Hotbed • 2022-11-21
Nat Falconer, Head of People at Forward Partners shares her advice on hiring people within your startup.
Who should be your first few hires
Hiring your first few team members always seems like a huge and important step towards scale. In order to assess the best people to hire, start by looking at yourself as the founder / founding team, and examine your strengths and weaknesses. Then, look at your targets and work out what you need people to be doing in order to reach these targets. Which of these things can you do, and where do you need support?
What are the first few critical roles to hire after a round?
With most fundraises, your goal and will be to achieve product-market fit. This goal, alongside your own strengths will indicate what you need to hire.
If you're building a product business and there's no product experience in your founding team - your first priority will be hiring a product lead. If you need help in marketing or sales, then that will dictate the next hire.
How to write a good job description
A good job description is key to attracting talent, especially as you are often competing against big tech companies, or popular start-ups. Make sure the mission of the business creates excitement, and your purpose is clear.
Write out the work the employee will be doing so they understand if they are a good fit for the role. To stand out, state what your growth plan looks like, along with salary banding.
Tip: Nat has seen an increasing amount of scaleups recruiting for 'employee number 1'. Early team members at scaleups often join at the most exciting time of the business, have multifaceted and fast paced roles, and go on to grow quickly within the organisation. Consider using this in your JD to build excitement when you can't compete on salary or benefits.
Reducing bias in your interview process
To keep biases out, have a process in place, to reduce the amount of focus on 'gut feel'. Ensure you have a representative applicant pool, and take affirmative action if you spot any bias.
Tip: Once you have the basics down, hunt out different networks you want to get involved with to share your job ad. Looking for under-represented groups? Check out the LinkedIn search bar for groups.
Equity and structure for first employees
Deciding whether to give equity away is never easy, and there is no one rule fits all. In order to understand the financial impact of the equity you're giving to employees, relate it to your fundraise. If you're raising £500k for 20% of the business, you understand what a 5% option pool equates to, and can communicate this easier with new team members.
Someone's share can be anything from 0.01% - 5%. Anything above 5% for a single employee starts to put off VCs as they know how much equity you'll be allocating to investors each round.
Remember that some employees will be more motivated by equity than others, and it normally depends on where they are in their career. Equity can be a great way to boost a package when you aren't in a position to offer competitive salaries, but as a general rule try and offer a mix. There are a number of benchmark tools like Figures and Otta who can provide salary and equity benchmarks across industries.
The role of an advisory board
Startups often have an advisory board to add additional team resource and experience when they have a small founding team, and generally having an advisory board is relevant and useful for founders.
Do you put this advisory board on your deck? If they are adding value with experience or network, add these people to a deck. Investors are looking for key competencies in your team, and having additional competencies with advisors can add a layer of security and confidence.
Do you pay an advisor? Many advisors will work for equity if they believe in your vision. If they're being paid, £12k per annum is the figure many charge. If they're asking for more, have a think about the value they are bringing to decide if it's worth the cost.
How much equity do you provide? Equity for advisory board members will come out of a different 'pot' to your employee options. Again, it depends on the value they bring, but a maximum of 5%.
Want to know how much to pay yourself? Often in the early days founders don't pay themselves. Post fundraise, there's always questions about how much you take out of the business for yourself, versus hiring early team members. Nat says the standard number seems to be £25k. However, you need to be able to survive and investors will often interrogate this number to assure themselves you are in a financial position where you can take that salary. Be honest about how much you'll need, and work that into your projections, but don't project taking too much VC money out for yourself. Nat recommends anything from £50k - £70k as a realistic founder salary.
How do investors view startups where there has been a cofounder split?
If you've had a fallout before pitching, don't worry. Investors are well versed in co-founder splits, and dealing within before a pitch can even be a positive. When investors look at the split, they try to determine whether it was down to personal circumstances, or a lack of belief in the vision and where the company is going. Regardless of a split, your co-founder relationship will always be challenged, as it is the biggest reason startups fail.
In order to provide confidence to VCs about your co-founder relationship, have conversations early to work out each other’s roles and goals for the company. How do you look at things when it goes wrong? How have you tackled conflicts? Do you understand each other’s circumstances? Do you have complimentary skill sets? Being able to answer these kinds of questions will help VCs understand that you have a good working relationship.
Tip: Get a co-founder agreement in place early so if there is a split, there is no grey area about who owns how much equity.
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