How to hire as an early stage startup
The word “company” has its roots in the Late Latin word “companio,” which means “companion.” The word “companio” itself is derived from “panis,” the Latin word for “bread.” Literally, “companio” translates to “one who eats bread with you,” reflecting the idea of fellowship or companionship among those who share a meal.
Over time, the term evolved through Old French as “compaignon” and entered Middle English as “companie,” taking on the meaning of a body of soldiers.
Companies are just a collection of individuals and a great company is a collection of talented individuals that are able to work together to meet a common goal over a sustained period of time. This is often overlooked by founders and investors alike. Who and how a company hires will make or break them.
Now, I’ll be the first to admit I don’t have a traditional background as a VC. I have founded, grown and of course failed with my own startups but I also spent 9 years as a head-hunter building some of the most exciting businesses across Europe. This experience gives me a unique perspective — I am able to identify talent and assess gaps in a team — what is needed for these ‘companions’ to make it to the next level.
Today, I wanted to share some of my experience and provide some insight, hints and tips that any founder should consider when building a team of their own.
What is your overarching philosophy or approach to hiring at the seed stage?
At the core, a company is a collection of people; its potential is essentially the sum of these parts. As a founder, it’s critical to be constantly analyzing the gaps in skill sets and personalities within your team. This involves being really, really harsh on yourself and sometimes, your team. You need to objectively identify areas of need in the present, short, and long term. Personalities play a crucial role as they can be catalysts for better productivity, essentially shaping the company’s culture and getting more out of fellow workers. Founders should always be asking themselves: “What skillsets are we missing, and are there any personalities that can enhance the overall team dynamic?”
How does this differ from hiring at later stages or in larger organizations?
In smaller teams, the impact of each hire is more significant. Hiring is always crucial, but adding one person to a team of 10 has a much different impact than adding one to a team of 100. At later stages, you can expect more proven skill sets and experience. You have deeper budgets, so you can be more selective. In a larger team, there’s more slack to cover while you take the time to find that ideal hire.
Role Identification:
How do you identify which roles are critical to hire for in a seed-stage startup?
This involves assessing existing skill sets, the stage of the business, and the needs for both cost and revenue, while evaluating risks. Analysing a balance sheet can reveal if there’s a need to bring functions like tech or finance in-house, or if more customer relations managers or salespeople are needed. It’s important to understand the skill sets at the senior management level and those required for the company’s future vision. Considerations like the dynamics of a remote or in-office team, the need for cross-functional leadership, and outside industry experience are vital. Planning for the next 18 to 54 months in terms of hiring is essential.
Are there specific roles or skill sets universally essential at this stage?
If I had to chose one, many late seed companies wait too long to bring on a Finance Director (FD). A good commercial FD is critical for both sides of the balance sheet — they’re not just able to control costs but also paint a clearer picture with regards to forecasting and make it easier to make quick decisions on new ideas and innovations.
Also, minimising outsourcing and bringing tech, finance, and marketing in-house as soon as possible is crucial, depending on your specific business.
Talent Sourcing:
What strategies do you recommend for sourcing candidates for a seed-stage startup?
Start with your own network, but don’t shy away from building relationships with relevant recruiters, headhunters, and agencies. They can offer invaluable process advice, salary information, and competitor analysis. When sourcing directly, it’s important to create a spec that is clear, concise, and showcases the brand and culture of your firm. Remember, a job spec is also a form of marketing — it has to sell you as a business not just a specific role — I see so many companies just writing down a few words in Times New Roman on a white page made in Microsoft Word… This is too basic. A spec should showcase the company and brand as well as detail what the role entails now and, in the future, the required experience, and include a vivid description of the company and its culture. I always liked putting a comment from the CEO on job specs, explaining why the role is crucial and what they’re looking for in terms of skills and capabilities.
Be cautious with job boards; if it’s the wrong board or the spec isn’t precise, it can lead to a flood of irrelevant candidates which is incredibly time consuming to get through (and if you don’t get through them, your inbox will continue to fill up with follow ups). So be clear and specific about what you need! If you find a job board that specailises in the talent pool you are looking for — again, provide details that paint a picture of your company. When I used to get in touch with great candidates I would put equal weighting on explaining the company, the role and the culture — I would paint as clear a picture as possible to enable them to visualise themselves in the role and at the business.
