On Startup Hiring

The emphasis on growth can tempt founders into “future-proof” hiring, favoring candidates with experience at scaled businesses while losing sight of how well they fill the current needs of the company.

The defining characteristic of every startup is growth. In a startup, it’s not where you are but where you’re headed that matters, progress measured not in absolute terms but as a rate of change towards greatness. In such a forward-looking environment, founders can easily fall into the trap of planning for tomorrow’s challenges without adequately preparing for today’s battles. Nowhere is this trap more pronounced than in hiring. The emphasis on growth can tempt founders into “future-proof” hiring, favoring candidates with experience at scaled businesses while losing sight of how well they fill the current needs of the company.

The consequences of such hiring decisions are often catastrophic at an early-stage startup where every team member has a critical impact on the company success.

Here are some ways this danger can manifest in an early-stage startup:

  • As Founder and CEO, you’ve concluded you need an engineering leader to mentor the young team and institute more rigorous software engineering practices. Instead of hiring a Director of Engineering (or promoting from within) to manage your high-output but small engineering team, you decide to “overhire” by bringing in an experienced VP of Engineering from a large enterprise company who manages multiple products and has thousands of employees reporting to him. You are bullish on the product roadmap and see a big business on the horizon that will require a large R&D team. You like the idea of planning ahead and proactively installing leadership that can effortlessly scale with the company.
  • Your early-adopter customers love your product. You’ve concluded it’s time to hire a sales leader to scale growth. Instead of hiring an account-executive from a high growth company (with a similar sales motion) you decide to poach a VP of Sales from the incumbent leader in your market, a 20-year-old multi-billion-dollar mature enterprise company. The Sales executive comes with strong account relationships at Fortune 50 companies. While your product is not ready for this market, you’re thinking ahead to the company’s inevitable move up-market.
  • Your core product is highly differentiated but is missing several “legacy” table-stakes features required by high-end customers. While you have plenty of room to grow in your current segment, you have your eyes set on the lucrative high-end of the market. To accelerate product completeness and mainstream customer adoption, you decide to hire an experienced engineer from the incumbent leader in your market, a 20-year-old company with a mature product platform.

These are all bad hires because they don’t address your current needs. And worse yet, the purported strengths of these hires are actually liabilities in your startup environment. More specifically:

  • The VP of Engineering will fail because he will prioritize process and efficiency over speed and agility, stifling product innovation as a result. The ideal engineering leader for a mature product platform that sees little new development, the VP is the wrong choice for a company where success depends on rapid product innovation.
  • The VP of Sales will fail because he can’t get you your next ten customers. It is of little consolation that he is the right sales leader when your startup becomes a $100M revenue business. The rolodex of Fortune 50 relationship turn out to be of little use; the sales team he has hired is inexperienced in selling new innovative – albeit incomplete – solutions that are rough around the edges.
  • The engineer from the established company will underperform, struggling to match the rapid pace of new feature development required in the new environment. A cautious, process-driven engineering approach is a bad fit for your agile, somewhat chaotic engineering culture.

Because product, engineering and business skill-sets vary so drastically across companies in different stages of evolution, it is essential to match a candidate’s experiences with the stage and precise needs of your company. The very traits that make a sales executive, manager or engineer successful at an established company will lead to failure at a young startup where the rules of the game are different. The engineer rewarded at an established company for effectively and safely advancing a mature product line, will fail at an early stage startup where the metric for success is fast new feature work over long-term robustness. The sales rep rewarded at an established company for effectively managing existing account relationship and ensuring customers renewals, will fail at an early-stage startup bringing to market an exciting (but incomplete) product that requires an evangelical sale. Paradoxically in all these cases the stronger the candidate’s track-record at their previous job, the more predisposed they are to failure in the new environment.

In general terms, you can think of a company’s evolution from startup to established company on a continuum across a few dimensions: risk/reward structure, nature of product innovation, sales focus and leadership skill-sets.

Figure 1
Figure 2

In each step of the journey you want to hire for skill-sets that strike the optimal tradeoff across these dimensions.

From a practical standpoint, this translates to answering the following questions for every hire:

  1. Does the new hire have the right skills to address current and short-term (12-24 month horizon) needs? While it’s great to hire candidates with long-term growth potential, that shouldn’t be over-emphasized relative to their ability to do the job well on day 1. This is especially true in sales: the team that gets you to $1M in revenue will likely not scale to $10M. It’s fine to upgrade sales as you progress.
  2. Does the candidate have experience at a company in a similar stage of evolution as yours? Put another way, does the candidate’s success at his current job translate to success at your company?

Great companies are rightly praised for their long-term vision but what doesn’t get enough attention is how they succeed by always striking a balance between long-term thinking and short-term execution. It’s a lesson every entrepreneur would do well to remember.

Ramu Arunachalam General Partner
Additional Reading