter, and was recruited to be the initial CEO of ARCH Development Corp.

Clint: One of the things Steve wanted to do was to teach. So he convinced the University to put ARCH Development Corp. in the business school and the University gave Steve an appointment as an Associate Dean of the Graduate School of Business. When I got on the ground there in 1988 to attend business school, Bob Nelsen and Keith Crandell, who are now my partners, were working at ARCH Development Corp. as volunteers. I joined them as a volunteer, seeing this as a great way to take my interest in science and technology and apply it to business. I got started by spending around 20 hours a week at Argonne National Lab, which is about 45 minutes from the University.

Aaron: Who did the University recruit to build the business?

2008 Compensation & Entrepreneurship Report in Information Technology

CLINTON BYBEE, CO-FOUNDER AND MANAGING DIRECTOR, ARCH VENTURE PARTNERS
Aaron: Wow. Twelve companies off of $9 million dollars?

Clint: That was after fund one, which was in the 1992 time frame. We had fully invested in fund one by 1992 and by this time we found ourselves in the venture capital business. We saw enough opportunity to organize a second fund, and as we set out to raise a new fund the Trustees of the University encouraged us to spin out. So we formed ARCH Venture Partners with the University’s blessing as a separate, private group, and we began to spread out geographically. It began with the Vice Provost of Columbia University inviting us to put an office there. He had followed our work at Chicago. This sparked the idea to pursue a national strategy.

Clint: We learned to syndicate. We made mistakes and learned some important lessons about funding to milestones. We ultimately wrote four of those first companies off, took four public, and four were acquired. Aaron: What was your industry focus? Clint: It was essentially the mirror image of the focus at the University of Chicago and Argonne National Laboratory, which is life sciences, physical sciences, and information sciences, and areas where those disciplines converge. Aaron: When did you make the break from the 501(c)3?

Clint: Yes. ARCH Development Corp., a 501(c)3 not-for-profit, was the general partner of ARCH Fund I. It was an odd structure. Steve Lazarus really raised the first fund - he brought immense credibility from his executive roles at Baxter and as Deputy Assistant Secretary of Commerce prior to that. We did 12 companies with that first fund.

Clint: Impossible. There was interest from some West Coast firms but Chicago was a long way away, it’s cold in the winter, and that didn’t appeal to them. We concluded that if we were going to turn the corner on this experiment, we had to have some seed investment capability, so we set out to raise a fund. It took over a year to raise the first fund, which was $9 million dollars, in 1989. It’s undoubtedly the hardest money that ARCH ever raised.

Aaron: Was this still under the auspices of ARCH Development Corp.?

Aaron: So it was hard to find funding?

13

14

Aaron holds a B.A. in Anthropology as well as an M.B.A. from Boston University. He serves on the Board of Advisors of Stax, Inc., a privately-held consulting and market research firm. Aaron and his wife Lauren have two children, Sophie and Sammy. In his spare time, Aaron plays tennis, runs and listens to music. On the off days, he can be found stoking the embers of his VW-sized Texas BBQ, mixing up a homemade hot sauce, or trying to create the perfect play-list from his ever-expanding record (mp3) collection.

Prior to joining J. Robert Scott, Aaron spent four years with a retainer-based executive search firm that serviced the high technology industry.

AARON D. LAPAT

Aaron has been with J. Robert Scott since 1993 and built the firm’s high tech practice. He leads senior level search assignments across a range of industry segments, including Software, Communications, Semiconductors/ Microelectronics, Specialty Materials and CleanTech. His practice emphasizes recruiting CEOs and functional leaders for growth-oriented and venture-backed companies.

Additionally, Aaron oversees the creation of the annual Compensation and Entrepreneurship Report in Information Technology at www.compstudy.com.

Managing Director J. ROBERT SCOTT

INTERVIEWS

B

Clint: I came here in 2000. We continued to get bigger. Our second fund was $31 million, our next fund was $107 million and the one after that was $180 million. As we scaled, it became less viable for Partners like me to spend nine months working on one company full time. At that time, Albuquerque was a difficult place to scale an operation. I knew Austin well and had a couple of companies here. So we concluded it was either Austin or California, and our collective judgment was that California was ripe with a lot of smart venture capitalists, so we came to Austin instead.

Clint: I was the only venture capitalist in the whole state. Actually, I think I was the only venture capitalist most people had ever heard of. Within a year after I got on the ground we helped start a company out of Sandia National Laboratories called MicroOptical Devices. I spent almost a year working nearly full time with the two scientific founders to get it started. It turned out to be a nice success as it was acquired by a public company called Emcore. The acquisition was the catalyst for Emcore’s transition out of equipment and into devices and components. It is now the center of gravity of Emcore. Aaron: When did you come to Texas?

Clint: We had someone who joined us for a while in New York, but we learned a lesson that other venture funds have learned. It’s hard to weld somebody on in a remote geography. It did not ultimately work out effectively. Instead we tried the other approach, which was to move people from the core out to remote geographies. Bob Nelsen moved to Seattle; he is from that part of the country and was interested in being out west. We saw an opportunity to have a presence near the University of Washington and that has been very productive for us. Since I was the only guy in the group who had been to the southwestern part of the United States, I went to Albuquerque in 1994. Aaron: Talk about finding a place off the beaten trail to do venture investing.

Aaron: How did you execute this? Did you send a partner to New York?

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Clint: We remain focused on three sectors, Life Sciences, Physical Sciences, and IT. IT for us tends to cut across opportunities in life sciences and physical sciences. Most of our physical science companies involve materials innovations that lead to semiconductor innovations or innovations in opto-electronics, photonics, energy, and communications. While the term cleantech makes us a bit uncomfortable because of the buzz and hype surrounding it, we have been involved in solar and other renewable technologies for some time.

Aaron: How has the investment focus of the firm evolved over time?

Clint: It can be. I think the really early stage stuff is probably an easier transition on operating guys because the companies generally need them to be involved in more things. At some point, however, people need to make the decision as to whether they want to be driving the car or sitting in the backseat. That is the decision you have to make in going from the operating world to venture.

Clint: That’s a great question because as you know, we now operate with offices in Chicago, Austin, Seattle, and San Francisco, which presents challenges. I think it works well for a couple of reasons. The first is that Bob, Keith, Steve, and I have worked together from the beginning and we have seen the good, the bad, and the ugly together, which helps to build a pretty close bond. Clint: Five. There are the original three, as Steve is now an emeritus partner, plus two others. Steve Gillis joined us about three years ago as a Venture Partner and he is now a Partner focused on biotechnology companies; and then Scott Minnick, who is also a biotech guy based in San Francisco. Both Steve and Scott have a significant amount of operating experience and entrepreneurial success. The venture partner model has been very good for us because it has allowed both sides to try before we buy. Aaron: Is it difficult for operating executives to make the transition to venture? Aaron: How many partners are there now?

Aaron: What is it in the culture of the firm and your investment philosophy that has kept the partnership an enduring one?

2008 Compensation & Entrepreneurship Report in Information Technology

CLINTON BYBEE, CO-FOUNDER AND MANAGING DIRECTOR, ARCH VENTURE PARTNERS

Clint: I have seen examples of both, and “done it before” entrepreneurial athleticism is probably going to outcompete deep domain expertise nearly every time. For example, we recruited a CEO to a company here in Austin, which he built and sold to a public company and then we recruited him into a telecom company, yet he had no telecom experience at all. He has done a great job because he’s a hard charging entrepreneurial operating guy and was able to compliment himself on the telecom side with team members from the industry. The best CEOs are the ones that know what they’re good at and what they’re not and work hard to get A+ people around them to fill in the gaps.

Aaron: Let’s move the discussion toward executive leadership in your portfolio companies. What makes a great CEO for an emerging business? Aaron: If forced to choose between entrepreneurial athleticism and deep domain expertise, which do you take? Clint: I don’t know that there is one answer. Two very good models that work are (1) “done it before” or (2) you “know the industry cold.”

Clint: Right. For example, we co-founded a company called Innovalight in 2003 around fundamental innovations in silicon nanoparticles developed at the University of Texas. The company is now based in Sunnyvale and is a very promising thin film solar company using its silicon nanoparticles in an ink as a key ingredient. Another example is a company called Nanophase Technologies, which my partner Keith Crandell founded back in 1990, long before nanotech was cool. Nanophase Technologies was formed to exploit the commercial applications of nanomaterials developed at Argonne National Lab. Cleantech gets lumped into our physical sciences activity because the innovations tend to be physical sciences related (materials, chemicals, electrochemical, etc.). We also find that where physical sciences and life sciences converge is a fertile territory for new companies. Sapphire Energy is a portfolio company that is making gasoline from algae, and represents a convergence of physical science and biological sciences.

Aaron: So, you have invested in the renewable technologies sector as an offshoot of your focus in advanced materials?

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INTERVIEWS

B

Clint: Yes. The accounting profession did us a bit of a favor in that regard in that they now for all practical purposes make you account for all options using variable accounting treatment, so there is no longer a disincentive to using milestone vesting as opposed to time based vesting or in addition to time vesting. I’m on the board and compensation committee of three companies where we have recently put together equity incentive plans that are heavily weighted to milestone vesting and the milestones have a very clear correlation to shareholder value, like revenue, gross margin, profitability, and market share. It is hard to do this in an early stage company, but it gets easier as a business matures and begins to ramp sales. Clint: I don’t know. That’s a good question. They are a lot harder. In the earliest stages of a company I would probably lean toward a blunt instrument. As the company matures, it is pertinent to begin to apply sharper and sharper instruments by tying vesting to hitting milestones that are directly correlated with building shareholder value. I have seen one ancillary benClint: They are very fluid. Sometimes technical milestones take longer, often times sales milestones take longer. Aaron: So does that mean milestone based vesting just doesn’t work at the early stages? Aaron: Because in the early stages, objectives are fluid?

Clint: Yes. This is an area where I’ve been spending a fair amount of time over the last year. By and large, most incentive plans are inadequate. Time vested options are a pretty blunt tool that do not correlate all that well to the performance that drives shareholder value. The incentive is the longer you stick around, the more you vest. Aaron: Instead, have you been tying vesting to performance objectives?

Clint: These can be very uncomfortable conversations to have if you don’t have a CEO that’s mature, and self-aware as to his or her own abilities. It is not uncommon for us to put incentives in place that reward the CEO for finding his replacement. Aaron: I suppose standard vesting schedules on options can be something of a disincentive for a CEO to move on.

Aaron: How do you manage the transition from one CEO to a new leader?

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Clint: Sure. We try to follow the great scientific innovations and their innovators, and unfortunately they don’t all exist in the United States. There are some great academic research universities in Europe. There are an increasing number of good scientific innovators in China. There, the pattern involves

Aaron: Venture Capital used to be a local business. That’s not your model. You guys have proven an ability to do it on a national scale. Do you now see the industry globalizing?

