The Challenge of Retaining Talent at Startups
In the race to build a successful startup, capital is often regarded as a decisive resource for survival and market expansion. However, when a startup can raise funds but fails to retain a capable team to turn ideas into products, customers and revenue, its financial advantage may be difficult to translate into sustainable growth.
This paradox is particularly evident for startups. They need employees with strong expertise, the ability to adapt quickly and a willingness to take risks, yet they often lack the resources to compete with large corporations in terms of salaries, benefits and employer branding. When more attractive opportunities emerge in the labour market, key employees may leave, disrupting operations, delaying product development and undermining investor confidence.
According to Carta’s recent State of Startup Compensation report, the number of new hires per month at companies covered by the platform’s data has fallen by more than 50%. The startup talent market has become more cautious, while businesses must place greater emphasis on resource efficiency and cost control.
In this context, talent retention is no longer simply an HR challenge but has become an economic management issue: How can every dollar spent on employees generate greater value while enabling a business to maintain its long-term competitiveness?
Quynh Diem, Director of An Xuan Organic Herbal Medicine Company, a startup founder who has exported products to the US market through official channels, said: “When financial resources are still limited, startups need to rethink their recruitment and talent retention strategies. Rather than simply seeking outstanding individuals, businesses should prioritise people who have the specific expertise they need and, more importantly, whose values align with the company’s culture, vision and development strategy.”
It’s Not Just About Salary
Large companies have an advantage in their ability to offer competitive salaries, comprehensive benefits packages and clear career progression paths. Startups can hardly replicate this model when cash flow is limited, revenue remains unstable and the time needed to break even is still uncertain.
However, this does not mean that startups are entirely disadvantaged in the competition for talent. With lean organisational structures, they can give employees greater autonomy earlier on, allowing them to engage directly in business decisions, contribute to product development and see the tangible impact of their work.
According to Quynh Diem: “I believe that retaining employees also comes down to support and understanding. Sometimes, they face personal challenges, such as caring for young children, dealing with their parents’ health problems or coping with family pressures. If leaders know how to listen, remain flexible and work with employees to find solutions, the relationship becomes more than just one between an employer and an employee. It also involves trust, mutual care and a sense of responsibility towards one another.”
These factors are also becoming increasingly important in career choices. Deloitte’s Gen Z and Millennial Survey, conducted among 22,841 respondents across 44 countries, found that 86% of Gen Z respondents and 89% of Millennial respondents considered a sense of purpose at work important to their career satisfaction. Work-life balance was also a top priority for both generations when choosing an employer.
In practice, talented employees consider more than just their monthly salary. They also assess career prospects, management quality, learning opportunities and the level of fairness within an organisation. A workplace where employees are overworked, priorities change constantly or contributions go unrecognised can still lose talent, even if the company has a promising product.
Therefore, one mistake startups make is assuming that employees must accept every hardship simply because they work for a startup. A spirit of shared commitment does not mean that employees should have to put up indefinitely with shortcomings in compensation, processes or management.
The Founder’s Management Skills
Research conducted by Gallup and Workhuman found that employees who received high-quality recognition were 45% less likely to move to another organisation over the following two-year period than the comparison group in the study. This finding reflects an association between recognition and the likelihood of leaving, rather than proving that recognition alone can prevent all cases of employee turnover.
At startups, founders often take on multiple roles simultaneously, from product development and fundraising to team management. The pressure to survive can lead them to focus primarily on revenue and deadlines, while people-related issues are only addressed after conflicts arise or employees announce their departure.
This reactive management approach makes it difficult for businesses to identify the risk of losing talent at an early stage. A talented employee may leave not because they have received a higher-paying offer, but because they see no clear prospects for growth, lack trust in the organisation or have to work in an inconsistent environment.
“When choosing to stay with a company, people look for more than just income; they also want to gain other forms of value. These may include a positive working environment, good colleagues, learning opportunities, greater autonomy, the chance to take on new challenges and the ability to see their own personal growth. These are also advantages that startups can create, even without a large budget,” said Quynh Diem.
Startups need to establish regular one-on-one discussions between managers and employees, focusing on three questions: What is hindering work performance? Which skills would employees like to develop in the coming months? What might make them consider leaving the company?
More importantly, feedback must lead to action. If employees repeatedly report being overworked but the company fails to adjust priorities, provide additional resources or improve coordination, these discussions are unlikely to build trust.
Not every employee needs to be retained at all costs. Businesses should identify roles that directly affect technology, customers, revenue, data or specialised knowledge. They can then prioritise retention budgets, succession planning and knowledge sharing to reduce dependence on any single individual.
(Source: Tap tri Dien dan Doanh nghiep)
