One of the biggest barriers to startup growth is hiring:
“The Series A crunch may be tough but the talent crunch is brutal. I talk to high-growth startups every day and I keep hearing versions of “compared to recruiting, fundraising was easy”. Just like fundraising, it’s very competitive. It takes time, preparation and selling, and getting it wrong can slow down or kill your startup.” – Nikos Moraitakis, CEO, Workable
You need the right people in the right roles, at the right time. And as your startup scales up, it’s likely that you’ll need to bring people on faster, to fuel that growth.
This blog post looks at the most important things to consider when hiring new employees and building out your team, pulling in expert advice from SaaS leaders around the world. It covers:
- Who to hire, when
- Building out functional teams
- Scaling up: the importance of middle managers
- How to attract top-quality candidates
- Employer branding
- Benefits and compensation
- How to identify A players
- Values fit
- Experience vs potential
- Generalists vs specialists
- Soft skills
- How to onboard new employees
Who to hire, when
As your startup grows beyond the founding team, one of your biggest challenges will be working out who to hire, and when to hire them. It’s a delicate balancing act:
- You must be able to afford to bring a new team member on board
- You need to have the workload to support a new hire…
- …But also not wait until your current team is overwhelmed and overloaded to bring on a new team member
- And you’ll need to have the time available to recruit, hire and onboard new employees.
According to Jason Lemkin, by the time you reach $10M ARR, you’re likely to have 100 people on your team. As you pass the $1M ARR mark, you’ve probably grown beyond your founding team, but fairly organically, adding new team members as the need arises, rather than planning strategically for your team’s growth.
But now it’s time to get strategic with your hiring.
Building out functional teams
At $1M ARR you might have a team of 10 or so people: a sales leader, an SDR, a sole marketer, plus your founding team and a handful of engineers. But to reach $10M ARR (or, truthfully, to grow much beyond $1M ARR), you’ll need to start building out functional teams within your startup.
This image from InsightSquared shows the organisational structure of HubSpot when it was just 100 people:
While HubSpot’s organisational structure won’t work for everyone – and definitely shouldn’t be taken as the perfect hiring blueprint – it is useful for visualising the different functions you’ll need to run a scaling business.
Some key considerations when building out your teams:
- How does my startup grow? Are you a product-led or sales-led organisation? This affects where you’ll invest most heavily in terms of headcount.
- Are you a single-product or multi-product business?
- When hiring the first employee in a new business function (for example, your first marketing hire), should you hire someone senior or more junior? Both can work, but you want to be deliberate in what you’re looking for, and put together a job description that corresponds to that.
Scaling up: the importance of middle managers
As your startup grows, the gap between the CEO and the individual contributors on the team widens. While many startups claim to thrive with a flat organisational structure, in reality the gap between the founders and the workers ‘in the field’ exists, whether you want it to or not. Which is why the middle management layer is the unsung hero of a fast-growing startup.
The heads-of-teams that sit between the founders and the individual contributors. These are crucial team members, balancing the role of player-coach to bring out the best in their teams. A strong middle manager will keep their team aligned with your company’s goals, and keep them moving together in the right direction.
How to attract top-quality candidates
When your startup is small, it can be hard to attract top-quality candidates. You’re an unknown: you don’t have the name recognition – even in the startup world – to compare with the likes of Google, or even Drift and HubSpot. And even if you get applications in from top-quality candidates, you definitely can’t match the salaries of more established, better-funded startups.
So, what can you do to attract high-quality candidates to your startup?
Employer branding
I’m not talking about a new logo, or going all-in on retargeting adverts that follow your website visitors around the internet. Employer branding is all about making your startup attractive to potential employees. Everything you do or say on social media is building your brand – both for your customers, and for potential employees.
Joining a startup can be a risk for many employees. Which is why employer branding is so important. You need to look reputable (like you’re a real company), and engaging (like somewhere they’d like to work).
A strong employer brand can help you stand out from the crowd, and attract more applicants to your jobs:
“We further committed to this value [default to transparency] by making our salaries transparent at the end of 2013, which resulted in a spike of applications for open Buffer jobs, and is a step I believe contributed significantly to growing our brand.” – Joel Gascoigne, CEO, Buffer
Benefits and compensation
Competitive pay is essential for attracting talented employees, and it’s even more important for employee retention. But while it’s unlikely your startup will be able to pay market-leading (or even market-) rates in the early days, it’s important to think about the whole compensation package you can offer to employees.
- Equity – many startups offer employees equity as part of their compensation package. This gives employees a chance to own part of the business, and share in its success.
- Opportunities for progression – startups grow quickly, and the best employees will grow with it. That could be progressing into a management role, or a senior individual contributor role.