Clint: We do, but mostly in troubled companies or as an interim step. We have a guy that’s worked with us in a couple of companies as Executive Chairman and he’s a delight to work with because he can come in to a company and quickly assess what needs to get done. He’s then very good at assuming an interim operating role and can drive a team hard to transition to the direction that they need to go. He then is good at recruiting a full-time CEO as his replacement.

Clint: We spend an increasing amount of time trying to build Boards with highly experienced operating executives. Some of the most valuable insights for our companies come from the operating people on the Board. At one of our companies, Cambrios Technologies, we recruited Dan Maydan to the Board. Dan was the former President of Applied Materials. Then we recruited Gene Benucci to the Board. Gene was the Founder and currently Chairman of ATMI, a leading semiconductor materials company. This company is doing electronic materials for touch screens and displays and having two deeply experienced operating people from that sector has made a huge impact. Aaron: Do you use the role of Executive Chairman?

efit in that it provides CEOs a tool around which to drive and motivate everybody in the organization. For example, one of our CEOs wanted every single employee tied to this plan and he posted the milestones on the wall so everybody knew the focus. As companies mature, you need to instill more discipline and focus. You almost have to create a religion around your mission and milestones. The creative people that got the company from start-up to a point of greater maturity sometimes have a hard time with this and the milestone based vesting sure helps to transition to a culture of execution. Aaron: What do you look for when you’re building Boards for your companies?

2008 Compensation & Entrepreneurship Report in Information Technology

CLINTON BYBEE, CO-FOUNDER AND MANAGING DIRECTOR, ARCH VENTURE PARTNERS

This is a major change. There remain plenty of great things to work on by focusing on what we do here in America. I think over time, however, that is going to change and we are beginning to put relationships in place to begin taking advantage of innovations that happen not just here, but internationally as well. If you kick it up a level and think about the venture industry in general, back in the early days of the business you could think about building a business largely in the U.S. market. Only after getting to a significant size or reduction in risk could one imagine building an international operation. This old model has changed where now you really have to do things on a global basis very very early. Now there are often market opportunities that are uniquely Chinese, or uniquely Indian. So I see the business becoming increasingly more global. I think it has to.

Chinese nationals getting educated in the best schools in the West, doing post docs over here and in Europe, working at places like Bell Labs and other great research institutions in the West and then returning to China to run research labs with better funding than they would be able to get in the U.S.

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Prior to joining Celunol, from 2003 to 2005, Mr. Riva served as Executive Director of Amec plc, a major global construction and engineering company based in the United Kingdom, where he was responsible for the company’s operations in the United States and Britain and for Amec’s global oil and gas business strategy. From 1995 to 2003, Mr. Riva served as Chief Executive Officer of InterGen, a Boston-based joint venture between Shell and Bechtel that developed more than 18,000 megawatts of electric generating capacity, along with gas storage and pipelines, on six continents. Under his leadership, InterGen raised $9 billion of non-recourse project financing to construct power projects and grew from a development company concept to a successful, global operating business. From 1992 to 1994 Mr. Riva was President and Chief Operating Officer of Boston-based J. Makowski Company, which developed the first independent power project in the United States.

Mr. Riva earned a S.B. and M.S. degrees in Civil Engineering from the M.I.T. and Stanford University respectively, and an M.B.A. from the Harvard Business School.

Carlos Riva became President, Chief Executive Officer and Director of Verenium in June 2007, after the merger of Diversa Corporation and Celunol Corporation closed. Mr. Riva joined Celunol, a privately held developer of cellulosic ethanol process technology, as Chairman and Chief Executive Officer in 2006.

CARLOS A. RIVA VERENIUM

President and Chief Executive Officer

INTERVIEWS

B

Carlos: I began my career as a civil engineer. I went to MIT as an undergrad and to Stanford for a graduate degree in engineering. My first job after school was with an architect engineering firm called Gilbert/Commonwealth. They were once one of the top architect engineers in the country specializing in building nuclear power plants. Aaron: What did you do for the construction firm?

Carlos: We were not exactly in the wilderness of Alaska, but we loved it. We contemplated staying but concluded it was too far away so we came back to Boston, which was our home. I joined up with a local entrepreneur by the name of Jacek Makowski, who is one of the real legends of the energy industry. He had been the developer of the LNG terminal in Everett, MA built by Cabot Corp. and had been the genius behind a number of other highly innovative projects in the energy industry.

Carlos: I was working on design of power projects and other civil engineering projects. The company wasn’t solely in the nuclear business, but that was one of their major areas. During my second year there, the accident at Three Mile Island happened. The firm was located in Pennsylvania, about 100 miles from Three Mile Island, and I remember everyone at the firm being excited because they thought the incident would lead to a lot of work. I remember telling one of my colleagues that he was out of his mind. I viewed that incident as the twilight of the nuclear industry for a long while, so I decided to go back to school to get an MBA and went to Harvard. When I graduated from business school, the last thing I wanted to do was to go back into the electric power business. I have always loved energy and wanted international experience, so I joined a company called Oceaneering International, a publicly listed company in the oil field services sector. They were the leading technology provider for underwater services to the offshore oil and gas industry. I was in with Oceaneering in the UK and did work all around the North Sea, West Africa, the Middle East, and Asia. I was later offered the job of running their West Coast US operations. This was principally focused on the offshore California and Alaska markets, and my wife and I decided to move to Anchorage. This was 1985 and oil prices started to fall precipitously, prompting the oil companies to curtail their frontier exploration, and thus evaporating our market. Aaron: The market collapsed while you and your wife were in the wilderness of Alaska?

Aaron: Why don’t we begin with your career history?

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Carlos: I had become President of the business and nine years after joining, we sold the business to Bechtel and Pacific Gas and Electric. The new owners then asked me to start a parallel business focused on developing power projects overseas, so I put together a group in 1995. The new company was called InterGen. We had some significant early successes. We developed and closed the financing on a 700 megawatt project in Great Britain, a 700 megawatt project in Mexico (which was the first IPP in Mexico) and then a 480 megawatt coal fired project in the Philippines, all within the first 18 months. Those projects gave us the anchor to set up development companies for those three regions: Europe, Asia, and Latin America, and we continued on at a pretty aggressive pace. Over eight years, from 1995-2003, we developed on the order of 15,000 megawatts of new projects in a dozen countries. We were planning for an IPO in 2001; then 9/11 and the Enron meltdown happened, combined with the unraveling of power markets, here in the US, all making an IPO impossible for a company like ours. So I was asked by the owners to change the nature of the company from being a developer to becoming an operator. We dismantled the development apparatus and turned the business into a global utility. I decided that running an operating utility business wasn’t where my interests lay and was lured away by a large British engineering contractor called Amec to run a large portion of their business with a view towards growing the company significantly. Carlos: I spent three terrific years in the UK, but much of the business Amec hired me to run was not a growth priority and at Aaron: How did you get connected to Celunol/Verenium?

Carlos: Jacek had put together an electric power project using Canadian natural gas, which had never been imported in such large quantities here before for electric power generation. He established a partnership with a number of local utilities and a Canadian gas pipeline company. He was looking for a project manager and brought me in to run the project. It was a significant deal. We developed a 500 megawatt project on the Massachusetts / Rhode Island border which turned out to be the first IPP built in the US. On the basis of that project, we built up a company and developed a number of other large generation projects in the Northeast. Aaron: What ultimately became of that business?

Aaron: What did you do with Makowski?

2008 Compensation & Entrepreneurship Report in Information Technology

CARLOS A. RIVA, PRESIDENT & CEO, VERENIUM

Carlos: The science was well ahead of most of the other competitors in the sector. It still needed a lot of work and still does, but it was at a stage that I thought was distinctive and could be driven forward. We had microorganisms that had been genetically modified to ferment the different component sugars of biomass into ethanol. We also had a pilot plant in Louisiana that was partially operational. So, we needed to finish building out the pilot plant and continue the scaling and technology development efforts.

Aaron: What was the state of the business when you joined?

Carlos: The business had been started in the early ‘90s and had gone through a number of evolutionary steps. They tried a couple of times to build commercial scale units, but when oil prices went back down into the teens there just wasn’t a viable business model. Throughout that time, though, they were moving the ball forward with their science and technology.

Aaron: How old was the business at this point?

Carlos: The Company wasn’t looking for a CEO who was a great scientist, organic chemist, or microbiologist. They were looking for someone that could take the business and the science, commercialize it, and develop it into projects.

that point, I was looking to get back to the US and back into energy with a development focus. I have always been interested in renewables, particularly cellulosic ethanol, and I became aware of Celunol, which was the predecessor of Verenium, and which had recently been recapitalized by a group of venture backers. Aaron: This plays to your development experience, but you have never run a technology company. Aaron: What was it that compelled you to Celunol?

Carlos: What appealed to me most was that this company had a distinct technological advantage. The company was one of the front runners of the industry from a technology development perspective, but had decided to become more than just a technology provider. We wanted to become further integrated and become developers, owners, and operators of production facilities using our technology to leverage us into that position.

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INTERVIEWS

B

Carlos: That’s right. I wasn’t a science guy, but I had a technical education, so I am not uncomfortable with science and technology. I also had experience building companies. Soon after joining, I knew we would need to get more funding. My CFO is a brilliant finance and deal guy; not from energy, but from life sciences and biotech. He and I were exploring various options and began looking at Diversa. They were a public company based in California that had a lot of interest in biofuels and were specialists in enzyme technology, which is another one of the components that is essential to our production process. They had great technology, but felt it was not being fully valued and decided to integrate vertically. Both companies were aware of each other’s strengths and technology, and as our discussions progressed, it became clear that a merger would accelerate each of our respective efforts to commercially produce cellulosic ethanol. Technically, Diversa issued shares and acquired 100% of what was then Celunol, but the Celunol management team was effectively invited to manage the combined company. Aaron: What time frame was this?

Aaron: You know the energy industry and are a deal guy.

Carlos: There was venture capital funding that came in about a year before I joined from Charles River Ventures, Braemar, Rho Capital, and Khosla Ventures. I think finding a CEO was a challenging process for them because this is such a new industry so it is difficult to pluck someone out of a company with deep exposure to this space. You have to take a bit of a leap of faith on adjacent skills.

Aaron: How was the business funded?

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Carlos: This was about a year ago. The combination of the companies was important as it provided funding to advance our cellulosic ethanol technology development. It also made us a public company. Shortly after we announced the merger we raised an additional $120 million through a convertible debt offering. We also did a subsequent convertible debt round which raised a further $50 million early this year.

