THE STARTUP CHAT

Steli: This is Steli Efti.

 

Hiten: And this is Hiten Shah.

 

Steli: And today we want to talk about that crucial face where you go from having hired your first employee to scaling your team up to ten people. In the beginning it’s just yourself or you and your co-founders. We talked in a prior episode about making the first crucial hire for your startup. Now you’re on a roll. You’re rocking and rolling. You’re growing the team, and it’s transforming from the beginning that was just founders to now you need to hire the first … Up to ten people could still be considered the founding team to a certain degree, depending on the timeline, but it’s the first a-team crucial foundation that hopefully will help the team grow. For the first ten hires this year or getting to ten people on the team, the difficulties, the challenges, the things people have to consider, to keep in mind, what kind of people to hire, what kind of people not to hire. We wanted to talk about that.

 

Hiten: We talked in a prior episode about how to hire your first team member, and this is just an extension of that. I’ll start just by kicking it off. It’s likely that at least your next couple after that are still people you know or people on your team know or people that your friends know. The reason I say that is that’s the easiest part of your network to go after, which is people that you already know. It’s going to be pretty tight. You’re probably going have some idea of what they’re like and knowing them. This is usually the common scenario that I see, which is the first couple hires after the first actual hire ends up being people the team knows. Sometimes it’s who that first person knows, too. There’s always this idea, and I think this works at any scale, but the first thing I would say is when anybody comes into your company you should always ask them, “Who’s amazing that you would want to work with?” Especially, obviously if they’re amazing, and they make it through whatever period you have of 30 days or whatever. That’s one of the easiest ways to build that list of people that you might want to work with, even if you’re not ready to work with them yet.

 

Steli: I’ll add something to that. I would ask people, “Who’s somebody amazing that you would want to work with that would never want a job here.”

 

Hiten: I like that.

 

Steli: In my experience, people are applying filters that are too tough. They’re not just thinking, “Who do I know who’s amazing?” but they’re thinking, “Who do I know who’s amazing who’s looking for a job or who doesn’t have anything good going on in their life?” That filters it out. That eliminates most of the people that you would want to hire, because most truly busy people will have something going on usually, have a career or goals or some path they’re on. I always like to add that, “Tell me somebody that’s amazing that you would love to work with and there’s zero chance we could ever hire that person, just for fun. Who’s somebody that’s incredible that we’ll never be able to hire? That’s the person I want to talk to.” I will even use that when I would reach out to these people and tell them, “Hey, Bob said you’re one of the smartest, most amazing people he knows, and he said we’d have never a chance to hire you, so I’m not even going to try it, but I am intrigued to know more about you.” Obviously that’s very flattering. People are really excited, but also it puts down the guard of people who already have a good job but are trying to go, “No, no, no, I’m not looking for a job. Please don’t try to hire me.” They just relax, and it’s just, “Hey, let’s get to know each other. Maybe now’s a good time, but even if not, maybe 2 years down the line or a few years down the line there’s going to be a good reason to work together.” If people put down their guard, you can truly explore if there’s a fit then. I can’t tell you how many people I’ve hired that would have never wanted a job here in the beginning, and then just gradually fell in love with the company, the team and everything, and then all of a sudden it became a real thing they considered and decided to join. I would add that to the questioning. I love the thinking process of the first ten people are going to be people within your network. They’re going to be referrals. It’s unlikely or not advisable, typically, for you to go, “Well, we need to hire a bunch of people. Let’s put up a post on Craig’s List and hire our first ten employees that way.” Not that it cannot work. Playing the lottery can also work if you want a plan to success and money. I would not tell you to play the lottery as your game plan for financial success. Putting job posts up and getting random people to apply, it’s just going to be a lot harder for you to get the type of people where trust is not a factor anymore and where people are not just coming into the startup with an employee mindset but really with an entrepreneurial, startup, scrappy, do-whatever-it-takes kind of a mindset. Maybe we should talk a little bit about what kind of people should you hire for the first ten people of the team? What kind of people typically should you try to avoid or positions that are just not needed. I do see quite a lot of startups, they’ll make hires in their first ten people that are enigmas to me when I’m like, “Why the heck? You guys are seven people, and you need a chief financial officer? Explain that to me. Why is that a super crucial role right now? What is this person doing eight hours a day every single day at this stage where you have zero revenue? What are we doing here?” There’s some hires that you probably don’t want to make in your first ten. There’s some type of people, type of positions, that you probably will need.