How important is network-based recruitment versus open job postings?
Network-based recruitment is incredibly important. It’s not just about finding candidates at low cost, but it’s also a positive signal to investors. It shows you can attract talent from your own pool, indicating a strong network and a compelling company vision. It’s really important for founders to be constantly networking in relevant circles; if you are able to build a fantastic network then you will always have a pool of talent by 1 or 2 degrees of which to revert to.
Of course, not every founder has a ready made network for every job function in the industry that they are entering, so it’s important to balance this with open job postings and traditional hiring routes.
Assessment and Evaluation:
What criteria or metrics do you suggest using to evaluate candidates for a seed-stage startup?
This depends on the role’s seniority and function. Look for relevant industry experience and skill set, as well as tangible evidence of their ability to produce what you’re asking them to do. Having candidates sit a test not only shows their capabilities but also how much they want the job. Good stints at previous jobs are important; someone who jumps around a lot is a red flag. Assess whether the candidate is being pulled by the job’s appeal, or simply pushing away from their current position.
There are some go-to questions I like to ask (wording can change for more colloquial language of course):
What do you enjoy both personally and professionally?
This is a great culture sense check. It doesn’t matter if interests don’t line up personally but you get a feeling for what gets them excited and enthusiastic about. It also leads to a more fluied, relaxed conversation where you can get to know the real ‘them’. It’s one I like to start with or ask quite early on. On a professional front, it also lets you see what value add they might bring; dependent on the team of course, but, you want someone who is going to really enjoy facets of their core job as well as have an interest in the wider business. Finding someone who loves their job certainly is not a necessity but it certainly does help — it’s the dream hire.
Why are you looking to leave?
Simple. But push them to elaborate as much as possible. This helps with the above point — is there a push or a pull factor? You want pull factors. You want to be getting someone who is going to be sorely missed by their old employer. It also helps you to understand what makes them tick and in turn, how you can motivate them if they do join: Money? Work life balance? Being part of something? Managing? All are absolutely fine answers — money, controversially is the easiest one to deal with. This is all information that you can use not just to whittle down candidates but to develop and motivate your chosen hire too.
What were you hired for in your previous role and what were the outcomes?
This can be partnered up with referencing. You’re getting two sides to the story. If there is no asymmetric information and no bias in the response then you’re quite simply seeing how good they are at delivering and executing. The answer should also reveal if they are a swimmer or a surfer — you want swimmers, those who understand in depth what they’re doing and how they’re doing it. Surfers ride the wave and do not control the outcomes. The detail of their answer — which you can push them on — should reveal this.
What did/does your old/current employer do well?
Firstly, maybe we can steal some tips from elsewhere. Secondly, we get a greater sense of what is important to the candidate. If they say “Benefits — they have a ping pong table and free sweets…” then this person is NOT going to be the best hire in a crucial function/position. Weigh up their answer and see if it aligns with plans/vision for your company.
What was your lowest/most difficult point in your career?
Let’s test some resilience here and see how they made it out. It’s also a great question to see how open they are. Everyone has had professional lows, not everyone is happy to be open and transparent about them. Transparency is a fantastic metric to prioritise.
What is your dream job?
It’s REALLY important to ask this one knowing that the answer does NOT mean that you are a stepping stone. It might reveal that you can help them achieve this but along the way, they’re going to help you. As I mentioned before, hires help you to build YOUR business. You should not expect them to be as wedded to it as you are. Take a pragmatic approach and see if you can align incentives, motivations and ambitions. We’re talking about people’s lives and journeys; tributaries all lead to rivers but they duck in and out, that’s absolutely fine because they give the river the fire power when they need it. Do NOT and I repeat do NOT rule a candidate out because they have their own personal ambitions.
What’s the best and worst thing your old employer would say about you?
I find this one really interesting. It’s great for sales people because you put them on the spot and see how open or closed they are going to be as well as finding out what could be quite vital information. It’s also a fun one that builds rapport, showcases a bit of vulnerability and gives you an insight into how defensive they are or are not.