Carlos: For starters, the company has changed by virtue of growing very rapidly. I do think about that question a lot, particularly when I see that some of our private competitors are able to be rather bold in statements to the market. We have to be very careful about what we say publicly, so we tend to be more cautious and guarded. By the same token, I think that being public gives us access to sources of capital that would not be

Carlos: It does, because enzymes are one of the important ingredients in cellulosic ethanol production. It is also a compelling commercial business on its own that has been growing rapidly. It is still small, but we had $26 million in product sales last year. The year before it was $16 million, and this year we have given guidance that we’ll be just shy of $40 million, so it’s a pretty rapid ramp up. This was quite a change because traditionally most of Diversa’s revenues came from contract research, yet there was very little opportunity to get operating leverage from contract research. So what they really wanted to do was become more of a product driven company. We were able to facilitate that transition, and it is going quite well. Aaron: How has being public changed the business?

Aaron: Does owning the enzyme business give you a meaningful competitive advantage?

Carlos: Extremely well. We had about four months between announcing the deal and getting SEC approval to work out a very detailed plan for integration. It was a little strange because Celunol management wasn’t part of Diversa during that four month period, so we had no real management responsibility, but everyone was very cooperative and we were able to integrate the businesses very smoothly upon closing. The R&D operations of the two organizations were merged and moved to San Diego, which is where Diversa was headquartered. Cambridge was where we had our project development and engineering groups, and we decided to locate our corporate offices here as well. Our production facilities in Louisiana rounded out the organization. All in all, the merger has been a success in providing a very strong enzyme business as well as the strong scientific talent base that we were looking for to support the growth of our biofuels technology.

Aaron: How has the integration with Diversa gone?

2008 Compensation & Entrepreneurship Report in Information Technology

CARLOS A. RIVA, PRESIDENT & CEO, VERENIUM

Carlos: It is a different industry, but a lot of the challenges remain the same. Two years ago, Celunol was a handful of people. Today we are close to 300 people, so we have grown very rapidly. Again there is no established cellulosic ethanol industry to speak of, so we drawn talent from adjacent industries in biotech, chemicals, power, and other places. This means people have different norms. They have been working in businesses in very different contexts, so part of my job as CEO is to forge the group into a cohesive operating team. Over the course of the last year, the integration of the two companies has been a unifying team effort.

Aaron: How has team building differed at Verenium compared with your previous companies?

Carlos: I think it is still early in the cycle, although obviously the Diversa and Celunol merger was a consolidation, but there has not yet been a lot of activity. There is some consolidation going on in the first generation biofuels companies, which is driven by the need to find better operating efficiencies. Our part of the industry is not yet in an operating mode. It is still very much about future promise, and while there might be some opportunities for companies to combine to get new technology, I don’t know that we’re yet at the stage where the advanced biofuels industry needs to consolidate.

there for us if we were private, and in the long run, this business is going to be about raising capital, and the cost of capital is going to be a critical dimension to competing in this business. There is also need for more transparency, not only to the outside world but also internally. I spend much more of my time than I would have imagined communicating, speaking to media, investors, and not only our equity and institutional investors, but also our debt holders, whereas in a private company, these demands are less. But being public has been important for the company, and the communication and transparency makes for a healthy management environment. There are a lot of challenges obviously. You need to be prepared to defend the positions that you take. Aaron: Are there consolidation opportunities in the industry yet?

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INTERVIEWS

B

Carlos: I try not to hire people for today’s company, but to project out three to five years, when we could have 1,000 people and six different cellulosic ethanol plants. For instance, we were able to hire a woman to run our specialty enzyme business who was a very senior executive at BP Chemicals, which was bought out by a private equity group. She has run billion dollar businesses. The question is, how can we attract that kind of talent into what is still a small company? I think one of the things that has benefited us is that this industry has enormous appeal. It has psychological appeal in the sense that there is potentially a disruptive technology to solve one of the great problems of our current age and economy, which is the overreliance on fossil fuels. There are also benefits in the sense of job satisfaction because we are tackling pressing environmental and energy security issues. These attributes help us attract talent that I think would be otherwise unavailable, and that makes a significant difference. Aaron: How has the tumult in the public capital markets affected you? Carlos: One of our challenges is that we are really the only public cellulosic ethanol company. There are other companies developing this technology as part of a larger business, but

Aaron: How do you recruit people who fit that profile?

Aaron: Typically building a company involves establishing a new culture. Certainly companies have their own identity and culture. My experience is that industries also tend to have a culture. With Verenium drawing on talent from a range of industries, has this created something of a cultural melting pot?

Carlos: That’s exactly right. In fact, I think the challenge is interesting to consider. If cellulosic ethanol has a characteristic as an industry, I would say that it tends to be currently dominated by life science and other science intensive industries where matters such as worrying about intellectual property and secrecy tend to dominate. I feel we have to move as an industry out of that mold and start worrying about our supply chains, relationships with other companies, transparency to the financial community, government relations – all these other issues that more evolved industries have dealt with. I am trying to foster a corporate culture around confidence in our capabilities to execute, rather than feeling that we can be perfectly protected by our patents.

www.compstudy.com

Carlos: From a technology and commercialization standpoint, I want us to be leaders of the pack in the cellulosic world. I expect that five years from now, we will have operating facilities in the Southeast with various facilities under construction. We will license our technology and technology packages more broadly and likely will be looking to logical places to expand internationally. Given that we’ve done a lot of work on sugar cane and energy cane as a feedstock in the Southeast, we would probably look south to the Caribbean or Brazil as logical areas for expansion. I see our enzyme business also continuing to grow, and I’m very bullish on its potential. Our industry is not going to replace oil, but it can take a big chunk out of future demand for fossil hydrocarbons. Verenium is right at the verge of being able to start to construct commercial facilities. This puts us at the forefront of the advanced biofuels industry, so I want to keep pushing that leadership position and trying to stay ahead of the pack. I believe that once you solidify a leadership position, one can have a sustainable competitive advantage that will allow the company to continue to grow and prosper. This is an industry that in the United States alone, by virtue of the mandate of the last energy bill, will grow to 16 billion gallons a year. At $3.00 a gallon, that’s a $48 billion dollars per year market that nobody owns today. So it’s a race.

Aaron: Another issue I see when recruiting in the cleantech sector is that many of the target markets for talent, like the chemical or energy industries, are comprised mostly of larger companies that are not historically entrepreneurial. How do you overcome this? Aaron: Where would you like to see the business five years from now? Carlos: Our task is to find the entrepreneurial people in the large companies. These types can be found, and when you do, you can unleash that capability and get a lot of leverage. Fortunately, there are a lot of smaller entrepreneurial businesses springing up in these industries, and they are also are a rich source of talent for us.

we’re the only cellulosic ethanol pure play, and I think what tends to happen to us is we get lumped in with the all the other biofuels companies. Even though our financial risk profile is vastly different from a grain ethanol or bio-diesel companies, we still get compared to them, so we tend to be subject to the rising and falling tides of those industries.

2008 Compensation & Entrepreneurship Report in Information Technology

23

CARLOS A. RIVA, PRESIDENT & CEO, VERENIUM

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• Founding CEOs hold an average of 22.05% of their company, as expected a significantly higher amount than non-founders who had an average of 5.46%.

• The average time of hire equity grant for the CEO is 5.40% while the median time of hire grant is 5.00%.

Base Salary – 2007 and 2008 Bonus – 2007 and 2008 Equity Holdings

• Average equity position held by the CEO drops steadily with an increase in financing rounds. For those companies with one or fewer rounds raised, the non-founder CEO holds an average of 6.28% of the company, compared to 4.86% at companies having raised four or more rounds.

• CEO base salary increased 4.2% at the average, from $227,000 in 2007 to $237,000 in 2008.

• The average CEO has a target bonus of $102,000 for 2008, which represents 43% of base salary. This compares to an average bonus received in 2007 of $69,000 on a total target bonus of $98,000, an achievement of 71%.

Base, Bonus and Equity by Financing Rounds

• In 2008, current equity held by the CEO ranges from 3.90% at the 25th percentile to 6.50% at the 75th percentile. The average equity holding for the CEO is 5.46%. • Average base salary remains relatively constant through rounds of financing for the CEO. In general, with additional rounds raised, the range of base salary for the CEO becomes tighter. This same trend holds true for CEO bonus.

CHIEF EXECUTIVE OFFICER

B

Base, Bonus and Equity by Founder Status

2007

• Non-founder total, actual and target, cash compensation is considerably higher than that of the founding CEO, an average of $339,000 for non-founders in 2008 compared to $286,000 for founding CEOs, a 19% premium for non-founders.

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$200 $155

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$200 $162 $195 $197 $205 $220 $225 $235 $236 $229 $238 $240

$205

25th percentile

www.compstudy.com $225 Median $227 Mean

$235

$237

75th percentile

$235

$237

$250

$250

$250

$260

$265

$260

$275

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

$20

Bonus by Financing Rounds
$16

Bonus – 2007 and 2008
25th percentile Median Mean $62 $69 $65 $65 $100

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile
Actual Bonus Received Target Bonus

$98 $100 $100 $100 $102

$30

Bonus by Founder Status
$65 $60 $65 $75 $100 $100 $101 $88 $103

$113

$100

$100

$102

$125 $125

$150

$125

$125

Time of Hire

Current

$125

Non-Founder ≤1

Founder

2-3

4+

3.00%

Equity by Financing Rounds

3.60%

KEY:

3.90% 5.00% 6.50% 5.46% 8.30%

Equity by Founder Status
3.60% 4.69% 5.64% 6.50% 4.86% 4.90% 5.88% 6.00% 6.28% 17.00%

3.90%

25th percentile

Equity Holdings
5.00% 5.00% Median Mean

7.00%

5.40%

5.46%

75th percentile

6.50%

10.00%

7.00%

25

22.05%

30.00%

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• Target bonuses in California and the Mid-Atlantic are the lowest among the regions. However, base salary in California is highest at an average of $247,000.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Business Segment

• With increasing headcount, the total target cash compensation for the CEO rises. Total cash ranges from an average of $280,000 in companies with 1-20 FTEs to $390,000 at the largest companies surveyed, those with greater than 75 FTEs.

Cash and Equity Compensation by Geography

• Base salary across the geographies shows little variance outside the West region, where base salary is 9% lower than the average across the regions.

Cash and Equity Compensation by Revenue

• CEOs at Content/Information companies earn the highest total cash package in our report with a total base and target bonus of $364,000. Additionally, equity holdings in this segment are also highest for the CEO at 7.10%. • Equity holdings generally decrease in direct proportion with increasing revenues, though there is a spike in companies with $5-10M in revenue. CEOs in these companies hold the highest average level of equity at 5.93%. • Equity holdings among CEOs in the Communications sector are lowest at just under 3.82% at the average.

• Average total cash compensation for the CEO correlates directly with rising company revenues. In the pre-revenue segment, the non-founder CEO earns an average total cash package of $288,000 while holding 5.78% of the equity of the company.

