Thought Leadership - Financial Services
How Unicorn Companies Can Overcome Hiring Challenges in a Post-Boom Era
Published February 14, 2024

Unicorns – pre-IPO businesses valued at $1 billion or higher – have lost some of their shine. In 2021 it was easy to quickly attract top talent to a unicorn company. But today, candidates in the U.S. and around the globe are wary. Valuations are underwater.  There is worry about downrounds and lack of runway.  Pitchbook data shows start-up collapses doubled last year, and those included some high-profile unicorn failures.  Given this climate, executives have tough questions for unicorns looking to hire.

“Candidates have heard the press about how unicorns over-raised, how the valuations are too high, and how firms aren’t investing anymore,” explains Dan Miller, co-head of True’s Venture Capital practice.  “They're aware of these factors going into conversations, and they are asking questions in a way they never would have two years ago when everything looked like a rocket ship.”

That reluctance makes hiring harder and slower than before. In 2021, True’s late-stage VC searches lasted 90 days on average.  In Q4, 2023, the average was 108 days.  So how can these once-sterling, pre-IPO companies attract talent now? When engaging with talent to fill critical positions, True suggests companies follow this advice: 

Be as transparent as possible about the company's financial situation.  “There’s no benefit in sugarcoating the truth,” says Shawn Thorne, co-head of True’s Venture Capital practice.  “The lesson for our clients is you have to expect the candidates are going to ask about valuations as a qualifying question…and sometimes the answers aren't good.”

What candidates want to see before they join is a clear path to profitability, adds Caroline Lo, Co-Head of Financial Services, based in London.  “Give them the financial accounts and board pack data to reassure candidates of the financial health of the business; talk openly about the known risks and how they're being managed.”

Remember, candidates already have access to this type of financial information for the public companies they may also be considering joining.  Your transparency helps put your business on even footing when it comes to explaining the bull case for the company and the market.

Leverage the investors behind the company, particularly those who have either backed the vision from the early days or who led the most recent financing.  VCs can help provide that financial transparency, and often can sell your company’s upside as well or better than anybody on the inside.

You don’t want to burn a VC’s time unnecessarily, advises Miller.  He says investors should only meet finalists, “but for key hires that will move the needle for their funds, VCs are usually quite motivated to help.”

During the unicorn boom, job descriptions could be vague.  The big valuations and equity potential were enough to attract talent. Growth was exponential, prompting companies to overhire or hire without a specific job description.  Now, candidates are wary of joining a company in a role that may not be central to the success of the organization.

“People want to know that they have a hand in their fate,” Thorne says.  “When the position’s intended impact is clear it helps recruit the candidate.”

Candidates want to know what their responsibilities will be, who they will be interacting with, and how they will fit into the big picture.  Companies should share more behind-the-scenes details with candidates, and earlier in the process than they would historically.  Put candidates under an NDA and create a package of materials with information relevant to the role.

Unicorn companies need leaders who can scale to public status.  To do that everyone must understand the challenges that could impede that progress. 

Despite the challenges facing start-ups and unicorns, there is no discount on top talent. For executive roles, strong candidates expect to be compensated fairly.

“You can't go in with a coupon book and expect to be able to purchase that talent,” Thorne says.

With fewer exits and longer time horizons for IPO, sought-after leaders are carefully optimizing for both cash and equity. Going low on compensation will lower the bar of talent you can bring on board.

“Candidates now have heightened awareness of the financial risk of joining a start-up,” Lo says. “Versus prior years where candidates took pay cuts and accepted low cash compensation, they’re now more conscious of maintaining a better income on the growth journey in front of them with a view that hopefully a wealth creation event will happen, but knowing it may not.”  

The hiring process may be slower now, but there is good reason for it.  Both candidates and companies are taking time to do their due diligence.  Candidates are doing their homework about everything from the finances, to the culture, to investor commitment, to the tone set by the CEO.

Companies should invest the same amount of care, Lo says.  That means more time with the job description, more thoughtfulness around how executives will be onboarded, and more personal effort into recruiting them to the company.  In-person meetings for finalists, particularly with investors, have proven highly effective at enticing candidates to unicorn companies.  That extra step it takes to fly them in or fly to see them means more today in the age of Zoom meetings.