 

Hiten: You do see a lot of people over-hiring. That just means they hire really fast. Related to that is what you were saying which is they hire people who are either too senior or just don’t make sense in a startup. Usually those are people with those C-level titles, VP titles, director titles. We are talking about the first few hires, so in those first few hires it’s very unlikely that those kind of hires will work. Another thing related to that is that you don’t want to use a recruiter in the beginning, either, just like you don’t want to a ton of job postings or anything. It’s likely these people will come from some way of the people you already know. Hiring a recruiter too early also causes a lot of pain where you’re just wasting money. Recruiters are actually really expensive. You’re looking for more of a personalized approach where the founder’s reaching out and things like that versus having to sit there and hire a recruiter and go through a recruiter and have them help you hire. That includes even hiring a recruiter as the first thing you do at a company. This is something people used to do back in the day, which is, “Oh, we need to hire people. Let’s hire an internal recruiter.” That’s also another a sign that the founders might just not be willing to do the work. That generally doesn’t end well. The biggest mistake is just hiring someone too senior. You want doers, basically. You want people that are going to sit there and actually do the work, not want you to just hire more and more people.

 

Steli: I used to always say in the early years in the startup, if you’re not somebody that is creating or designing a product, then you need to be somebody that is selling that product. Either you’re a designer, hacker, or you’re a hustler. I know you don’t love that term, but you need to be hiring highly practical people that can actually create things or bring in revenue. When you think about positions like a chief financial officer when there’s not that many finances, it’s overkill. When you think about a chief innovation officer, any chief that a large Fortune 500 company would have, you probably don’t want except the CEO. Of course, the co-founder could be the CTO and all that. In general you don’t want to be hiring these super senior people. As you said, VPs of anything, these people are amazing in scaling things. These people are great when there’s infrastructure, where there’s lots of people to organize and all that. As an example that’s very familiar to me, you’re not going to hire a VP of sales to be your first salesperson at a startup and see a lot of success. It’s not going to happen. Please don’t do that.

 

Hiten: Please don’t do that.

 

Steli: These people haven’t sold shit in years. If they’re good, you should not be able to hire them if you have no salespeople. A VP of sales wanting to come and be your first salesperson, to me, is the first and the only red flag I need to say, “Don’t hire that person. There’s something wrong here.”

 

Hiten: They’re looking for a lot different situation than what you can provide them.

 

Steli: If they’re good, and then if they’re bad then that title is probably bullshit anyways. They might have had some other startup with the title of VP of something. They didn’t really do the job of vice president. Just don’t hire uber senior people. Very senior people, A, they’re incredibly expensive. B, you should not be able to hire them except if it’s your best friend, your father, your neighbor. If you don’t have some crazy advantage, you should not be able to just post on Craig’s List and get an application from a super senior person to work at your four-person startup. You have to ask yourself, “Why is this person even interested in this job?” If I put up a job posting and then a CEO of a Fortune 500 company applies to be my assistant, I’m not excited. I’m scared shitless. I’m like, “Something here does make no sense for this person to want to do this job, so what is wrong here? Something must be wrong here.” Can’t be that a person that was making millions of dollars wants to be my assistant. It doesn’t mean that it’s impossible, but it makes a lot of alarm bells ring and makes me want to go, “What is wrong in this situation?” These people are good at managing lots of people and lots of process. You’re not in the situation yet of managing process and scaling things and training and hiring and leading people. You’re less than ten as a total company. You want producers. You want somebody that’s going to … and creative producers. If it’s a salesperson, it needs to be a salesperson that’s going to be able to sell a moving target. Your company might be shifting and changing. As you go along, you need a salesperson that’s able to sell something without a brochure, without a lot of collateral, without a perfect brand, without a lot of recognition in the market, and with changing information. Today you tell the salesperson, “This is what we’re doing,” and then two months down the line you’ve discovered some really important things, and you’re shifting or pivoting what you’re doing, and you need somebody that’s very flexible and is going to help you figure out how to sell this product, what kind of product you should be selling, just as well as doing the jobs of selling it, and not just somebody who comes and knows how to do a job. Chances are, in the very early days, things are going to be changing a lot.

 

Hiten: You really nailed it. These senior people coming in too early, that’s a red flag, and you should definitely check into why they’re even willing to do that. Outside of that, let’s say for some reason someone doesn’t have a network or anybody that they can hire. What do they do?

