Hiring talent at a startup is critical to success. The most precious capital at a startup is human capital. However, it’s too convenient – and, misleading – to think that hiring people based on the simple criteria of whether they are startup types or big company types is enough. Even startups go through stages that are quite distinct. Generally speaking, a startup really goes through three stages. Understanding the stages will help you make the right hiring decisions. Conversely, it’ll also help job seekers find the right company.
Creation Stage:
Nothing exists, everything must be created. Products. Customer base. Recruitment. Basic processes. Even culture is being created. Everything. Six Sigma quality does not matter, existence and speed does. Typically, this is the seed funding through Series B round. I call this the “I say I have the right to exist” period. Raw skill, passion, and talent are critical because the ratio of people:output is 1:1. Budgets are heavily weighed toward staff costs across the board but for marketing the situation is exacerbated. This stage is generally characterized as a period when … complexity is low, uncertainty is high.
Growth Stage:
Existence alone is not enough now. Quality matters. Improvements matter. This is also the longest lasting stage. Contrary to popular belief, I believe this is the craziest (chaotic?) period for most startups – not the creation stage. This is when broken things stop getting ignored and start getting attention. This is the Series C to D round. Hopefully, you’re at a startup that does not need its mezzanine (or, final venture funding) round to be a “Z” round! This is the “others say you must exist” period – when many customers say this implicitly by voting with their wallets. Different VCs have different motivations and time horizons for exiting but this is also around the time when various options for exiting the company get discussed. The company (cash flow positive or not) needs big currency badly for late stage growth so IPOs are discussed, potential mergers, selling the business, and so on. Experience starts to overshadow raw talent at this stage because the ratio of people:output looks more like 1:3 or 1:4. Marketing budgets begin to take on substantial program costs. Most liquidity events happen at this stage. Complexity is high, uncertainty is high.
Leverage Stage:
Some folks like to call this the preservation stage but I think it’s more about leverage. You start seeing the law of diminishing returns in action – or, at least, fear it - for every aspect of your business. Efficiency, scale, operational excellence, and so on. These are words often tossed around during this stage. The engine “just runs” at this juncture and the business truly has an inertia. The ratio of people:output gets even more skewed. Marketing departments grow big but program dollars get an (order of magnitude) larger! Complexity is moderate, uncertainty is low(er).
Most people can make the transition from one stage into the next immediate stage (ahead or back). Personally, I prefer to hire ahead. In seeking a job, I also like to look for something in the late creation stage or early- to mid- growth stage.
Very few people can leap a stage and remain effective. There are some amazing people who can do it but they’re usually the exceptions, not the rule. But, as a mentor once remarked to me,” skill sets are easily transferrable but mind sets are not.” Talented people select jobs based on what they want to do, not necessarily on what they could do. Simply being in your office to interview for a job should not be assumed as a clear signal that they want to be there. Many people go to job interviews because they could get it, a recruiter scheduled it, a friend referred it, hate their current job, and so on. I’m veering a bit here but this is also why I don’t buy into the notion that recruiting passive candidates is better than engaging active candidates. It’s logical for a big company to think this way but a startup is much better served by treating active candidates with equal consideration.
Stop the cookie cutter interviews laden with “tell me about your background” or “what are your proudest achievements” or “what are your areas of expertise.” Have a meaningful conversation around why they want the job and probe their background against it. You’d be surprised at some of the conversations that’ll arise from that simple, innocent question.
- John
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