You’ve come up with a great idea, drafted a business plan, researched the market, obtained the IP, and courted investors to close on financing. You’re exhilarated. I know this, because I’ve seen it so often with start-up clients at the Sonder Group, and before that at NewcoGen (a Flagship Ventures fund). You’re exhausted, too. And you’re just in time for one of the most demanding, delicate, and make-or-break balancing acts you’ll ever face: hiring your team.
When money is tight, always to use your own network first. That’s common advice, and it’s good. Hire people you’ve already have had success with, people you enjoy working with, and who know your market. Tap into your own network of colleagues, board members, advisory board members, and future customers to help you find candidates. At the same time, as Marshall Loeb of MarketWatch reminds us, “Don’t hire someone just because you know them.” I have seen early stage biotech companies regret hiring people with experience that’s not quite market-relevant, but whom they know, and whom they believe plausibly to be able to learn the job. Why the regret? Because there is no time to train employees — even talented ones. Everyone hired at the beginning should bring key knowledge that can help to propel the company forward and not hold it back, even temporarily.
There’s another balance to be struck between bringing in specialists and bringing in generalists. On one hand, early employees in start-ups inevitably end up wearing multiple hats. On the other hand, generalists with no initial experience in the start-up’s particular market can be a drag on progress. In this day and age, markets and technologies advance at lightning speed. The solution is to hire specialists from a competitor or who have already had success in the same job elsewhere.
Beware, however, of getting lured into hiring someone with a big name who is accustomed to working in a large organization with lots of support: that often leads to frustrations on both ends. When you court candidates, don’t, as I’ve often see start-ups do, fail to be transparent about the true challenges of the job. Try to be as open as possible. That way, when problems occur, as they will, your new employee is ready to meet them with resolve rather than surprise or disappointment. Once you’ve finally found the final candidate, what do you offer them? If you haven’t already, do some initial research regarding salary guidelines. This calculator can help you review the fully loaded cost of a head count. If you have a friend in the business, you might also want to sneak a peek at the Radford surveys.
Communicate well with your board and plan the amount of equity you will offer. Start with a very open conversation with the candidate about their past and current compensation. Do a full accounting, including salary, commission, bonuses, equity, medical, dental, life insurance, retirement, car allowances, phone/office supplies, education reimbursement, and any other relevant components. Try not to expect that they will get so excited about the job they will take a big cut in pay. When the going gets tough, you don’t want them questioning their decision to join.
Finally, don’t try to do it all. Outsourcing marketing, manufacturing, accounting, human resources, and other such jobs can help conserve capital and allow you to focus on the prize — successfully launching your venture. Research as much as possible: this Wall Street Journal how-to is a great place to start.
And of course, consider partnering with search experts for at least some of the top executive positions to minimize risk and maximize success.