• Equity holdings for the CEO follow an inverse trend as company headcount grows. Non-founder CEOs in the smallest companies hold 5.88% while those in companies with greater than 75 FTEs see equity holdings reduced to 4.99%.

CHIEF EXECUTIVE OFFICER

B

California $350 $112 $238

$345 $98

$247

1-20

$280 $203 $77

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England $328 $238 $90 $343 $107 $236 21-40 $220 $99 $319 www.compstudy.com Salary

KEY:

Software

Cash Compensation by Business Segment
MidAtlantic $315 $234 $81 $237 Midwest $336 $239 $97 $237 $215 $364 $123 $241 West
Communications Hardware, Semiconductors, Electronics Services, Consulting, Integration Content, Info Provider

$327 $90

$358 $121

41-75

$347 $106 $241

Bonus

$322 $107

$115 $275 76+

$390

South $321 $229 $92

$351 $106 $245

CleanTech

California 5.64%

5.11%

5.88% 1-20

2008 Compensation & Entrepreneurship Report in Information Technology

New England 3.82%

6.11%

Equity by Headcount (FTEs) Equity by Geography
21-40 5.79%

KEY:

Average

Software

Communications

Equity by Business Segment
MidAtlantic 5.51% Midwest 6.96%
Hardware, Semiconductors, Electronics Services, Consulting, Integration

6.19%

5.01%

5.31% 41-75

5.63% West

4.99% 76+

Content, Info Provider

7.10%

South

5.07% 4.45%

PreRevenue 5.78%

$288 $61

$227

Cash Compensation by Revenue
Up to $5M 5.37% $310 $91 $219

PreRevenue

Up to $5M

Equity by Revenue
$5 – 10M 5.93% $107 $223 $5 – 10M

$330

$10 – 20M 4.96%

$374 $105 $269

$10 – 20M

$20M+ 5.10%

$419 $139 $280

27

$20M+

CleanTech

CHIEF EXECUTIVE OFFICER

28

Base Salary – 2007 and 2008 Bonus – 2007 and 2008 Equity Holdings

• President/COOs saw a small increase in average base salary in 2008, rising $5,000 or 2.8% over 2007. • Average target bonuses decreased slightly in 2008 for the average President/COO, from $63,000 in 2007 to $58,000 in 2008. Actual average bonus paid in 2007 was $55,000, which represents an attainment rate of 88%.

• Founding President/COOs hold a 15.43% average equity stake in their companies, compared to 2.88% for non-founders.

Base, Bonus and Equity by Financing Rounds

• The average current equity holding for the President/COO is 2.88%. Time of hire grants range from .80% at the 25th percentile to 2.60% at the 75th percentile. The average time of hire grants falls very close to the top quartile at 2.58%.

• President/COOs at companies with one or fewer financing rounds earned, on average, $31,000 less in base salary than their counterparts at companies with four or more rounds of financing raised.

PRESIDENT/ COO

B

Base, Bonus and Equity by Founder Status

• Cash compensation for founding President/COOs varies largely when compared to their non-founder counterparts.

• Equity holdings for President/COOs with one or fewer rounds is 4.98% at the average. With dilution from additional rounds raised, the average equity holding decreases to 2.05% in those companies having raised four or more rounds.

2007

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$155 $150 25th percentile $165 www.compstudy.com Median $175 Mean

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$160 $165 $162 $165 $180 $182 $183 $172 $182 $191 $200 $188 $190 $193

$158

$175

$178

$180

75th percentile $183

$200

$200

$200

$210

$225

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

$11 $9

Bonus by Financing Rounds Bonus by Founder Status
$15 $41 $50 $51 $58 $42 $43 $49 $50 $80 $52 $25 $32 $30 $50 $55 $60 $58

Bonus – 2007 and 2008
25th percentile $30 Median Mean $50

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile
Actual Bonus Received Target Bonus

$63

$80

$25

$67

$80

$80

$80

$80

Time of Hire

Current

$108

$120

Non-Founder ≤1

Founder

2-3

4+

0.10%

Equity by Financing Rounds
1.00% 1.50% 4.00% 2.88% 4.55%

0.80%

Equity by Founder Status
1.00% 1.30% 2.00% 9.00% 2.05% 1.00% 2.15% 2.79% 4.00% 15.43%

1.00%

25th percentile 1.50%

KEY:

Equity Holdings
1.50% 1.00% Median Mean

2.58%

2.60%

2.88%

75th percentile

4.98%

6.00%

4.00%

29

26.90%

30

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Business Segment
• Total cash compensation is highest for President/COOs in California and New England, driven primarily by the two largest base salary levels among regions.

• Total cash compensation for President/COOs rises steadily with increasing headcount levels, from $223,000 at the earliest stages to $269,000 for those companies with more than 75 FTEs.

Cash and Equity Compensation by Geography

Cash and Equity Compensation by Revenue

• President/COOs of Software and Content/Information Providers earn the highest total cash compensation in 2008 at just under $250,000 at the average, though their counterparts in the Software segment are a very close second. • Average total cash compensation for the President/COO is greatest for companies with $20M or more revenues at $305,000. • President/COOs of within the CleanTech sector hold the largest equity stake at 4.76%.

• Mid-Atlantic and New England President/ COOs hold a greater stake in equity when compared to the overall average.

• President/COOs average equity holdings decreased gradually as company headcount grows, though for the largest companies, there is a spike in holdings for the President/COO.

PRESIDENT/ COO

B

California $248 $64 $184

$268 $76

$192

1-20

$223 $156 $67

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England $219 $184 $35 $251 $202 $49 21-40 $180 $52 $232 www.compstudy.com Salary

KEY:

Software

Cash Compensation by Business Segment
MidAtlantic $245 $178 $67 $178 Midwest $242 $187 $55 $177 $169 $249 $189 $60 West
Communications Hardware, Semiconductors, Electronics Services, Consulting, Integration Content, Info Provider

$241 $63

$239 $62

41-75

$238 $184 $54

Bonus

$223 $54

$201 76+

$269 $68

South $221 $181 $40

$228 $181 $47

CleanTech

6.76% 1-20

2008 Compensation & Entrepreneurship Report in Information Technology

Equity by Headcount (FTEs) Equity by Geography
2.79% 21-40

KEY:

Average

California 2.81%

2.39%

New England 1.43%

3.69%

Software

Communications

Equity by Business Segment
MidAtlantic 2.09% Midwest 3.39% 2.25%
Hardware, Semiconductors, Electronics Services, Consulting, Integration

5.34%

1.60% 41-75

2.89% West

3.04% 76+

Content, Info Provider

2.71%

South

1.23% 4.76%

PreRevenue 9.40%

$243 $58

$185

Cash Compensation by Revenue
Up to $5M 2.60% $221 $47 $174

PreRevenue

Up to $5M

Equity by Revenue
$5 – 10M 2.28% $189 $48 $5 – 10M

$237

$10 – 20M 1.27%

$240 $176 $64

$10 – 20M

$20M+ 3.29%

$305 $208 $97

31

$20M+

CleanTech

PRESIDENT/ COO

32

• Bonus attainment in 2007 for the CFO was 63%.

Base Salary – 2007 and 2008 Bonus – 2007 and 2008 Equity Holdings

• Average base salary for CFOs increased 5.2%, or $8,000, from 2007 to 2008.

• Average target bonus for the CFO rose slightly to $49,000 in 2008 which represents 29% of base salary.

• Moreover, founding CFOs are targeted for a $7,000 smaller average bonus than non-founding CFOs.

• Time of hire equity grants for non-founding CFOs average 1.01% and ranged from 0.30% at the 25th percentile to 1.20% at the 75th percentile.

Base, Bonus and Equity by Financing Rounds

• The average CFO base salary generally increases with additional rounds of financing raised, from $159,000, at companies having raised 1 or fewer rounds, to $166,000 at companies having raised four or more rounds.

Base, Bonus and Equity by Founder Status

• Non-founder CFOs earned an average total cash compensation of $6,000 more than their founding counterparts. • Founding CFOs hold an average equity stake of 3.24%, compared to 0.94% for non-founders.

• Contrary to the effects of dilution, equity holdings for CFOs increased significantly with 2-3 financing rounds, doubling to 1.05%. With four or more rounds raised average equity held decreases slightly to 0.91% for the CFO.

• Average current equity holdings ranged from 0.50% at the 25th percentile to 1.20% at the 75th percentile and the average current equity stake falls within this range at 0.94%. Equity holdings did not fluctuate materially for the CFO from our 2007 report.

CHIEF FINANCIAL OFFICER

B

2007

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$130 25th percentile www.compstudy.com $144 Median Mean $156

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$125 $138 $144 $145 $159 $160 $165 $165 $159 $165 $166 $173 $175 $174

$135

$150

$157

75th percentile $165 $165

$170

$180

$185

$185

$188

$185

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

Bonus by Financing Rounds
$24 $5 $25 $25

Bonus – 2007 and 2008
25th percentile $35 $20 $22 Median $25 Mean $28 $36

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile
Actual Bonus Received Target Bonus

$19

Bonus by Founder Status
$25 $38 $45 $35 $48 $48 $52 $53 $55 $40 $42

$40 $40

$45

$49

$55

$49

$55

$80

$59

Time of Hire

Current

$57

Non-Founder ≤1

Founder

2-3

0.00% 0.05%

4+

Equity by Financing Rounds

0.30%

25th percentile 0.50%

KEY:

Equity Holdings
Median Mean

0.50% 0.90% 1.20% 0.94% 1.00%

Equity by Founder Status
0.50% 0.50% 0.52% 2.00% 0.91%

0.90%

75th percentile 0.94%

1.00% 1.10%

1.00%

1.00%

1.00%

1.01%

1.20%

1.05%

1.30%

1.20%

33

3.24%

4.00%

34

• CFO equity rises gradually as the company earns greater revenue.

• CFO equity holdings ranged from a high of 1.11% in the MidAtlantic to a low of 0.80% in the West.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Business Segment Cash and Equity Compensation by Revenue

Cash and Equity Compensation by Geography
• Average total cash compensation for CFOs climbs steadily with increasing company headcount.

• CFOs across each region earn a total cash compensation ranging from a high of $228,000 in the Mid-Atlantic to a low of $174,000 in the Midwest. Base salary is highest for California CFOs at an average of $176,000.

• CFOs of Communication companies are expected to earn the highest average total cash compensation for 2008 at $231,000. • Total cash rises consistently for the CFO with increasing company revenues, from nearly $180,000 at pre-revenue companies to $262,000 at companies with greater than $20 Million in revenue.

• Equity holdings for CFOs decrease as companies grow to 4175 FTEs. With more than 75 FTEs equity holdings rise again to 0.94%.