 

Steli: That’s always very hard for me to believe. Even if your network is very limited … I came here ten years ago. When I moved to the US and the Valley, I knew nobody, literally zero people, zero humans that I knew in the US. Then what do you do? You hustle. You go to events. You talk to people. You try to make some friends. You tell them what your challenges are, what kind of people you’re looking for, that you’re trying to build a business or a team. They give you recommendations. They tell you, “Ah, I know this other guy. Maybe this person’s a good fit. I’ll connect you.” It’s hard to believe that you know zero people and you cannot meet people and start building a network. If you are in a place, if you just moved to a country, and you don’t know lots of people, just try to meet as many … Part of your early job is going to be to meet as many people as possible and create a little network and create some friendships and then ask the people that you’re meeting sitting down for a coffee or a dinner or lunch. Tell them about your challenges and ask them if know smart people that you could be working with. If you’re entering a new industry where you have no network, you have some biotech idea, but you’ve always been in the B to B sales spaces, so you know nobody in the biotech space. You could just ask yourself, “All right, so maybe I don’t have the direct connection to lots of people who do biotech, but who do I know that is maybe in medicine? Who do I know that is in science?” Even if I know nobody, I’ll go, “Who do I know went to a school that covers some of these topics?” I’ll ping a bunch of people, send them emails, and go, “Hey, I’m really interested in this biotech field. Do you know anybody who’s really smart who’s in that field that I can ask questions, get advice from?” Just start building a network, I think is my answer to that. I don’t know if you could think of a scenario where people couldn’t be doing this, or if you have a good tip for people, if you don’t have a network, here’s what you do to hire some good people.

 

Hiten: I just asked the question because I know some people listening feel like they don’t have a network, and they might be thinking, “Oh, what do I do?” Honestly, your suggestion’s the best. If you can’t go network and go find people or get people to talk to you about what you’re doing and get their advice, then you might not want to be doing what you’re doing. It is a relationship most businesses are all about relationship, all businesses are. I think it’s really crucial to think about it like that and go build the network. Because you’re working on something that’s a specific problem in the world, it shouldn’t be that difficult for you to go out there and start talking to people about what you’re doing, even if it’s some professors or someone in your local area that’s interested in the topic. You’re building a business and people are always happy to talk to you about what you’re doing. Sometimes you just have to reach out to enough of them.

 

Steli: Let’s flip this around. Let’s say you know what kind of people you want to hire. You know through your referrals, through your network in the early days where to go to talk to people, but now how do the hiring process look like when you’re still less than ten people or when you’re scaling up from one to ten employees? How many interviews do you do? Do you have everybody interview everybody? How complex or simple is this? How do you know if somebody is going to be a good hire for that super early stage? What are the characteristics you’re looking for? How do you on-board these people, because a lot of times, for most startups, the answer to most of these questions for the first ten people will be something like there is no process. There is no real interviewing stages, and there’s no real on-boarding. You just talk to people, and somebody seems cool or seems exciting, and you say, “Congratulations! You got the job. You start tomorrow,” and when they show up at the office you go, “Well, figure out how to do this or how to fix this or please build us that,” and you just throw people into the cold water. From one to ten, is that the right approach or the most practical approach? Is there things that you’ve seen companies do that you would advise people to do as they think about hiring the first ten people in terms of the actual, not the recruiting process so much but then the hiring process?

 

Hiten: For me, I think it’s even more important in the early days to have people that can just jump in and start working. If they’ve got too many questions or too many things going on, you probably don’t have answers anyway, because it’s super early. They have to be able to pick up the tools, pick up whatever knowledge is out there and just start working, start doing stuff and obviously ask questions and things like that, as necessary. I really prefer people who within the first day you can just see the hustle, as you would say it, and see them jump into the job and start doing it. I don’t see any other way at the earlier stages. There’s just so much to do usually, actually all the time. You’ll want people that can just jump in and start doing it. That’s a criteria. That’s what you’re looking for.