Remember, this is not an exact science and you are not going to get the perfect person every time (if ever) so take a long term view, stay pragmatic and weigh up pros, cons and how much you’re willing to compromise on certain skills.
How do you balance the need for specific skills versus cultural fit?
Key skills are paramount — you can’t afford to have someone who does not have the ability to perform the role, but cultural fit shouldn’t be completely side-lined. For instance, you don’t need fantastic chemistry immediately, but it’s a definite no if they can’t get along with your team. The role’s influence over management or the wider business also determines the importance of cultural fit.
Compensation and Equity:
How should seed-stage startups approach compensation and equity offers?
It’s tricky but should be a mix of base salary, performance bonuses, and equity. Equity can be structured with ratchets, unlocking over time or upon meeting KPIs. Equity is important for retention but can complicate cap tables if not handled correctly, so seek legal advice for structuring equity with cliffs. When offering equity, you can of course go with a lower-than-market base salary, BUT keep in mind, top talent comes at a price. Always be honest with candidates about compensation and avoid overpromising — this includes when offering a job to a candidate but also during the process too. You want to align and manage expectations from the start of meeting anyone. Too many founders/hiring managers see getting someone below market as a company “win” without taking into account the candidate/new hires feeling. A win-win at the start is essential to maintain trust, motivation and performance.
What are some common pitfalls to avoid in this area?
Avoid overpromising on bonuses, setting unrealistic KPIs, giving away too much equity, lowballing on base salary, or citing overly optimistic numbers early in the hiring process. Also, feedback! Even if they’re not right for the role, this might just be a timing thing — they’ve taken the time to prepare and meet with you, take the time to provide some feedback — positive or negative. It’s just good Karma.
Integration and Retention:
Once hired, what strategies do you recommend for effectively integrating new hires into the startup environment?
Integrating them across the business and all its functions will help them to in-turn integrate into a startup environment. Making sure they spend time in the opening few weeks or months to work alongside all of the different departments to get a feel for how everyone works in that environment. This will also breed a more collaborative culture and give them a thorough understanding of what a startup means or is! You’re a startup — take advantage of the small team and give people access to different areas of the business whilst you are still small!
Finally, depending on role, try to get them and the whole team together as much as possible. I would say 2 days WFH is fine and important (modern world, give them at least one benefit from being born in this generation!) but being in the office at least 2–3 days a week with everyone is equally important. The learning curve can be steep and working next to people who can help will compound their skills and learning.
How can startups retain talent in the highly competitive early-stage ecosystem?
Perform and show integrity at all times. People follow leaders, not managers. Respect everyone, remembering they’re helping you to build YOUR business and/or dream. Be transparent, especially if their role won’t evolve much. If they need to leave, that’s fine, as being transparent about it will enable you to plan accordingly. but always create an environment for them to thrive professionally and personally.
Challenges and Solutions:
What are some common hiring challenges faced by seed-stage startups?
Remuneration is always an issue. Don’t try to compete with shallow benefits, but compete by showing genuine vision for the business and where the candidates fit in. You have to be agile in your hiring; compromise is often needed. Before any process, create the perfect applicant profile and decide where you are willing to compromise, because you WILL have to. Avoid rushing the hiring process and ensure thorough due diligence, even with very close connections.
Can you share any specific strategies or solutions to overcome these challenges?
As mentioned above, balancing the search between your network and open job postings, being realistic in your offer, and maintaining agility in the hiring process are key strategies.
Personal Experience:
How have your experiences in head-hunting, running a startup, and advising startups influenced your views on hiring?
These experiences have enabled me to see what is and isn’t important in a hiring process, allowing for quicker identification of talent and a better assessment of personality and cultural fits. This is important not just for hiring but also when making investment decisions. Being able to identify the skills, aptitude, personality, and growth potential of individuals is fundamental when identifying a good versus bad investment. I’ve learned that there are no “good” or “bad” personality candidates; each team has its own chemistry, and someone who may not work well with me could be a perfect fit elsewhere. This understanding helps in connecting the right people with the right teams.
I hope this was helpful! If you’re building an early stage startup and want to chat, spitball or want a bit of advice then always feel free to reach out at tw@verb.ventures.