CHIEF FINANCIAL OFFICER

B

California $216 $52 $164

$223 $47

$176

1-20

$176 $136 $40

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England $231 $178 $53 $207 $162 $45 21-40 $153 $49 $202 www.compstudy.com Salary

KEY:

Software

Cash Compensation by Business Segment
MidAtlantic $214 $171 $43 $172 Midwest $200 $153 $47 $140 $34 $150 $192 $151 $41 West
Communications Hardware, Semiconductors, Electronics Services, Consulting, Integration Content, Info Provider

$228 $56

$174

41-75

$207 $167 $40

Bonus

$198 $48

$183 76+

$244 $61

South $195 $162 $33

$222 $168 $54

CleanTech

California 0.87%

0.98%

1.09% 1-20

2008 Compensation & Entrepreneurship Report in Information Technology

Equity by Headcount (FTEs) Equity by Geography
21-40 1.21%

KEY:

Average

New England 0.96%

0.84%

Software

Communications

Equity by Business Segment
MidAtlantic 1.04% Midwest 1.51%
Hardware, Semiconductors, Electronics Services, Consulting, Integration

1.11%

0.84%

0.84% 41-75

0.80% 0.77% West

0.94% 76+

South

0.96%

PreRevenue PreRevenue 0.83%

$179 $23

$156

Cash Compensation by Revenue
Up to $5M 0.87% $191 $153 $38

Content, Info Provider

CleanTech

0.89%

Up to $5M

Equity by Revenue
$5 – 10M 0.98% $160 $41 $5 – 10M

$201

$10 – 20M 1.07%

$233 $177 $56

$10 – 20M

$20M+ 0.98%

$262 $188 $74

35

$20M+

CHIEF FINANCIAL OFFICER

36

• Compared to early stage companies, average target bonus sharply increases for those CTOs in companies that have raised two or three rounds of financing.

• For companies with one or fewer rounds raised the average equity stake is 1.76%, decreasing for each additional comparative financing stage in our report. • Non-founding CTOs earn, on average, $10,000 more in total cash compensation than their founder counterparts. • As expected, founding CTOs hold considerably more equity in their companies than non-founders, with an average of 8.91%.

Base Salary – 2007 and 2008 Bonus – 2007 and 2008 Equity Holdings

• Average base salary for the CTO increased by $8,000, or 5.0%, between 2007 and 2008.

• Target bonus increased for CTOs, from an average of $52,000 in 2007 to $57,000 in 2008. Actual bonus paid out in 2007 averaged of $30,000, a 57% rate of attainment.

Base, Bonus and Equity by Financing Rounds Base, Bonus and Equity by Founder Status

• Time of hire grants for the CTO range from 0.20% at the 25th percentile to 1.70% at the 75th percentile. The average time of hire grant falls within this spectrum at 1.19%. Average current equity for the CTO is 1.53%. • Base salary does not fluctuate greatly for the average CTO relative to increasing financing rounds.

CHIEF TECHNOLOGY OFFICER

B

2007

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$130 $130 25th percentile www.compstudy.com $150 Median Mean $160

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$140 $150 $143 $150 $165 $170 $170 $173 $165 $166 $168 $173 $175

$162

$170

75th percentile $173

$170

$185

$190

$195

$190

$195

$192

$195

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

$5

Bonus by Financing Rounds
$9

Bonus – 2007 and 2008
25th percentile $20 $20 $27 $24 Median Mean $30 $37 $37 $40

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile
Actual Bonus Received Target Bonus

$20

Bonus by Founder Status
$22 $20 $25 $37 $38 $40 $42 $45

$50

$52

$54

$63

$57

$52

$57

$60

$69

$70

$63

$65

Time of Hire

Current

$63

Non-Founder ≤1

Founder

2-3

4+

0.00%

Equity by Financing Rounds

0.20%

25th percentile 0.60%

KEY:

Equity Holdings
1.00% Median 1.00% Mean 1.00% 1.19%

75th percentile 1.53%

1.70%

0.60% 1.00% 2.00% 1.53% 2.50%

Equity by Founder Status
0.50% 6.00% 1.00% 1.10% 1.00% 1.28% 8.91%

1.64%

1.70%

1.76%

1.80%

2.00%

2.00%

37

13.30%

38

• Average total cash compensation for the CTO varies widely across regions.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Business Segment Cash and Equity Compensation by Revenue

Cash and Equity Compensation by Geography

• Total cash compensation for CTOs gradually increases with increasing headcount. At the largest companies, there is a larger jump in total cash compensation, driven by a target bonus nearly double that of the next smaller company stage CTO. • CTOs in California earn the highest average base salary at $189,000. • Software CTOs are expected to earn the largest total cash compensation in 2008 at $242,000 and will enjoy the largest equity stake in their companies with 1.81%. • CTOs at the most developed companies, those with greater than $20M in revenues, earn considerably more cash compensation at the average than CTOs at smaller companies. • CTO equity holdings are greatest in California, at 2.18% followed by the West with 1.64%.

CHIEF TECHNOLOGY OFFICER

B

California $242 $71 $171

$242 $53

$189

1-20

$205 $155 $50

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England $240 $185 $55 $288 $119 $169 21-40 $164 $48 $212 www.compstudy.com Salary

KEY:

Software

Cash Compensation by Business Segment
MidAtlantic $222 $179 $43 $178 $33 Midwest $208 $173 $35 $163 $24 $139 $156 $189 $155 $34 West $74
Communications Hardware, Semiconductors, Electronics Services, Consulting, Integration Content, Info Provider

$211

41-75

$218 $174 $44

Bonus

$268 $183 76+ $85 $203 $161 $205 $160 $45 $42

$230

South

CleanTech

California 1.81%

2.18%

2.90% 1-20

2008 Compensation & Entrepreneurship Report in Information Technology

Equity by Headcount (FTEs) Equity by Geography
1.45% 21-40

KEY:

Average

New England 0.90%

1.59%

Software

Communications

Equity by Business Segment
MidAtlantic 1.34% Midwest 1.76% 0.69%
Hardware, Semiconductors, Electronics Services, Consulting, Integration

1.57%

1.13% 41-75

1.64% 1.10% West

0.98% 76+

South

1.10% 1.03%

PreRevenue 1.78%

$200 $51

$149

Cash Compensation by Revenue
Up to $5M 1.95% $211 $168 $43

PreRevenue

Up to $5M

Equity by Revenue
$5 – 10M 1.74% $189 $38 $151 $5 – 10M

$10 – 20M 0.93%

$243 $185 $58

$10 – 20M

$20M+ 0.82%

$295 $110 $185

39

$20M+

Content, Info Provider

CleanTech

CHIEF TECHNOLOGY OFFICER

40

Base Salary – 2007 and 2008 Equity Holdings Bonus – 2007 and 2008

• Average base salaries for Heads of Engineering rose by $7,000 from 2007 to 2008.

• Average target bonus did not change materially from 2007 to 2008, rising $1,000 for the Head of Engineering.

Base, Bonus and Equity by Financing Rounds

• The median equity grant remains at 1.00% at time of hire for the Head of Engineering, though at the average that figure is 1.29%. • Current equity for Heads of Engineering ranges from 0.50% at the 25th percentile to 1.50% at the 75th percentile, with an average of 1.29%.

• Average base salary for Heads of Engineering trends slightly upward based on the number of rounds of financing, ranging from $153,000 for companies with one or fewer rounds raised to $166,000 for companies with two or three financing rounds.

Base, Bonus and Equity by Founder Status

• Bonus attainment in 2007 for the Head of Engineering was 63%. • 2008 target bonus as a percentage of base salary is 24%.

HEAD OF ENGINEERING

B

• Non-founding Heads of Engineering receive an average base salary that is slightly higher than their founder counterparts. • As expected, founding Heads of Engineering have a substantially greater current equity stake in the company. The average current equity for founders is 6.22% while for nonfounders it is 1.29%.

• Average target bonus decreases steadily as the company raises additional rounds of funding. However, the median Head of Engineering experiences little change in target bonus.

2007

• Consistent with the expected effects of dilution, average current equity holdings for Heads of Engineering decrease when comparing companies across financing stages. At the earliest stage, the Head of Engineering holds 1.79% of the company, decreasing to 0.99% at companies with four or more rounds raised. Interestingly, at the median Heads of Engineering hold 1.00% across all rounds of funding.

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$135 25th percentile www.compstudy.com $147 $150 Median Mean $156

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$145 $147 $146 $150 $153 $161 $162 $163 $165 $163 $165 $165 $166

$130

$150

$163

75th percentile $165

$175

$180

$180

$175

$180

$180

$188

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

$6

Bonus by Financing Rounds
$14

Bonus – 2007 and 2008
25th percentile $20 $15 $31 $20 Median Mean $24 $24 $30 $30 $31

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile
Actual Bonus Received Target Bonus

$38

$16

Bonus by Founder Status
$25 $30 $24 $32 $33 $39 $30 $43 $31 $50 $56

$39

$80

$50

$50

Time of Hire

Current

$39

$49

$50

$50

Non-Founder ≤1

Founder

2-3

4+

0.10%

Equity by Financing Rounds

0.30%

KEY:

0.50% 1.00% 1.50% 1.29% 1.50%

Equity by Founder Status
0.40% 0.80% 1.00% 0.99% 1.00% 4.60% 1.34% 1.40%

0.50%

25th percentile

Equity Holdings
Median Mean 1.00%

1.00%

1.00%

75th percentile

1.50%

1.29%

1.29%

1.79%

2.00%

1.50%

1.50%

41

6.22%

8.00%

42

• Target bonus remains largely unchanged for the Head of Engineering across company sizes.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Business Segment Cash and Equity Compensation by Revenue
• As expected, equity holdings decline for the non-founder Heads of Engineering as the company grows.

• Base salary increases for the Head of Engineering as their company increases in size from 21-40 FTEs to 41-75 FTEs, a $9,000 rise.

Cash and Equity Compensation by Geography
• Heads of Engineering in California also lead the pack with the largest average equity holdings, at 1.73%.

• Total cash compensation is highest among Heads of Engineering in California as compared to the other regions, driven by the largest base salary and highest target bonus at the average.

HEAD OF ENGINEERING

B

• CleanTech Heads of Engineering earn the lowest total cash and equity compensation of the segments, driven by a base salary of $144,000. • Average total cash compensation for Heads of Engineering rises gradually as a company grows in revenue, from $196,000 at pre-revenue companies to $214,000 for those with companies earning more than $20M.

• Not surprisingly, Heads of Engineering for companies that are pre-revenue have much greater current equity holdings than their counterparts at companies with revenues in excess of $5M.

