Tech startups are exciting places to be, especially for the founders and first wave team. The technology is inspiring, the market need is obvious, funding is in sight – what could possibly go wrong?
The fun (and the challenge) grows as the company scales up. This is when the potential begins to prove itself, but also when it begins to stretch. Founders can’t do everything, and the team must expand to keep the momentum. Hiring for the scale-up phase is a daunting prospect – there’s a lot to think about, but there are some proven approaches to help along that path.
Most startups will find a way to get through their first year. R&D grants or development project funds are available as kick-off stimuli to get the idea or the company off the ground. I do a lot of work in the space sector, where this is a common entry point, although funding here is typically aimed at the technology development or project delivery rather than as investment to build the company.
With a good story that identifies a market need and matches a technology, product or solution, there are communities of angel investors, startup accelerators or other sources of seed funding. These will often get the technology up through a couple of notches in the technology readiness level (TRL) scale, whilst also preparing the company for what follows. The company will typically still be a few people in a lab or workshop, and this is where the stretch will hit hardest.
Having attracted some growth funding, the most common failure point for startups begins in year two, and research shows that 70% will fail in years two through five. Much of these will be down to weaknesses in the business model or the product/market fit. Whilst 15-20% of failures will be directly down to people or team issues, the human factors that underpin the business model or the product weaknesses are major contributors across the board.
The most substantial team-building challenge confronts those founders and companies that are a year or so into their plan. They probably have a small team, possibly as co-founders or associates known to the founder, have won some early-stage funding from whatever source they could, and are preparing for the next stage of growth. At that point they are pitching for or have been awarded a new injection of cash from angel investors or seed funds to deliver the growth plan.
If this is close to your situation, read on for seven strategies that you may find helpful as you navigate the next part of your journey.
1 Plan for the result you want
Elsewhere on this site, I have developed a management framework around the six axes that must be considered when scaling up a company. These are summarised as:
- processes; and
The people part is some way down the list, because founders, co-founders and the early associates will do a lot in the early days around the purpose, problem, and proposition parts. These must, however, be clearly defined and agreed before venturing out into the hiring arena.
Underlying this is the founder’s personal vision of what a successful result is for their startup. This talks to things like ambition, scale, lifestyle, and exit. Often a private matter, it sets the agenda for the growth plan. There is a huge difference between a five year plan to build a compact team of a dozen specialists in a niche activity, and a fifteen year plan to build a multi-national market leader with thousands of employees and a hands-off leader.
2 Understand structure
Hiring at this stage is more than just collecting a group of talented, like-minded and enthusiastic people. As the business evolves and goes through a couple of growth phases, it becomes more about how those people are organised and combine, so that the whole is greater than the sum of the parts.
I often ask startups that I work with to sketch out how the business will look in, say, three years’ time. This is conveniently in the middle of the failure hotspot, but is far enough ahead to believe that the business has moved into commercial operations – customers are coming on board, orders taken, manufacturing or service delivery is in progress, invoices are issued and cash received. With more people needed at this point it is critical to know who does what.
It is also necessary to consider layers. At some point the initial flat structure of founders plus a collection of team members gets too wide to be manageable. New layers of supervision and functional management add complexity to the sketch.
With a clearer view of the future state (and you may need some external help to get there), you can look outward with a reasonable shopping list for the people you need.
3 Know the shapes you are looking for
This middle stage is a transition from the all-in improvisation of most founders to the structured, functional, and delegated steady state that the three-year sketch imagined. Flexibility is key, and this is where Andrew Chen (link) talks about the value of ‘T-shaped’ staff. His argument is that the first batch of new people into the business should have a primary purpose and be excellent at it, but also have the breadth of abilities (and attitude) to apply themselves well to other tasks across the team.
If the T-shaped resources are scarce, then at least surround yourself with ‘can-do’ people. As a founder, you got this far on a lot of application and just getting on with it, even if at times you didn’t really know what you were doing. Willing ‘do-ers’ may not have the skills for a deep dive on a specialist subject, but they will cover a lot of ground, and that goes a long way at this stage.
4 Pace yourself
Time is precious and timing is everything at the seed-stage, and this is especially so with hiring. Recruitment of key hires from a wide candidate pool is exhausting and time consuming, so no matter how tempting, don’t try to do it all at once. Look at the development plan and the milestones within it – can you phase in technical, QA, finance, marketing and sales at different times through the year? Each one has different attributes, and you may need help to select good candidates outside your own specialisms.
This is where you will need to acknowledge that in this new world, you must spend a substantial percentage of your week working ‘on’ the company rather than working ‘in’ it. Time management and priorities come more to the fore at this stage.
5 Build for chemistry
The first few people beyond the founding team are the seeds from which you cultivate a productive and effective culture. Through the internal atmosphere and externally through social media and other business networking, it will soon become apparent if team members enjoy being part of the team, are challenged intellectually, are supported, and succeed together. This has an organic effect, by attracting others to the company. The flip side is the effect of bad early hires that can erode a culture and limit your growth through unproductive time and problem fixing.
Take time to develop a strong candidate flow and select carefully from them, going beyond the technical competence – the easy wins or the readily available may not be the long-term champions you need.
6 Trial and error
The ten or so people you bring on board in year two may not have the optimum skills to lead or thrive in the 100-person company you imagine a couple of years later. It may sound harsh, but you are not offering jobs-for-life here.
Some may not even get that far – a good interview can still mask underlying personality or attitudes that don’t work within the team setting. If these people get into the company, it is best to work out the issues and deal with them quickly. Probation periods are a valuable tool, but prevention is better than cure.
I see a lot of interesting variations on the recruitment process that try to go further than the classic desk interview selection. It may be an investment of time and effort on your part, but the more you can ‘try on’ a candidate, the more confident you can be in their fit to the culture and performance of the team.
One company I know goes through a multi-stage selection process that is almost like a 360-degree assessment involving other functions, peers, senior and junior staff to create the richest picture of the candidate, as well as deep dive reviews of their technical skills. Another sets project tasks as pre-work that are dissected as much for approach and method as for the technical outcome. Another even asks candidates to spend a day inside the company, shadowing the tasks and just being ‘with’ the team. There, the chemistry is revealed in the downtime alongside the functional knowledge, as they discuss the tasks of the day.
7 Get help
As a founder with a great solution idea, the mechanics of growing a company can get in the way. Building a team is rewarding and ultimately valuable if they can deliver the commercial success you imagined in the beginning. It will take you into places you weren’t skilled or ready for, and so your support network comes into its own. Take guidance from your advisory board (if you have one), the accelerator you are involved with, independent mentors or other experienced people in your network. This is not a path to travel alone, so ask questions, try to make the best decisions you can, and build a winning team that shares your vision.
Comments or lessons to share?
I’d love to hear from early stage startups who are or have been in this place. What are your experiences of bringing in and working with your first dozen or so people?
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