One of your biggest duties as a founder is building out a quality talent pipeline. Besides fundraising and product-market fit, failing to hire quality talent fast enough is one of the biggest reasons early stage startups fail. This is in fact so important that when we do diligence on a team, one of the questions we always ask is, “who do you need to hire and do you already have those people in mind?” Building a talent pipeline is hard and takes time. It’s not something you’ll do in a weekend.
There are plenty of mistakes on this path that founders make while building out their talent pipelines. Try to avoid them.
Recruiting is not something that can be outsourced or fully delegated early on. It doesn’t matter if you’re the technical founder or a non-technical founder, you must have your eye on quality people to hire down the line. You, as the founder, are responsible for crafting and communicating the vision of your startup to potential recruits. As a startup, you won’t be able to compete with big corporates on cash compensation, so you have to compete on growth (i.e., equity value over time) and on vision.
Your employees can recommend friends and former colleagues. They can even begin to communicate the vision of the company to them — but the final responsibility to sell quality talent on taking the risk to work for you needs to come down to you, the founder.
And absolutely do not hire an outside recruiter before you have actual department heads and managers. The founder CEO should always have a talent pipeline on hand and the founder CTO should always have technical talent in mind. Even if you can’t afford people right now, make a list of folks you’d like to ideally bring on when the opportunity presents itself.
Hiring Mercenaries, Not Missionaries
You can’t afford to compete on cash compensation anyway, but don’t try to smoke-and-mirrors compete on it either. Long-term growth or compensation is a perfectly acceptable card to use in attracting quality talent, but you don’t want to attract people who are merely looking for a big payday early on.
In other words, you want to hire missionaries, not mercenaries, at first.
As you grow and your payroll budget increases, it’s fine, even helpful, to hire people who are great at their crafts and who are mostly looking to work at well-compensated companies. But at the beginning, these individuals can put undue pressure on you and your team and will jump ship as soon as the next-best-compensated opportunity comes their way.
Missionaries, on the other hand, sign up primarily for the vision and growth. They’re hard to come by but often make up the core of a founding and founding+ team.
Kicking the Can Specifically
You may start working with valuable players on a contract or equity-only basis with the understanding that if they perform well, they can join full-time. Or you may hire a quality player far below market rate with the understanding that you’ll move them aggressively to market rate. These are both acceptable strategies for bringing on new talent.
What you don’t want to do is set unrealistic expectations for candidates on what they will earn or how they will earn it. It is far better to under-promise and over-deliver in the compensation market than the inverse. Give candidates a good idea of what they can expect should you reach your conservative growth, development, and fundraising goals. Give them a good idea of what is within their control to move the compensation needle and what is not in their control. Let them know you are on the same team and you are not intentionally using a cloud of abstraction on compensation to string them along.
Kicking the Can Generally
You also don’t want to wait too long to start recruiting. Recruiting is way harder and more time-consuming than a lot of founders estimate (which is a huge reason why you always want a pipeline of excellent talent at your fingertips). You may think your startup is great and amazing and going to take on the world, but it’s another thing to convince somebody to leave a cushy job or a safe career to come join you. You’ll need to sell them on vision, give them a compelling opportunity for compensation, and give them time to deliberate with other stakeholders.
Speaking of which, understand that a big part of the recruiting process is winning over people with whom you have no real chance to speak. Spouses, parents, colleagues, and friends all weigh on a candidate when they think about joining your company. You need to make them feel like the candidate is making a good decision. Vision and growth are a huge part of that at the seed and pre-seed stage, while straight compensation can be a better bludgeon at growth stages.
In general, we rarely seen teams hire product people too early. If you’re reasonably anticipating growth and needing to double down on product development in the next few months, you want to start talks for hiring now.
In a similar vein to kicking the can on compensation and full-time employment is aggressively over-titling. We see founding teams do this themselves — it’s odd to call yourself a “COO” on a team of 3 people — so it can be a common mistake. The thinking usually is that the earliest employees will stay in their relatively senior roles on a small team as the company grows. And aggressive titling can be attractive to especially junior talent because it looks like a boost on the resume. But this should only be the case for candidates who have exhibited a good ability to grow with the team and in their management skills.
It’s a blow to team morale and talent to take engineer #2, give her the role of “Vice President of Engineering” when she only has one subordinate, and then “demote” her in a title to “engineering manager” and bring in a VP of Engineering from a bigger firm. That’s true even if the title demotion comes with a raise and increase in responsibilities.
Like we said above, we’ll sometimes see teams with super-inflated titles when it’s just a few people. A team of 5 people rarely needs a “CFO” even if that’s the person who primarily handles finances.
Worse than aggressively over-titling the founding team and early employees is aggressively under-titling employees relative to the founding team. If you have a “CTO” and a team of engineers but all the engineers share relatively junior titles, it may be better to give your CTO a lower title. This not only allows the “CTO” to grow into the role but it also engenders camaraderie and trust from the engineering team.
Vinay Hiremath, the CTO of Loom, was great at properly titling himself relative to his team. He spent years using the title “head of engineering” before taking the “CTO” title. As head of engineering, he was doing all that a CTO would do but took a humble title as he grew more into the role. Now he manages a large engineering team with multiple departments and has really become a CTO in the traditional sense of the word.
These are some common mistakes teams make in building out their talent pipelines. They’re easier to avoid if you diligently build out your talent pipeline alongside your product roadmap so that you aren’t scrambling to find new talent and make these mistakes along the way. Your early investors should be able to help you both avoid these mistakes and build out that pipeline, so make sure to ask about talent during your due diligence on investors.
At 1517, we have a growing community of 3000+ hackers, makers, scientists, students, and recent grads that our portfolio companies can work with to grow their teams. We regularly pull new people into our community as part of both our outreach work and our inbound conversations. We also regularly field these kinds of questions from pre-seed stage founders, so feel free to reach out if you want to chat.