California $204 $42 $162

$227 $48

$179

1-20

$203 $159 $44

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England $206 $156 $50 $198 $161 $37 21-40 $158 $193 $35 www.compstudy.com Salary

KEY:

Software

Cash Compensation by Business Segment
MidAtlantic $205 $176 $29 $154 Midwest
Sample size too small to report Sample size too small to report

$184 $30

41-75

$208 $167 $41

Bonus

$188 $149 $191 $147 $45 $39

$168 76+

$206 $38

West

South $172 $144 $28

$197 $157 $40

Communications

Hardware, Semiconductors, Electronics

Services, Consulting, Integration

Content, Info Provider

CleanTech

California 1.39%

1.73%

1.98% 1-20

2008 Compensation & Entrepreneurship Report in Information Technology

Equity by Headcount (FTEs) Equity by Geography
1.24% 21-40

KEY:

Average

New England 1.16%

1.30%

Software

Communications

Equity by Business Segment
MidAtlantic 1.30% 1.00% Midwest
Sample size too small to report Sample size too small to report Hardware, Semiconductors, Electronics Services, Consulting, Integration

0.96% 41-75

1.06% West

1.02% 76+

Content, Info Provider

1.34%

South

0.97% 0.78%

PreRevenue 1.84%

$196 $34

$162

Cash Compensation by Revenue
Up to $5M 1.35% $198 $159 $39

PreRevenue

Up to $5M

Equity by Revenue
$5 – 10M 0.97% $169 $5 – 10M

$202 $33

$10 – 20M 0.81%

$209 $162 $47

$10 – 20M

$20M+ 1.24%

$214 $168 $46

43

$20M+

CleanTech

HEAD OF ENGINEERING

44

Base Salary – 2007 and 2008 Bonus – 2007 and 2008 Equity Holdings

• Average base salary for Heads of Sales increased by 4.3% from 2007 to 2008.

• Average 2008 projected bonuses for Heads of Sales are expected to be significantly higher, 42.8%, than actual bonuses paid in 2007. However, the average target bonus for 2008 is 2% lower than the average target bonus for 2007.

Base, Bonus and Equity by Financing Rounds

• The average time of hire equity grant for non-founding Heads of Sales is 1.20%, which is above the median of 1%. • Average base salaries for Heads of Sales are approximately equal at companies that have had two to three rounds of financing and at companies that have had four or more rounds. Average target bonuses for that position steadily increase at companies with more rounds of financing. The average projected bonus is almost $10,000 higher at companies with four or more rounds of financing than at companies with one or fewer rounds of financing.

Salary, Bonus and Equity by Founder Status

• The average base salary for founding Heads of Sales is only slightly higher than the average base salary for nonfounders, while the median non-founder Head of Sales earns slightly more in base salary. • The non-founding Heads of Sales are anticipated to receive an average at-plan bonus of $98,000 in 2008, compared to $77,000 for founders in the same year.

• Heads of Sales at companies with one or fewer rounds of financing raised have relatively wide ranging equity holdings, from zero at the 25th percentile to 2.70% at the 75th percentile. This can possibly be explained by varied responsibilities for the role in early stage ventures.

• On average, the Head of Sales holds 1.21% of the company’s equity.

HEAD OF SALES

B

2007

2008

• Founding Heads of Sales make up the difference in equity holdings. Founding Heads of Sales hold more than six times the amount of equity as their non-founding counterparts. This is a nearly 100% increase in their equity holdings from 2007.

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$140 25th percentile $150 www.compstudy.com Median $160 $160 Mean

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$150 $150 $165 $167 $150 $150 $150 $169 $169 $169 $170 $170 $170

$120

$150

$167

$169

75th percentile

$180

$180

$185

$190

$185

$190

$190

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

$22

Bonus by Financing Rounds
$30

Bonus – 2007 and 2008
25th percentile $40 $50 $50 Median $70 Mean $75 $90 $98 $100

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile $100 $100
Actual Bonus Received Target Bonus

$24

Bonus by Founder Status
$40 $40 $37 $40 $90 $92 $77 $90 $97 $100 $100 $98

$130

$150 $150

Time of Hire

$150

$150

Current

$150

$150

Non-Founder ≤1

Founder

2-3

4+

0.00%

Equity by Financing Rounds

0.50%

KEY:

0.60% 1.00% 1.40% 1.21% 1.75% 3.00%

Equity by Founder Status
0.60% 1.00% 1.30% 1.21% 0.80% 1.00% 1.40% 1.14% 1.41% 7.45%

0.60%

25th percentile

Equity Holdings
Median Mean 0.75% 1.00% 1.00%

75th percentile 1.20% 1.21%

1.40%

2.70%

1.50%

45

15.00%

46

• Equity holdings by Heads of Sales are the highest at pre-revenue companies. Heads of Sales at companies with $10-$20M of revenue hold the lowest percentage of equity on average.

• Equity holdings for Heads of Sales in the Mid-Atlantic outpace holdings in other regions at an average of 1.51%, as compared to 1.30% in New England and 1.15% in California. Equity holdings for Heads of Sales in the Midwest and the South are significantly lower, at 0.95% and 0.97% respectively. • Average total cash compensation continues to be higher for Heads of Sales in the Software segment than in other segments. 2008 bonuses are also projected to be higher for Heads of Sales in this segment, at almost 1.5 times more than target bonuses in the IT Services/Consulting/Systems Integration segment.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Business Segment Cash and Equity Compensation by Revenue

• Both average base salary and average target bonus for Heads of Sales steadily increase as company headcount increases from 1-20 to 76 or more full-time employees (FTEs), with average salary 24% higher and average expected 2008 bonus 32.5% higher at the larger companies.

Cash and Equity Compensation by Geography

• Heads of Sales in California are projected to edge out their counterparts in the other geographies in total cash compensation for 2008, followed closely by those in the Mid-Atlantic and South. This marks a shift from 2007, when the total cash compensation of the Heads of Sales in the Mid-Atlantic and New England topped the charts.

• Equity holdings steadily decline as company headcount increases with Heads of Sales at companies with 76 or more FTEs holding 0.88% of equity as compared to Heads of Sales at companies with 1-20 FTEs who hold 1.70% of equity on average.

HEAD OF SALES

B

• Total cash compensation for Heads of Sales trends upward as company revenues increase, with Heads of Sales at companies with $20M+ of revenue receiving 45.6% more than at pre-revenue companies.

• Non-founder Heads of Sales equity holdings vary significantly across business segments. Interestingly, those in the CleanTech segment are at the top of the pack, with equity holdings at 1.84%.

California $283 $113 $170

$285

$112 $173

1-20

$228 $145 $83

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England $252 $161 $91 $257 $164 $93 21-40 $160 $91 $251 www.compstudy.com Salary

KEY:

Software

Cash Compensation by Business Segment
MidAtlantic $247 $168 $79 $177 Midwest $232 $160 $72 $154 $69 $157 $253 $165 $88 West
Communications Hardware, Semiconductors, Electronics Services, Consulting, Integration Content, Info Provider

$268 $91

$223

41-75

$278 $102 $176

Bonus

$252 $95

$110 $180 76+

$290

South $197 $149 $48

$266 $168 $98

CleanTech

1.70% 1.15% 1-20

2008 Compensation & Entrepreneurship Report in Information Technology

Equity by Headcount (FTEs) Equity by Geography
21-40 1.26%

KEY:

Average

California 1.33%

New England 0.77%

1.30%

Software

Communications

Equity by Business Segment
MidAtlantic 1.11% Midwest 0.89% 0.95%
Hardware, Semiconductors, Electronics Services, Consulting, Integration

1.51%

1.08% 41-75

1.18% 0.99% West

0.88% 76+

South

0.97% 1.84%

PreRevenue 1.45%

$243 $81

$162

Cash Compensation by Revenue
Up to $5M 1.26% $251 $160 $91

PreRevenue

Up to $5M

Equity by Revenue
$5 – 10M 1.31% $170 $96 $5 – 10M

$266

$10 – 20M 0.89%

$278 $108 $170

$10 – 20M

$20M+ 1.00%

$301 $118 $183

47

$20M+

Content, Info Provider

CleanTech

HEAD OF SALES

48

Salary and Bonus – 2007 and 2008 Equity Holdings

• Average base salary for Heads of Marketing increased slightly, by 3.75%, between 2007 and 2008, rising from $160,000 to $166,000. The median base salary increased by $10,000.

• Average equity holdings are significantly greater for founders, 7.19%, than for non-founders, 0.92%.

Salary, Bonus and Equity by Financing Rounds

• Time of hire grants for Heads of Marketing averaged 0.91%, a 24% decrease from 2007. • The average and median base salary for Heads of Marketing steadily increases as companies raise additional rounds of financing, evidencing the greater need for marketing expertise as companies mature. On the other hand, the average bonus for Heads of Marketing decreases with additional rounds of financing. The average projected bonus for Heads of Marketing dips by $7,000 from companies with two or more rounds of financing to those with four or more rounds.

Salary, Bonus and Equity by Founder Status

• The average target bonus for Heads of Marketing remained flat from 2007 to 2008, though Heads of Marketing received, on average, 62.5% of their target bonus last year.

• As expected, average base salary and average target bonus for non-founders are higher than for founding Heads of Marketing, reflecting the cost of bringing in outside marketing expertise.

• On average, the Head of Marketing holds 0.92% of their company.

HEAD OF MARKETING

B

• Average equity holdings for Heads of Marketing at companies with two to three rounds are higher than average equity holdings for Heads of Marketing one or fewer rounds. The equity holdings for the Head of Marketing in the later stage companies almost match the holdings for the Heads of Marketing at companies with one or fewer rounds.

2007

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$140 $135

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$135 $146 $145 $150 $159 $159 $166 $165 $168 $165 $170 $169 $170

$146

25th percentile

www.compstudy.com Median Mean $160 $160

$160

$166

75th percentile $170

$175

$180

$184

$185

$178

$190

$185

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

Bonus by Financing Rounds
$10 $5

Bonus – 2007 and 2008
25th percentile Median Mean $30 $25 $25 $25 $30

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile
Actual Bonus Received Target Bonus

$20

Bonus by Founder Status
$25 $25 $25 $30 $40 $40 $43 $45 $50 $53 $43

$40 $40

$40

$55

$48

$60

$48

$48

$55

$72

$55 $55

Time of Hire

Current

$60

Non-Founder ≤1

Founder

2-3

4+

0.00%

Equity by Financing Rounds

0.20%

25th percentile 0.40%

KEY:

Equity Holdings
Median Mean 0.70%

0.40% 0.90% 1.25% 0.92% 1.30% 2.50%

Equity by Founder Status
0.30% 0.65% 0.69% 0.70% 0.74%

0.90%

0.90%

75th percentile 0.91% 0.92%

1.00%

1.25%

1.00%

1.00%

1.10%

1.37%

1.25%

49

7.19%

9.32%

50

• In general, equity holdings for Heads of Marketing decline with increasing company revenue, from 1.15% for pre-revenue companies to 0.58% for companies with more than $20M of revenue. Surprisingly, Heads of Marketing at companies with $5-10M of revenue enjoy the greatest equity holdings, at 1.16%.

