Sandy McKinnon, partner at Pentech VC, explains how to navigate the tricky process of making the best hires to grow your team.
Scaling a startup from a group of mates in a co-working space (your typical ‘Hustler, Hipster & Hacker’ – core) to a small, growing team is arguably one of the toughest challenges founders face. It’s a journey very few people ever have to attempt, and without a route-map there is a high probability of getting lost.
Over the years at Pentech, we have been lucky enough to support companies like Nutmeg as it scaled from two people to become Europe’s leading robo-advisor, FanDuel from a team of four to 400, and Maxymiser as it grew from 23 to 400 headquartered in NYC (and acquired by Oracle). Focusing on the more chaotic two-to 20 team-member stage of company growth, here are some of the tips we’ve picked up along the way:
1. Don’t start hiring widely until you achieve product/market fit .
If you ask 10 VCs when you should start expanding your team beyond the core founding group, you’ll probably end up with 20 different answers. The reality is before you reach product/market fit (PMF), your startup is really just a set of assumptions which you’re trying to turn into a hypothesis you can test – and it is super-risky to expand beyond the minimal number of functional heads required. Typically, the biggest challenge is calling when PMF has been reached, because it’s always based on imperfect data. But once you have determined your North Star metrics and then achieve PMF, that is the moment to hit the gas.
2. As VCs, we don’t say ‘Here’s a manual, now get on with it’.
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Where (good) VCs will really help you is with how to bring people in, what the job specs should say, what to offer in remuneration and so on – all the stuff that would take a first time-founder a long time to figure out for themselves. Job specs are vitally important and typically pre-Series A stage founders find it hard to write them (because they’ve never had to think about them before).
3. Always ask yourself, ‘What do I really need this hire to do?’
Hiring is an art you get better at over time. When most founders start out they can soon become dispirited, enduring day after day of meeting people who range from very wrong to not quite right. My advice here is identify exactly what you need and then spell it out in the job spec. You certainly don’t have time to meet a constant stream of random folks, so you need to be sure about who’s going to be right for your organisation for the stage you’re at.
4. A toxic hire can wreck your startup.
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‘Avoid a**holes at all costs’ is a cliché for good reason. Always think hard about cultural fit when you meet candidates – how will they fit in with your team? Often it’s hard to differentiate between folks on paper – they may all have first class degrees from top tier universities, and have worked at Google or Facebook, etc. So the focus shifts to personality – and what else they bring to the table. Where there’s doubt, they should probably be out.
5. Reference everybody while you can.
Always take more references than you’ll think you need, and when it comes to the referencing process, avoid confirmatory bias. Go beyond the references the candidate provides you with. Folks know folks (LinkedIn’s handy here). And if there’s any hint of reservation about a person in a reference call, then don’t hire them.
6. At two-to-20 you need to hire more ‘T-shaped’ people.
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By ‘T-shaped’, I mean people who have vertical expertise, say, as a python programmer, but other skills too: an instinct for product marketing or they come with sales experience. At this stage of the company journey, T shaped people are more useful, given you need hires who can span organisational boundaries (the engineering team may have to double up as customer support to start with). As you grow, however, you’re going to need ‘I-shaped’ people – with deep vertical expertise in a particular area.
7. When recruiting, exhaust your personal networks first.
As an early stage founder you are unlikely to have deep professional networks, but you will have people you were at university with, or investors and mentors, not to mention former colleagues and your founder peers. Exhaust them first. The beauty of networks is that they can be very efficient, particularly when you’re looking for something specific.
8. Getting shot of bad hires is never easy.
It’s always preferable not to have hired someone who is a corrosive influence in the first place. But some folks interview particularly well and it may take weeks before you realise you’ve hired a dud. What you tend to find when you come to fire a bad apple is that they’ll probably know more about contract law than you. So, first, sit down with a solicitor and get chapter and verse on employment law on what you need to do. Then adhere strictly to a codified disciplinary process. Otherwise it might come back to bite you.