Enhance ReadabilityEveryone in the startup world talks about how the team is the most important part of any business. “Business isn’t business; business is people.” “Bet on the jockey, not the horse.” “I’d rather have a great team with a bad idea than a bad team with a great idea.”
Hiring is a lot of work, but as a startup CEO, it’s the best use of your time. Tweet This Quote
Most tips, strategies, events, and resources for CEOs looking to grow their business focus on fundraising: from business plan competitions to accelerator “demo days” to angel investor groups to every “ten tips for pitching investors” blog post.
According to the recently released report from my firm, Village Capital, “Show Me What You Can Do,” 90% of CEOs surveyed said hiring was an “administrative” function (versus a strategic one). Why aren’t startups CEOs obsessed with hiring the way they are with fundraising and customer development?
The myth of “we can’t afford that”
Startup CEOs need to approach hiring from a position of abundance versus a position of scarcity. In my experience, startup CEOs typically do not look for the best person for the job—rather, the best person who responds to a job description.
You need to think strategically about your team and who you will need to hire a year from now. Tweet This Quote
The “bootstrapping mentality” for startups is great—in most areas. This “lean startup” approach enables founders to build a low-cost prototype and make sure customers will love it before spending massive amounts on marketing or mass-scale production.
However, while bootstrapping works well in most areas, it has one major downside—hiring. The right person for the job is never available when you need them. As a startup CEO, you need to think strategically about your team a year from now and spend the next 12-18 months finding and recruiting specific people.
Here’s how the story goes poorly. Your startup has a great product, and you’ve managed to secure a couple of big contracts with great customers (largely because you, the CEO, have managed the sale end-to-end). As a result, you’ve closed an investment round, and you now have the capital to hire that great VP of Sales to optimize your current customers and bring on the new ones. So, you write up a description, send it around to your networks, and hope to find the best person for the role as fast as you can.
You should only spend time hiring someone to do things your team cannot do on its own. Tweet This Quote
There are two problems with this approach: time and people. First of all, most great people are not actively looking for a job, but would be passively interested. Second, even if you did find the right person, you’ll spend 3-6 months finding, selecting, and onboarding them.
But, you have two high-stakes contracts coming up, and to implement them you’ll need to hire the best possible team right away—and you need to grow your business at the same time. Now, you’ve put yourself in a bad position with your current customers, burned through your critical first six months after closing an investment round, and you have to play catch-up.
Figure out what you need—before you start to hire
Most startup CEOs I know approach hiring as an administrative task that requires good marketing: write a job description, tell everyone you know, and pick the best person who applies. Hiring is an outbound, recruiting process.
When hiring, you never know who will be the right cultural, personality or firm fit—cast your net wide. Tweet This Quote
However, when fundraising as a startup CEO, you don’t post a notice and only limit yourself to the investors that come in the door. Rather, you go find them. You do the same thing with customers, and you should do it with hiring, too.
If you’re posting a job description without thinking through, in advance, what kind of candidate you actually want, you’re bringing a knife to a gunfight. Entrepreneurs put incredible rigor on testing hypotheses around customers, so why not do the same with hiring? Vinod Khosla describes one process, gene pool engineering, in an excellent blog post, providing one roadmap to get this right. In reality, hiring is your most strategic activity.
Four steps to figure out who to hire
As a startup CEO, how can you identify who to hire, even when you don’t have money to pay them today? Here’s a four-step guide that can help you figure out how to hire.
1. Identify the two or three largest risks to your company. Why do we start with risks, rather than opportunities? As a CEO, you should hire for your weaknesses, rather than your strengths. Simply put, you should only hire to do things your team cannot do on its own. Another question to ask is, what would kill your company? Let’s say you’ve got a great product that two large banks have offered to market to their customers in a key distribution partnership. How would it look if, one year later, your product didn’t make the bank more money? The bank would be upset, and future bank customers would be less likely to buy.
2. Identify the skill set necessary to mitigate those risks. In the above example, let’s say you’re most worried about whether the frontline bank employees will understand your product and know how to market it correctly. Presumably, you would want to identify someone to hire who (a) understands how financial services products make banks more money, and (b) understand how to manage training and implementation of new products and services for bank employees.
3. Identify and contact the world experts in each position. In the above example, you would want to identify a list of three to four positions that would understand how banks make money and how bank representatives work. People with retail management or HR experience in a bank may be one; a VP of Corporate Development (who understands how to evaluate and implement new products) in a financial services firm might be another. You never know who will be the right cultural, personality, or firm fit—so cast your net wide. Then, you literally want to find specific people who fit these roles. Get in touch with these people through LinkedIn or findable addresses, and you can send a short message like this:
Ross
In your short conversation, you will (a) ask for advice on your company’s strategy, and (b) ask for advice on the specific hypothesis you have on the role that would ensure success. If you think the person has the right skill set and right cultural fit, you’ll then ask if this is the kind of role they would be interested in (or ask for recommendations). Don’t get discouraged if most conversations go nowhere. If you have ten conversations, you might emerge with one or two great candidates—just like finding new customers.
4. Figure out what the best candidates need—and fundraise for that. Most companies would say, “I can’t possibly recruit a talented team member from a major bank to my startup—I don’t have any money.” You underestimate two things: (1) the power and attractiveness of a cash plus equity combination working for a great startup (most people running startups have “Imposter Syndrome” and think no one would want to work there); and, more importantly, (2) the reason to fundraise now is so that you can pay for people you will need in the future who you can’t afford today. Instead of saying, “We would like to raise $500,000 to grow a team,” it would be a much more compelling case to say, “We’re raising $500,000 for four key hires who we’ve already identified, here are their names, and we know the second we close this investment round, they will leave their jobs and work for us.” Then, with cash in the bank, you hit the ground running from day one.
A good startup CEO may spend more than 50% of their time recruiting the next generation of team members. Tweet This Quote
If this sounds like a lot of work, it is. But it’s the best use of your time. (AOL founder Steve Case, a close partner of ours, often estimates that a good startup CEO spends more than 50% of their time recruiting the next generation of team members to match the growth of the company). Ultimately, if you prioritize hiring, you’ll set yourself apart from other teams by having a process that literally identifies the people you need well in advance to implement your vision.
(And if you’re reading this and want to join our team at Village Capital—drop me a line at [email protected]; our team can see what our critical risks are and whether you can help take us to the next level by removing them!)