• Average current equity holdings for Heads of Marketing vary slightly by business segment, with Heads of Marketing in the Communications, Cleantech and Services/Consulting/ Systems Integration segments having the lowest average holdings. • Total cash compensation for Heads of Marketing generally trends upward as company revenues increase. However, Heads at companies with $20M of revenue or more experienced a slight drop in total cash compensation despite enjoying the highest average projected bonus.

• Heads of Marketing in California received the highest average base salary at $177,000. Heads of Marketing in the West are targeted to receive the largest average bonus of $68,000. • Heads of Marketing in the Communications segment receive the highest average total cash compensation, largely due to having the highest base salary, $180,000.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Business Segment

• Average total cash compensation for the Head of Marketing increases as the number of full-time employees (FTEs) increases. Surprisingly, the target bonus for Heads of Marketing at companies with 41-75 FTEs is lower than at companies with 21-40 as well as those at companies with 76 or more FTEs.

Cash and Equity Compensation by Geography

• Interestingly, the total cash compensation for Heads of Marketing in the West and California bested those in New England and the Mid-Atlantic, marking a shift from 2007. Those in the New England came in at the bottom of the pack.

Cash and Equity Compensation by Revenue

• Average equity holdings for Heads of Marketing generally decline as headcount increases, with those holding the position at companies with 1-20 FTEs enjoying more than 125% greater equity holdings than at companies with 76 or more FTEs.

HEAD OF MARKETING

B

California $214 $48 $166

$222 $45

$177

1-20

$176 $145 $31

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England $228 $180 $48 $198 $159 $39 21-40 $159 $212 $53 www.compstudy.com Salary

KEY:

Software

Cash Compensation by Business Segment
MidAtlantic $210 $171 $39 $167 Midwest $215 $168 $47
Sample size too small to report

$212 $45

41-75

$212 $170 $42

Bonus

$226 $158 $213 $159 $54 $68

$177 76+

$230 $53

West

South $186 $141 $45

$207 $164 $43

Communications

Hardware, Semiconductors, Electronics

Services, Consulting, Integration

Content, Info Provider

CleanTech

California 0.95%

1.09%

1.50% 1-20

2008 Compensation & Entrepreneurship Report in Information Technology

Equity by Headcount (FTEs) Equity by Geography
0.95% 21-40

KEY:

Average

New England 0.78%

0.85%

Software

Communications

Equity by Business Segment
MidAtlantic 0.97% Midwest 0.75%
Sample size too small to report Hardware, Semiconductors, Electronics Services, Consulting, Integration

1.00%

0.89% 41-75

0.94% West

0.66% 76+

Content, Info Provider

0.94%

South

0.59% 0.73%

PreRevenue 1.15%

$189 $35

$153

Cash Compensation by Revenue
Up to $5M 0.96% $199 $159 $40

PreRevenue

Up to $5M

Equity by Revenue
$5 – 10M 1.16% $174 $5 – 10M

$225 $51

$10 – 20M 0.84%

$232 $179 $53

$10 – 20M

$20M+ 0.58%

$230 $171 $59

51

$20M+

CleanTech

HEAD OF MARKETING

52

• At the average the Head of Business Development received about 52% of their target bonus in 2007, or $33,000 on a target of $63,000. This 52% attainment was the lowest among all positions surveyed in this year’s report.

Base Salary – 2007 and 2008 Bonus 2007 and 2008 Equity Holdings

• The average base salary for Heads of Business Development rose by 5% from $157,000 in 2007 to $165,000 in 2008.

• At $66,000, the average 2008 target bonuses for Heads of Business Development are only 4.7% higher than 2007 target bonuses.

Base, Bonus and Equity by Financing Rounds
• The Head of Business Development holds an average of 1.05% of the company.

• Heads of Business Development at companies with two to three rounds of financing are expected to receive bonuses that are roughly equal to those at four or more rounds of financing, while the Heads at companies with one or fewer rounds of financing enjoy higher bonuses at both the median and average.

Base, Bonus and Equity by Founder Status

• Unlike other positions the average base salary for nonfounder Heads of Business Development is roughly the same as the average base salary for founders. • The average target 2008 bonus for non-founding Heads of Business Development is $16,000, or 32% higher than the average bonus for founders. • Founding Heads of Business Development hold an average 6.31% equity stake compared to 1.05% for non-founders.

• Time of hire equity granted to Heads of Business Development averages 1.23%, with a median time of hire grant of 1.00%. • As expected, equity holdings for the Head of Business Development decline with an increase in company funding from an average of 1.80% in those with one or fewer rounds to 0.76% in those companies who have raised more than four rounds.

HEAD OF BUSINESS DEVELOPMENT

B

2007

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$131 $144

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$150 $150 $150 $150 $165 $165 $158 $165 $165 $165 $166 $168 $170

$150

25th percentile

www.compstudy.com $155 $157 Median Mean

$150

$165

$165

75th percentile

$175

$180

$185

$185

$185

$186

$190

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

$5

Bonus by Financing Rounds
$23 $22 $25

Bonus – 2007 and 2008
25th percentile $20 $25 $25 $33 Median $38 $40 Mean $50 $65 $65 $63

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile $66
Actual Bonus Received Target Bonus

Bonus by Founder Status
$25 $30 $38 $40 $45 $50 $50 $63 $66

$80

$80

$90

$95

$100

Time of Hire

$100

Current

$95

$75

Non-Founder ≤1

Founder

2-3

4+

0.00%

Equity by Financing Rounds

0.30%

25th percentile 0.50%

KEY:

Equity Holdings
Median Mean

75th percentile

0.50% 1.00% 1.20% 1.05%

0.09%

Equity by Founder Status
0.50% 2.10% 0.66% 0.76% 1.00% 1.20% 1.00% 1.08% 4.00%

1.00%

1.00%

1.00%

1.05%

1.20%

1.20%

1.23%

53

1.75%

1.80%

6.20%

6.31%

54

• As anticipated, Heads of Business Development equity holdings decrease steadily with increasing company headcount, although Heads at companies with 21-40 FTEs enjoy the greatest holdings at 1.61%. • Average total cash compensation for Heads of Business Development is anticipated to be highest in the West during 2008 at $255,000, driven in large measure by an $84,000 average target bonus.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Business Segment Cash and Equity Compensation by Revenue

• Both base salary and total cash compensation for Heads of Business Development are relatively flat as companies increase their headcount, although there is a slight downward trend in total cash compensation for Heads at companies with 41-75 fulltime employees (FTEs). The target bonuses generally decrease as the company expands, although Heads of Business Development at companies with 76 or more FTEs enjoy a modest increase in target bonuses over those at companies with 41-75 FTEs.

• Heads of Business Development in the Communications sector have the highest equity holdings at 1.28%. • The total cash compensation for Heads of Business Development is generally flat at companies with various levels of revenues; however there is a spike at companies with $20M+ in revenue, with Heads of Business Development at these organizations receiving $287,000 or roughly 30% more than companies under $20M. • Average equity holdings for Heads of Business Development increase from pre-revenue companies up to $5M companies, but then taper off and are lowest at companies with $20M or more in revenue.

Cash and Equity Compensation by Geography

HEAD OF BUSINESS DEVELOPMENT

B

• Heads of Business Development in the Content/Information Provider business segment have the highest total cash compensation at $254,000, though also hold the lowest average equity in their companies, 0.76%.

• On the other hand, Heads of Business Development in the West hold the lowest average equity holdings at 0.79%.

• Heads of Business Development in the South hold the highest average equity holdings at 1.58%.

California $240 $74 $166

$233 $64

$169

1-20

$237 $155 $82

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England $225 $163 $62 $235 $165 $70 21-40 $166 $237 $71 www.compstudy.com Salary

KEY:

Software

Cash Compensation by Business Segment
MidAtlantic $201 $161 $41 $161 Midwest $201 $148 $53
Sample size too small to report

$223 $62

41-75

$217 $164 $53

Bonus

$255 $171 $254 $170 $84 $84

$173 76+

$238 $65

West

South $197 $170 $27

$217 $165 $52

Communications

Hardware, Semiconductors, Electronics

Services, Consulting, Integration

Content, Info Provider

CleanTech

California 1.14%

1.28%

1.43% 1-20

2008 Compensation & Entrepreneurship Report in Information Technology

Equity by Headcount (FTEs) Equity by Geography
21-40 1.61%

KEY:

Average

New England 1.28%

0.97%

Software

Communications

Equity by Business Segment
MidAtlantic 0.96% 0.94% Midwest 1.00%
Sample size too small to report Hardware, Semiconductors, Electronics Services, Consulting, Integration

0.77% 41-75

0.79% West

0.57% 76+

Content, Info Provider

0.76%

South

1.58%

PreRevenue 1.09%

$220 $66

$154

Cash Compensation by Revenue
Up to $5M 1.43% $218 $164 $54

CleanTech

0.80%

PreRevenue

Up to $5M

Equity by Revenue
$5 – 10M 0.71% $157 $61 $5 – 10M

$218

$10 – 20M 0.72%

$220 $174 $46

$10 – 20M

$20M+ 0.65%

$287 $111 $176

55

$20M+

HEAD OF BUSINESS DEVELOPMENT

56

• The average equity position held by the Head of Human Resources drops significantly as the company moves from two to three rounds of financing to four or more rounds. For those companies with two to three rounds raised, the nonfounder Head of Human Resources holds an average of 0.34% of the company, compared to 0.13% for those at companies with four or more rounds of financing raised.

Base Salary – 2007 and 2008 Bonus – 2007 and 2008 Equity Holdings

• Average base salary for the Head of Human Resources increased slightly from 2007 to 2008 from $105,000 to $113,000.

• The average Head of Human Resources received a bonus of $15,000 on a target of $25,000 in 2007. In 2008, average target bonus is $28,000, or 24% of base salary.

Base, Bonus and Equity by Financing Rounds

• Current equity held by the non-founding Head of Human Resources is the lowest among the executive positions surveyed in this report and ranges from zero at the 25th percentile to 0.30% at the 75th percentile.

• Average base salary and target bonus are higher for those Heads of Human Resources at companies with two or three rounds of financing raised than for their counterparts at companies with four or more rounds raised.

