Pave Raises Millions for Startup Compensation Transparency

Determining appropriate compensation at privately funded, rapidly growing companies can be remarkably complex, and missteps in this area can result in pay inconsistencies and the kind of uncertainty that negatively impacts employee morale.

Pave, a startup headquartered in San Francisco and a recent graduate of the Y Combinator program, is working to resolve disparities in pay and equity through a software platform designed to simplify the process of monitoring, evaluating, and sharing employee compensation details.

The central question remains whether the tech industry, historically marked by pay inequalities and gender-based differences in compensation, is prepared to embrace this level of openness.

Investment firms appear to believe it is. Andreessen Horowitz has invested significantly in Pave, contributing to a $16 million Series A funding round that values the company at $75 million post-money, as we previously reported in August. This funding round also features participation from the a16z Cultural Leadership Fund, Bessemer Venture Partners, Bezos Expeditions (Jeff Bezos’s personal investment firm), Dash Fund, and Y Combinator.

Kristina Shen, a General Partner at A16z, will assume a position on the company’s board of directors. Marc Andreessen will serve as a board observer.

A rebrand and re-focus

Pave, previously known as Trove, is focused on developing an online platform of data and real-time resources aimed at fostering greater equity in compensation within the startup ecosystem. The platform’s features enable businesses to monitor, evaluate, and effectively communicate employee compensation details on an individual level. This is achieved through integration with popular HR systems like Workday, Carta, and Greenhouse, a process CEO Matt Schulman states takes customers approximately five minutes to complete when using Pave.

The service assists companies in managing all aspects of employee pay, encompassing promotion processes, compensation modifications, bonus distribution, and the allocation of equity to new hires.

For employees, the platform provides a comprehensive view of their total compensation package, alongside predictive insights into potential growth opportunities regarding their company stake. This feature is called Total Rewards, and it mirrors a similar offering recently launched by competitor Welcome (which secured $6 million in funding this week), sharing the same name and objective.

Schulman explains that startups commonly encounter difficulties with managing stock options, equity, benchmarking data, and promotion timelines due to these processes traditionally being handled offline and being quite complex. However, transparent communication regarding these elements is crucial for both attracting talent and retaining existing employees.

A key hurdle for Pave lies in persuading its startup clients to share data concerning their compensation practices. While the data is anonymized to prevent employees from viewing their coworkers’ salaries, it necessitates a company’s willingness to track and address potential disparities in compensation.

“I anticipate that some companies will be slower to adopt this approach, particularly those who don’t immediately share this vision,” Schulman acknowledges. “Transforming compensation practices, which have remained largely unchanged for many years, presents a significant undertaking.” Currently, Pave collaborates with companies individually to determine the extent of information they wish to share with their workforce. Ultimately, Schulman envisions the establishment of an industry-wide standard.

Is the Industry Prepared for Compensation Benchmarking?

The founder believes achieving this goal is within reach. Schulman referenced Carta, a cap table management solution, as an illustration of how broadly accepted a tool can become.

“Initially, some businesses were hesitant to use Carta, feeling uneasy about consolidating all their records into a single, centralized database,” he explained. “Today, it’s commonplace. Carta is utilized by nearly all venture-backed companies.”

However, even Carta has faced challenges in promoting a practice it advocates for: equitable employee compensation. The company is currently involved in a legal dispute with its former vice president of marketing, Emily Kramer, alleging gender discrimination. Kramer’s lawsuit claims she received $50,000 less in pay compared to her colleagues, and her equity grant was only one-third the share amount given to her male counterparts. Additionally, the company recently reduced its workforce by 16%, attributing the decision to a slowdown in acquiring new customers.

Given the difficulties experienced by Carta, which is valued at $3 billion, an early-stage company like Pave will undoubtedly encounter significant obstacles regarding transparency. The startup hopes its new, industry-wide benchmarking initiative will stimulate discussion and encourage companies to move in a positive direction.

Pave is launching today a collaborative effort with portfolio companies from a16z, Bessemer Venture Partners, NEA, Redpoint Ventures, and YC to collect compensation information. This data, gathered through an opt-in process, will enable Pave to publish a compensation benchmark report detailing how companies compensate their employees. The report will be publicly available, but will present aggregated data, ensuring no individual company’s performance can be identified.

Other platforms, including Glassdoor and AngelList, have previously attempted to measure pay across different positions. Schulman notes that “companies often don’t have confidence in that data” because it is sourced from crowdsourcing and may contain survey biases.

The tool is intended to enable companies to move from conducting diversity and inclusion analyses annually to performing them on an ongoing basis, “preventing them from deviating from a fair and equitable approach,” he stated.

While Pave seeks to encourage other companies to share sensitive data, it is still in the process of implementing the same level of transparency internally. The company declined to disclose the diversity breakdown of its team, which has expanded from five to thirteen employees in a short period and aims to reach thirty employees by the end of the year. A review of LinkedIn profiles suggests that Pave’s team is predominantly white and male.

The increasing prevalence of remote work may accelerate the adoption of transparency. The growth of distributed workforces has prompted companies to address questions surrounding compensation, Schulman explained.

“How do you compensate a San Francisco-based engineer who wishes to relocate to Wyoming?” Schulman asked. “That’s the central question for many organizations.” This shift is transforming compensation into a mainstream topic of discussion, and the company has garnered interest in its services from companies like Allbirds, Checkr, Tide, and Instabase. Schulman reports that initial users have expressed strong support for transparency.

After establishing a strong foothold within the venture-backed startup ecosystem, Pave plans to expand its reach to other regions and business types.

“There are 3 billion people globally who participate in the labor market,” he said. “Currently, how they are compensated remains largely unknown.”