Off to a flying start: who should you hire to raise a €10M+ Series A?

Analysis of the early hires of 15 top B2B software companies in Europe

Intro

Guest post: Hi there, it’s Maddy (again!). As a Partner at Erevena — a London-based Executive Search firm — I spend a lot of my time talking to Founders of Series A and Series B (and beyond) businesses about how they should structure their leadership teams. For example, when should they bring in their first VP Marketing hire, what kind of profiles of people should they be hiring as leaders, and how should they structure seniority levels. These are just some of the questions that come up on a day-to-day basis.

But — until recently — there was an important gap in my knowledge:

• ‘How do companies get to the point that Series A leadership hires become a possibility?’
• ‘What about the first part of the journey from starting out to Series A?’
• ‘Who should Founders hire right at the beginning of their journey to take them through the first 18 months and raise a top Series A (€10M+)?’

To help find some answers to these questions, I started looking through LinkedIn to gather data and had a few conversations with the team at Point Nine to get their thoughts.

Some time ago I published “The Unicorn Trajectory”. My hope was that the report would help founders make better hiring decisions post-Series A. My hope with this ‘Off to a flying start’ post is that these findings will increase founders’ chances to raise what the folks at Point Nine call a ‘Tier 1 Series A’(a.k.a. a €10M+ Series A led by some of the best later-stage funds in the world).

Let’s dive into it…

Methodology

My first task was to build a dataset of highly successful seed-stage companies. So, I went on LinkedIn and pulled together:

• 15 B2B software and marketplace companies that were started in Europe (shown in the slide below),
• Each one of the companies was founded in 2016 or later.
• Each of them had raised a Tier 1 Series A and have now raised more than $50m (assuming this is a proxy of success, largely because it’s publicly available info, unlike revenue)

Within each of these companies, I found the title, function, years of experience, start date and leaving date of every person they hired during the first 18 months of their journey. This equates to 409 people in total, including f.

Using those data points, I’ve been able to pull together an overview of what the ‘average’ hiring patterns are in super high growth, seed-stage companies. In other words, if you want to have raised $50m+ within the first 4 years of starting out, this guide should help you know who to hire in the first 18 months to be able to get there.

Number of people

Starting with the most fundamental of all of the data points, let’s look at simply the number of employees that each company had over the first 18 months:

What we can see in the graph above is that the ‘average’ company in the dataset had 4 people on their team when they were founded, and 18 months later they had 25 people.

As a founder, however, please don’t think that in order to be successful you must have 25 people on your team 18 months after founding. As you can see, the business in the dataset with the most hires had a whopping 60 people on staff only 18 months after setting out, whereas another company had only 5 people.

It’s also worth noting that the above data points don’t include churn: they are simply a snapshot in time of the number of people on the team.

When we include churn, we can see how many people each company hired in total during the first 18 months:

As a rule of thumb using the above chart, we can assume that if you’re on a path to raising $50m in your first 4 years of business, you’d want to be hiring roughly 4–5 people a quarter every quarter for the first 18 months.

What about the functional split of these people?

Whilst the numbers covered above are interesting, they don’t give a lot of colour around how teams should be structured, so let’s look at how these people are broken down by function…

Unsurprisingly, for a collection of B2B software and B2B marketplace businesses, the majority of people hired were in Technology (Engineering and Development), followed by Product. 18 months after starting out, the average business had 9 people in their Technology function, and 5 people in their Product function.

Interestingly, you’ll also note that these rapidly growing companies tend to start hiring sales and marketing people at least 6 months after starting and that these teams remain fairly small before Series A (<5 people).

As a good rule of thumb, the average company will have 25 people 18 months after starting: 15 of those people will be working on the product and tech, and 10 will be working on sales, marketing and operations. The average company will have only 1 finance-focused person as they start raising their Series A. The P9 folks confirmed that this quantitative data was very much in line with their experience.

Experience of employees

Having 9 people in your Technology function each have 20+ years of experience is quite a different thing to having 9 people who are all in their first role. So, how exactly should each function be structured in terms of seniority/experience?

Let’s look first at the experience levels of each company overall…

The graph above shows that the average company in the dataset started out with 33 years of experience on their teams, across all of their staff combined. After 18 months, this figure hits 201 years of prior experience.

And if we look at this on a person-by-person basis, what we can see is that the ‘average’ person in the ‘average’ company during the first 18 months of the life of the company has around 8 or 9 years of work experience behind them…

Now let’s look at the same data, but split out by function:

What you can see above is that the average person in the Technology function has 12 years of prior experience at the beginning of the journey. But, 18 months later, the number of years of experience in the Technology function has decreased to 8.6 years.

So, the ‘average’ Technology team 18 months after starting out, has 9 people all of whom have 8–9 years behind them.

A quick summary of this for all functions is shown below…

Seniority of titles versus experience

There can often be an inclination to inflate titles of new hires in the very early stages of starting a business — it can be a cost-effective way to attract great candidates and can appear to quickly solve the issue of building out a leadership team. But in the medium term, there can be a price to pay for doing this: you can end up with a reasonably inexperienced leadership team that you can’t hire above because the existing team already hold C-suite titles.

To give some clarity on how the companies in this dataset approached this, take a look at how titles correlate to years of prior experience:

If you’re curious about how the average team breaks down over these levels, the chart below shows how many people were hired at each level over the first 18 months:

To make this slightly easier to remember, the average company hires the following people in the first 18 months:

• 2 or 3 founders
• 1 to 2 C-levels
• 1 to 2 VPs or Directors
• 1 to 2 Heads of
• 1 to 2 Leads
• 18 Individual Contributors

Roles of employees

To give a further indication of detail around how each company hired their teams, the below is an overview of the first 10 job titles hired (excluding Founders) into 8 of the companies in the dataset. I’ve excluded 7 of the companies here to keep things streamlined, but if you’d like to see them all then let me know and I can send them to you.

In conclusion

The companies on our list for this research built their teams in many different ways, but the overall themes were…

1. Companies hired 4 to 5 people per quarter, every quarter, for the first 18 months
2. They ended up with 25 people at the 18-month point
3. 15 of those people were in Tech/Engineering/Product, and 10 were in Sales/Marketing/Ops/Finance
4. At the 18-month point, the average person in the average company has 7–9 years of prior experience. There might be one person with up to 35 years behind them and there’ll probably be one or two who are in their first job.
5. Each company had, on average, 2–3 founders, 5–6 leaders (VPs, Directors, Heads of, Leads…) and 18 individual contributors

Here is an illustration that sums this up (feel free to share):

It’s worth noting that the numbers above are averages: some companies, like Hopin, hired a lot more people than the average and other companies hired fewer. This data isn’t intended to give you a definitive guide on how you ‘must’ or ‘should’ build your team: it’s intended to help you, a Founder, have a guide to see where you might be aiming at, 18 months after starting out.

Most importantly, build your company for your vision, raise from funds that will support you, and hire people that you are super excited to work with!

Looking forward to continuing the conversation!

Maddy