And here we go to one of the most crucial things to be defined at the beginning of your startup: THE INITIAL TEAM.
…we spent one and a half years building a team. That team was tested on different other projects.
You must consider investing a significant amount of your time in the task of recruiting people. These people may be: co-founders, employees or outsources.
And the first thing to have in mind in this recruiting process is that, as Steve Blank says:
A startup is not a smaller version of a large organization.
That’s why in the beginning of your startup, you shouldn’t consider recruiting people to fill the jobs needed in a large organization. You must consider the roles and activities that are needed for building, testing and iterating your product, business model and marketing channels.
PREPARING FOR THE SEARCH
Before starting the search, it is important to think about the competencies that are going to be needed in this early stage of your venture. And to understand that, I strongly recommend you to learn the fundamentals of The Lean Startup and Growth Hacking Methodologies.
In this early stage, the objective is to test and find a viable business model (not to aggressively sell and scale yet). So, you’ll need people to support you on the activities related to that objective. For instance, maybe a person that knows a lot about data analysis will be much more important than one that knows a lot about managing large sales teams.
The essential roles and activities
And what are the activities needed to develop your startup to the traction stage? Certainly, there are a lot of good posts that talk about the roles that must be played on the startup team. From a practical perspective, I recommend you to consider the activities below:
- ENVISION the PRODUCT and the BUSINESS MODEL: this role is played by the founder(s) and it refers to building and communicating an enticing vision of the product and of the business. It will probably be based on a problem one of the founders had in life that she was able to turn into a solution and a business model idea.
- BUILD the PRODUCT and the TESTS: If the founders come from a technical background they’ll naturally encompass these activities. However, not always those that faced a problem and had the idea are able to actually build it.
- DESIGN the product: while “building” refers more to the product features functioning, the “design” refers more to the interface your product has to the customers. In many cases, those that build the product functions aren’t those that create the interfaces.
- Get the product to POTENTIAL CUSTOMERS: certainly, to just envision and execute the product roadmap will end up in disaster if the product (and its prototype) never get to real prospects and customers. The person that leads these activities must have a strong sense of empathy to really connect and understand what are the objectives and pain points of startup’s target market.
- ANALYZE the DATA: here we have a critical role that is not so clear for people in the beginning of the journey. Once we are talking about startups, it’s essential that someone is able to define, manage, analyze and report the data generated by customers interactions with the product. This information will nurture insights for product improvements and new tests.
- Think and Test MARKETING STRATEGY and CHANNELS: Despite scaling is not the focus in this very beginning, it’s essential that someone begins working on marketing channels since day 1. Defining customers personas and testing ways of acquiring customers in an effective way is key to help on business model validation.
- Manage the CASH: cash management is vital for any startup and it will support all the activities that are performed by the team. That’s why it is not “just” an administrative task. Here, we are talking specifically about the activities of managing and reporting cash available, cash burn rate and cash runway. p.s.: if your product demands raising funds to be developed, you’ll need someone with that expertise too.
- Guarantee a RELENTLESS EXECUTION: at the beginning it will be played by the founder(s) too and it refers to getting things done. This person should focus on prioritizing and keeping a high-rate of completion in the tasks that will turn the vision into reality.
- Deal with ADMINISTRATIVE issues: these are tasks that must be done in order to keep the startup running. Accounts payable, accounts receivable, renewing licenses, etc.
- Other KEY ACTIVITIES: based on the “key activities” defined on your business model canvas you will find other important roles that must be played by the people on your team. For example, if your startup offers solutions in the food industry, you’ll have to count on people to perform activities related to food preparation and logistics.
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After thinking about the activities that will be needed for your startup, your task will be to check which of them might be done—in a satisfactory way—by the people that are already part of your startup today.
And here it is important to dedicate some time to balance the decision of adding more tasks to a single person or not. Besides understanding team members’ capacity to absorb a task satisfactorily, the “secret” is focusing on balance: not too many activities for a single person (ineffectiveness), but not too many people hired too (high costs).
After defining which activities may be performed by the current team members and which demand new people to be done, your quest shall begin.
WHERE DO I FIND THESE PEOPLE?
Maybe you have already found them. Think about the people that you know. Friends, family members and acquaintances. If you have more people in your team, ask them to do the same.
Other people that you may know are those that you have worked with. From previous companies, projects and activities. Maybe someone from your college could be a good fit too.
There is one key element to take into account: the more you know the person in advance, the better.