- Opportunities for learning – the ever-changing nature of startups also gives employees the opportunity to learn new skills, and help out in new areas of the business.
- Office perks – many startups offer free breakfasts, team lunches, Friday happy-hours, and fun office additions such as ping pong tables, to help bring their team together.
- Health and wellbeing perks – alternatively, now companies have adopted remote work, many startups are investing in perks to help their teams stay healthy, instead of office snacks.
- Paid time off – startups can be an intense place to work, so it’s essential to give your employees plenty of time off to recharge.
How to identify A players
Your team at $1M ARR will look fundamentally different from $10M ARR. The people you need to reach $1M ARR won’t necessarily have the skills and abilities to help you scale up to that next milestone. If you’re looking for the A players to add to your team, here are four criteria to think about.
Values fit
Each employee you hire has a direct impact on your company culture. Your A players will be a good match with your company values, and be able to demonstrate that with examples during an interview. It’s important not to confuse this with ‘culture fit’, which can often become a shortcut to ‘hiring people like you’, and contribute to a lack of diversity within your team.
Experience vs potential
Is it better to hire an experienced candidate, or one with less experience but more potential to learn and grow with your startup? There’s no easy answer. The ‘right’ mix of potential vs experience will change as your startup grows, and as the needs of your team changes over time.
Generalists vs specialists
In the early stages of your company, you need employees who can turn their hand to anything. But as your startup grows and roles become more clearly defined you’ll need employees with specific skills, as it will become less important for all your employees to be able to ‘do it all’. As you scale up, your A players will increasingly be specialists, rather than generalists:
“Companies in their infancy need people to do many things… At a certain point, generalists need to develop a speciality or they will not make it to later stages of a company.” – Alexander Taub, co-founder at UpStream
Soft skills
Your A players will need different skill sets depending on which role you’re hiring for. But as well as their practical skills, soft skills like teamwork, adaptability, creativity, empathy and communication are essential. Now the COVID-19 pandemic has forced companies around the world to go fully remote, communication skills are more important than ever, to keep your team aligned and keep morale high.
How to onboard new employees
When you bring new team members on board, it’s essential that you set them up for success. In the early days of your startup, you can get away with an informal onboarding process. But as your startup grows, the business will become more complex. There will be more people to meet, more projects going on, more products to get to grips with…
So what are the essential elements of a successful onboarding process? Here are four important things to cover:
Meet the team
When your new employee joins, you want to help them get to know people as quickly as possible. Introduce them to their direct team, and their manager can set them up with introductions to other team leaders, product owners and people they’ll be working closely with in their role.
In this new remote world, it’s important to be deliberate about helping new employees meet your existing team. They won’t be able to go for lunch with their new colleagues, or bump into people at the coffee machine, making it harder to build relationships and get to know the wider team.
Tools and technology
Your new employee will want to get up to speed as quickly as possible. To help with this, make sure they have access to all the tools they’ll need to use day-to-day. You’ll likely have a list of everything they need from a company perspective – like email, video calling and HR software. You should also work with their manager or head-of-department to put together a list of all role-specific tools they’ll need access to, so you can set them up before they join.
Catch up regularly
In a remote company, it’s more important than ever to check-in regularly with your new employee. You can’t see them each day, which makes it hard to understand how they’re getting on.
At the same time, you don’t want them to feel like you’re scrutinising everything they do.
So put some structure around it: you or their manager (whoever is most appropriate depending on their role) should check-in with them one-on-one a couple of times in their first week, then once a week for another couple of weeks, and then after a month. This will give them the space to get settled in their new role, while providing them with the opportunity to ask any bigger questions, and get feedback on their initial performance.
Ramp up and set expectations
The goal of your onboarding process is to provide your new employee with all the information they need to go from knowing nothing on day one, to being a fully-contributing member of your team.
It’s important to set and communicate expectations with your new employee about how long that will take. It may take longer in some roles than others – for example, it may take several weeks before your new sales rep is ready to run a solo call with a new prospect.
If this is the first time you’ve hired for a role of this type, you may not know how long it’ll take to ramp-up your new employee. But hopefully you’ll have a network of founders around you that you can ask for advice and to share their experience.
Closing thoughts
Building a successful startup is hard. When we speak to startup founders, we hear the same two concerns time and again:
- Money: How much runway do you have? Are you running out of cash? When do you need to raise your next round of funding?
- Team: Who should your next hire be? Is now the right time to hire, or should you wait a bit longer? How will hiring for this role affect your existing team structure?
It’s clear that hiring is one of the most pressing, ongoing considerations for SaaS founders, and one of the biggest challenges you’ll face.
In the early days, one wrong hire can literally make-or-break your company. But a great team can be the competitive advantage your startup needs to outgrow the competition, and successfully scale-up from $1M to $10M ARR.