 

Steli: Absolutely. This is an interesting one. Some people might be good at a specific skill set, but they need to be managed. They’re not good at being self-reliant and just coming up and when they don’t know what to do, they make a decision based on what they’ve learned, based on their best conscious, but they don’t need to be told all the time what to do next and how to do things. You give them a project, you tell them what their ultimate goal is, and then you can set them free, and they love that freedom, and they’re able to just operate on their own. It doesn’t mean that you’ll never talk when you’re not up to ten people and your team is still small enough to be in one small space. There’s going to be a lot of serendipity and talking and asking questions and for feedback and all that. All that is good, but when you have somebody who needs to be managed every day, needs to be told what to do, for those first ten people, it’s going to be very tough. Even if they’re good at their skillset, say someone’s a great designer, visually that person can design beautiful things, but they cannot just tackle projects. They cannot just manage their time. They cannot just prioritize what’s really important to design now versus not. They need to be managed every single day. It’s going to slow down way too much for the first ten people for it to work out, so you want people that can self-manage and that are practiced and that are not afraid to make mistakes. They’re not constantly looking for others to give them the thumbs up, so they have the approval of others, so they’re not alone with that decision. When necessary, they can make decisions. They can take some risks, and they’re okay if it fails, or if they made a mistake, they’ll learn from it. They’ll move on. You definitely looking for that. Another thing that I’ll say that just popped in my head is that a lot of times in the early days, it might be hard for the first ten employees, especially if you find some exceptional talents and people are really amazing. It’s not going to just be a one-way street. This always applies to amazing talent but probably even especially in the early days for the first ten. You’re not a company that is just hiring. You’re really recruiting. These people will probably need some convincing to want to even work for you and want to join your company. You’re going to have to pitch them and treat them almost like they’re investors, and you’ll need them to buy into your vision of what you’re doing. You’ll really will need to sell them. You’re not just telling them there’s a job opening. “Please send us your CD. We’ll look at it.” If they’re really great, they’ll need to be sold. Often times in the early days, small teams and small startups won’t utilize their network to make that selling and recruiting easier. If you have advisors or investors, if you have anybody that has authority and experience and that believes in you and knows a lot about you, you should utilize these people in your recruiting process for the first ten hires, to get feedback what other people think. “Hey, is this really going to be a good fit? Is this person really good at this area? Do you think they’re going to be great as a hire number three or number four or whatever it is?” Just getting some outside feedback from people that are really experienced at hiring tons of people in early-stage startups, but also for the convincing part. I know that in our case, the first few people we wanted to hire, we would bring them to YC to the dinners, and then we would mingle around and then bring them to PG and basically have PG sell these people on why we’re an amazing startup to join.

 

Hiten: That’s pretty cool.

 

Steli: That is much more convincing than me telling you we’re a great startup. When Paul Graham tells you that, “Out of all the startups I’ve seen, these guys are going to kill it. This is an amazing team. You should try to join.” It’s much more convincing, obviously, much more powerful than if it’s just us saying, “Hey, we think we’re great, and we’re the best startup ever, and you should join us.” Whenever you can, not everybody knows PG or is part of YC, but you know you have advisors. You might have some investors. Too many startups, they don’t utilize their network to help them even hire, to have some of their investors do some of the interviews, to talk to of the people they’re trying to convince and help them convince those hires in the early days.

 

Hiten: I agree. That’s a great one. Is that your tip, or are we going to tips?

 

Steli: I think we’re right at the tip time, so this is going to be my tip.

 

Hiten: Okay, cool. My tip is just take it slow. Those first crucial hires are so crucial, and I see too many people just hire really fast. They hire the first smart person they see for something that they’re really trying to get done. They don’t bother to, like you said, have advisors or investors or anybody that’s involved in the company vet them in any way or even have someone who might have that expertise that’s a friend of theirs do an interview or a quick call or something like that. Take your time. It is a process, and don’t speed it up. Don’t just hire the first person you see for a role. That’s not going to work. It’s actually really counterproductive early on in a company. The only difference would be if you really already know them and you’ve been sort of working with them on the weekends or something like that.

 

Steli: I love it. That’s super important. The first ten are going to be the foundation to scale up your business. If you get that foundation wrong, you might not notice it immediately, but down the line everything will start breaking apart, and it might have been just because the first ten people you hired were not the right people. Take your time and get those hires right. This is it from us for this episode. Again, I started pitching this a little bit more and asking people a little more if you enjoyed this startup chat, if you enjoy the podcast, do us a favor. Go to iTunes. You can just go to thestartupchat.com, and then you’ll find a link to iTunes, and give us a review. Ideally it involves the number five, but you can give us as many stars as you want. Be honest with it. Give us feedback. We love to hear it, and more importantly than us loving seeing many yellow stars and nice reviews, the more reviews we get, the more people will discover the podcast, the bigger the community will grow. Hopefully that helps and benefits everybody, so thanks for that.

 

Hiten: Happy hiring. Bye.