However, if there isn’t anyone that fits the profile from your closest circles, you’ll have to look for them in other places. And—it is important to say—that may take some time and effort.
Engage in events, activities, etc. Connect with interesting people in social networks. Search for people in online forums. But, do the best you can to really know these people. Try working in a project with them, for example.
Slowing down this part of the process, will raise a lot the chances of success in hiring someone that will add value to your startup.
Yeah, I know that a startup should fail fast… However, failing in recruiting the right people might cost the success of your startup. Accepting someone in the team because she seems okay, is a too high risk to be run by your business.
EVALUATING THE CANDIDATES
- Are they smart? In other words, they must be smart enough to think by themselves so you don’t have to tell them what to do every time. Besides that, they must be able to learn things outside their specialties, once things change fast in a startup.
- Do they get things done? They must be great doers, otherwise your startup may lack the pace of execution necessary to evolve. Focus on those with an entrepreneur mindset too.
- Do I want to spend a lot of time around them? Finally, imagine hiring someone that is smart and get things done, but who doesn’t share the same values as you or has a toxic personality. Awful, right? That’s why it is fundamental to find someone you like to be with, even considering your differences.
Sam reinforces the importance of searching for a practical evaluation of the candidate, instead of a theoretic one. If you or one of your team members have never worked with the candidate, study thoroughly about the projects and initiatives that person was part of.
During the interview, ask for projects and accomplishments. Ask for references and really talk with these people to understand how was the experience of working with that candidate.
If possible—as he suggests—try working with that person in a small project before accepting them to join your startup. That will reveal the real characteristics of that person in a professional environment.
CONVINCING PEOPLE TO JUMP ON BOARD
Right. There are a few good candidates that make a perfect fit in your startup and you are decided to have them on your team. But, wait a minute… They need to be interested in being part of your team too.
Certainly, people have different motivations and what convinces one person may not convince the other. However, you may consider these three main “motivators”:
Yes, this is quite obvious. People see value in cash and they could agree working with you for some money. Let’s consider the advantages and disadvantages of this kind of incentive:
- it will help you get people on board if you were not able to make your vision enticing enough for people to jump on board “just” for a share in your startup. CAVEAT: People should be somehow excited about the idea. Jumping on board just for money is not recommended.
- it gives you more flexibility and less headaches if the person doesn’t perform well, once you can fire them.
- it will raise your cash burn rate.
- if money is the main motivator, it may be easier for them to live your company for more money.
- Once the money reinforces the contract characteristics of the relationship, you may get frustrated when you see they don’t act as the owner.
To tackle some of the activities, you may certainly outsource them to a third party company. That may bring you even more flexibility regarding your cash burn rate. However, have in mind that the dedication and the time available for you may not be the same as if someone was working inside your startup. So, think wisely about what activities you will outsource and how it will happen. Do the same questions to outsources as you do for your team.
Well, you may choose to offer a share of your company for them to jump on board. And some people, may even be more tempted to accept equity instead of money. Let’s see the pros and cons of this alternative:
- it will help you keep your cash burn rate low.
- it may raise the level of engagement (considering the person owns shares) on startup growth.
- won’t allow you to simply fire the person
- may demand more time on documents preparation, terms of equity, split percentages, vesting period, etc.
- it will dilute current founders shares in the company.
It’s worth saying that, for the first employees, startups usually give some equity beyond the cash payments.
Purpose and Vision
Hey, wait. Cash and Equity are clear, but nobody can be paid with purpose and vision. Right? Well, not totally. But, a great and compelling purpose and vision may reduce the amount of cash or equity you’ll have to give them.
For some people, the motivation will come (in part) from the desire to work with you to reach goals that are aligned with their own goals. For those people, if you present them a better vision than other startups, they may accept joining your team even not receiving as much money or equities.
A pitch deck could be a good resource if you want to organize your thoughts in a compelling way to present and convince people to work with you.
Always act with transparency when recruiting. Being disappointed or disappointing some of your team members may lead to a complete disaster. Don’t over promise when hiring or recruiting. Don’t ignore important signals about the candidates.
Recruiting takes time: your time on recruiting activity is actually an investment. Once the impact of one person in a small startup is extremely high, this time will pay you a lot more than if you pass a time in any other issue. Don’t hire with just one interview… When hiring, the “fail fast” mantra shouldn’t be taken into account.
Finally, if some of your choices didn’t work, FIRE FAST. Don’t postpone this movement if the fail has already become evident.
Please, let me know your opinion about this post, spreadsheet or both! 🙂