HEAD OF HUMAN RESOURCES

B

2007

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$80

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$85 $85 $85 $95 $104 $105 $108 $113 $130 $113 $130

$85

25th percentile $95

www.compstudy.com $105 Median $108 Mean

$100

$113

75th percentile

$130

$135

$144

$145

Sample size too small to report

$145

$150

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

$5

Bonus by Financing Rounds
$4

Bonus – 2007 and 2008
25th percentile $10 $10 $10 $14 $15 Median Mean $18 $38 $20

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile
Actual Bonus Received Target Bonus

$25

$28

$10

Bonus by Founder Status
$10 $16 $10 $19 $25 $22 $23 $18 $32

$63

$28

$75

$34

Time of Hire

Current

Sample size too small to report

$20

$34

Non-Founder ≤1

Founder

2-3

4+

0.00%

Equity by Financing Rounds
0.00% 0.00%

0.00%

25th percentile 0.06%

KEY:

Equity Holdings
0.10% 0.10% Median Mean

75th percentile

0.00%

Equity by Founder Status
0.05% 0.10% 0.13% 0.10% 0.20% 0.20% 0.31% 0.34%

0.30%

0.24%

0.27%

0.30%

0.30%

57

Sample size too small to report

0.27%

0.50%

0.30%

58

• Heads of Human Resources in California also hold the largest equity stakes in their companies with 0.54% at the average.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Revenue

Cash and Equity Compensation by Geography

• Total cash compensation and equity holdings for the Head of Human Resources are both higher at companies with 76 or more FTEs when compared to those at companies with 41-75 FTEs. The rise in equity holdings can possibly be attributed to the broader role that the Head of Human Resources plays in these larger organizations. • Heads of Human Resources in California earn the highest total cash compensation; however, Heads in the West have the largest bonus at $46,000.

• Average total cash and equity cash compensation varied with company revenues with Heads of Human Resources at companies earning $20M or more receiving an average of $153,000 in cash compensation, with 0.39% in equity holdings.

HEAD OF HUMAN RESOURCES

B

California $141 $25 $116

$164 $30

$134

Sample size too small to report

1-20

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England
Sample size too small to report

Software

Cash Compensation by Business Segment
$130 MidAtlantic $108 $12 $96
Sample size too small to report

$158 $28

21-40

$129 $103 $26

www.compstudy.com Salary

KEY:

Midwest
Sample size too small to report

Sample size too small to report

41-75

$129 $112 $17

Bonus

Communications

Hardware, Semiconductors, Electronics

Services, Consulting, Integration

Content, Info Provider

$157 $111 $46

$144 $46 $98

$148 $117 76+ $31 $130 $16 $114

West

CleanTech

Sample size too small to report

South

California 0.24%

0.54%

Sample size too small to report

2008 Compensation & Entrepreneurship Report in Information Technology

1-20

Equity by Headcount (FTEs) Equity by Geography
21-40 0.24%

KEY:

Average

New England
Sample size too small to report

0.22%

Software

Communications

Equity by Business Segment
MidAtlantic 0.17%
Sample size too small to report

0.17% 41-75

0.28% 76+

Midwest
Sample size too small to report

Sample size too small to report

0.32% West

Hardware, Semiconductors, Electronics

Services, Consulting, Integration

Content, Info Provider

0.53%

Sample size too small to report

CleanTech

Sample size too small to report

South

PreRevenue 0.23%

$149 $33

$116

Cash Compensation by Revenue
Up to $5M 0.28% $124 $16 $108

PreRevenue

Up to $5M

Equity by Revenue
$5 – 10M 0.22% $120 $5 – 10M

$145 $25

$10 – 20M 0.09%

$119 $217 $102

$10 – 20M

$20M+ 0.39%

$153 $117 $36

59

$20M+

HEAD OF HUMAN RESOURCES

60

Base Salary – 2007 and 2008 Bonus – 2007 and 2008 Equity Holdings

• Average base salary for the average Head of Professional Services rose $8,000 in 2008 to $156,000. • The average time of hire equity granted to the Head of Professional Services is 0.60%.

• The Head of Professional Services received an average bonus of $33,000 in 2007, which represents 72% of the 2007 target. Average target bonus dipped slightly lower for the Head of Professional Services from 2007 to 2008.

Base, Bonus and Equity by Financing Rounds

• Current equity held by the non-founding Heads of Professional Services is 0.75% at the average and ranges from 0.10% at the 25th percentile to 1.00 % at the 75th percentile. • Average base salary and bonus for Heads of Professional Services are slightly lower at companies at later rounds of financing raised; however, average equity holdings for those same executives at companies with four or more rounds of financing are one-third greater than their counterparts at companies with two or three rounds raised.

HEAD OF PROFESSIONAL SERVICES

B

2007

2008

Non-Founder ≤1

Base Salary by Financing Rounds

Base Salary – 2007 and 2008
$130

KEY:

Founder

2-3

4+

Base Salary by Founder Status
$126 $125 $135 $156 $160 $160 $163 $149 $150 $150 $160 $163

$135

25th percentile

www.compstudy.com $148 Median $150 Mean

Sample size too small to report

$156

$160

75th percentile

$170

$180

$170

$180

$185 $183

2007

2008

KEY:

Non-Founder Founder ≤1

2-3

4+

$15

Bonus by Financing Rounds
$15

Bonus – 2007 and 2008
25th percentile $22 $25 $32 $33 Median Mean $45 $46 $45 $45

2008 Compensation & Entrepreneurship Report in Information Technology 75th percentile $48
Actual Bonus Received Target Bonus

$60

$20 $25

Bonus by Founder Status
$22 $30 $31 $45 $45 $35 $60 $64 $50 $54 $55

Sample size too small to report

$74

$64

Time of Hire

Current

$100

Non-Founder ≤1

Founder

2-3

4+

0.16%

Equity by Financing Rounds
0.10%

0.10%

25th percentile 0.30%

KEY:

Equity Holdings
0.40% Median Mean

0.10% 0.30% 1.00% 0.75% 0.96%

Equity by Founder Status
0.27% 2.20% 0.40% 0.50% 0.66%

Sample size too small to report

0.60%

75th percentile 0.75%

0.80%

0.88%

1.00%

1.00%

1.00%

61

7.23%

7.75%

62

• Heads of Professional Services in companies with greater than 40 FTEs see equity holdings reduced by over one-third from the 0.86% held by those in companies with 21-40 FTEs. • There is a steady trend upward in total cash compensation for the Head of Professional Services as company revenue increases. The reverse correlation holds true for average equity holdings.

Cash and Equity Compensation by Headcount Cash and Equity Compensation by Revenue

• With increasing headcount, total cash compensation for Heads of Professional Services rises from $182,000 in companies with 21-40 FTEs to $206,000 at companies surveyed with 41-75 FTEs where it plateaus.

HEAD OF PROFESSIONAL SERVICES

B

California $206 $47 $159

$207 $43

$164

Sample size too small to report

1-20

Cash Compensation by Headcount (FTEs) Cash Compensation by Geography
New England
Sample size too small to report

Software

Cash Compensation by Business Segment
$149 MidAtlantic
Sample size too small to report

$198 $49

21-40

$182 $140 $42

www.compstudy.com Salary

KEY:

$187 $24 $163

Midwest
Sample size too small to report

Sample size too small to report

41-75

$206 $160 $46

Bonus

$236 $179 $57

$157 76+

$205 $48

Communications

Hardware, Semiconductors, Electronics

Services, Consulting, Integration

Content, Info Provider

Sample size too small to report

West

CleanTech

Sample size too small to report

South

$209 $151 $58

California 0.66%

0.90%

Sample size too small to report

2008 Compensation & Entrepreneurship Report in Information Technology

1-20

Equity by Headcount (FTEs) Equity by Geography
21-40 0.86%

KEY:

Average

New England
Sample size too small to report

0.50%

Software

Communications

Equity by Business Segment
MidAtlantic
Sample size too small to report

1.34%

0.56% 41-75

0.59% 76+

Midwest
Sample size too small to report

Sample size too small to report

0.61% West

Hardware, Semiconductors, Electronics

Services, Consulting, Integration

Content, Info Provider

Sample size too small to report

CleanTech

Sample size too small to report

South

0.15%

PreRevenue

PreRevenue 1.17%

$147 $20

$127

Cash Compensation by Revenue
Up to $5M 0.84% $189 $151 $38

Up to $5M

Equity by Revenue
$5 – 10M $5 – 10M 0.68% $154 $40

$194

$10 – 20M

$10 – 20M 0.68%

$218 $161 $57

$20M+

$20M+ 0.62%

$240 $174 $66

63

HEAD OF PROFESSIONAL SERVICES

64

• Of the over 1,200 Board Members reported in this survey, investors comprise more than half of the seats, while outside members make up approximately 20% of the Board. • Investors comprise 33% of the Board of Directors in the earliest stage companies, shifting to approximately half of the Board in those companies having raised five or more rounds of financing. • Current and former employees lose seats on the Board with increasing financing rounds raised. • Very few outside Chairpersons and Board Members receive annual equity grants for Board service, 10% and 5%, respectively.

Board Demographics

• There were 342 reported Chairpersons in this survey.

Board Composition by Financing Round Annual Cash and Equity Grants

• The Chairperson is the CEO of the company 56% of the time. An investor acts as Chairperson at 16% of the companies surveyed.

• With increasing financing rounds, the makeup of the Board of Directors shifts to include both a greater number of outside members and, more so, a larger percentage of investors.

BOARD OF DIRECTORS

B

• Half of the outside Chairpersons surveyed receive an annual cash grant to serve on the Board of Directors, while only 15% of outside Board Members receive the same.

56%

CEO

10%

Chairperson

Board Member

Annual Cash Grants 4

50%

Percentage of Outside Directors Receiving Annual Grants Percentage of Outside Directors Receiving Annual Grants
15% 12 12 14 20 25 10% Current Executive (Non-CEO) 14% 11% Former Executive 4% 3% 16% Investor Outside Executive 6% 19%

Board Demographics
www.compstudy.com 56%

Annual Equity Grants

5%

Chairperson 40

Board Member 41

Chairperson 4%

Board Member Academia/ Other 2%

Equity Granted to Join Board – Chair and Board Member

Chairperson Chairperson
18% 33% 49%

2008 Compensation & Entrepreneurship Report in Information Technology

Board Member Board Member

0 or 1

Board Composition by Financing Round
0.00% 17% 44% 39% 2 0.20% Investors Current/Former Employees Outside Directors 19% 52% 29% 3 0.40% 16% 54% 30% 4 0.48% 0.50%

Current Equity – Chair and Board Member

KEY:

0.09% 0.30% 0.00%

Outside Board of Directors Outside Board of Directors
0.40% 0.60% 0.72% 1.03% 25th percentile Median Mean 75th percentile

1.40%

0.50%

1.93%

21% 50% 29% 5+

0.70%

• The outside Chairperson receives an average equity grant of 0.48% to join the board, while the average outside board member receives 0.40%. At the 75th percentile the chairperson receives 0.70% to join the board versus 0.50% for the outside board member.

Outside Board of Directors Compensation

• The median outside Chairperson holds 0.60% of the company, though at the average the equity held is 1.93%. This suggests a small number of outside Chairpersons with relatively large holdings. Outside board members hold a median position of just under one-third of a percent.

A

BOARD OF DIRECTORS

65

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