Your seed round is (typically) your first meaningful infusion of investor capital, and it's going to have two results:
“Our immediate goal after investing in your seed round is that you get to your next round by hitting your numbers/projections in around a year so,” says Trace Cohen, managing director at New York Venture Partners.
The reason for investors' urgency is simple: Most startups don't make it to their next round. The majority run out of financial runway long before they hit the numbers required for the next round, taking their company — and investors' capital — down with them.
Source: Mattermark Data
This ticking clock is going to change the way you hire.
In your earliest stages, you were hiring to solve immediate pain. Maybe you needed someone who could come in and take all of the operations work off of your plate. Maybe you needed an engineer who could take your messy MVP and make a real product. Hiring was a function you executed on an ad hoc, as-need basis. Now, it's a perpetual process.
If you're progressing through your growth plan, you're going to be constantly recruiting for new roles. In order to sustain this, you must develop a rigid structure for hiring, including:
After surveying over 1,000 startups, we've broken down a playbook for achieving all of the above.
When you were hiring on an as-need basis, you didn't need a recruiter or head of talent. Now that you're executing a long-term hiring plan, you need someone to lead the initiative.
Without a directly responsible individual (DRI), your hiring processes will grow haphazard and derail your growth—and oftentimes, it will be your founder's fault. Devin Satnick, director of talent at real estate startup Reonomy, explains that founders often set hiring goals with their gut. The sales team will have a busy week, and the founder will think, “We need to hire 10 more sales roles to handle this lead volume!” without considering the marketing and management roles needed to support 10 new salespeople.
As Satnick points out, however, a well-structured talent department, lead by a dedicated team member, will prevent sloppiness. A DRI will have the perspective to say, “According to our talent plan, we need to hire a paid marketing expert and a sales admin before scaling up our sales department. If we don't, we'll be spending money on sales people who are poorly managed and who don't have reliable lead volume.”
Keeping a disciplined process around hiring—from your high-level talent plan to the minute details of filling your candidate pipeline—gets increasingly complex as your company grows, which is why hiring-focused roles become much more common as a company grows. On AngelList, roughly 90% of talent-dedicated roles exist at companies with more than 10 employees.
Source: AngelList Data
After your seed round, you're going to be hiring for very specific roles—often ones you're completely unfamiliar with. This can make it tricky to build good avatars. For example, how do you hire someone to run your financials if no one on your team has ever done accounting? How do you hire your marketing department if your team is full of engineers and operation leads?
The answer to this problem is simple. Go talk to someone who is already in that role.
Dave Koslow, COO of DocSend, is an advocate of this method. For him, it serves two purposes:
“On the one hand, it's very direct. You're using the insight to speed your interview process. On the other hand, you're making really good connections. You might be hiring for one content marketer today, but six months down the line, you're going to need another, and so you might be in a really good position to actually recruit that person.”
Go through your network (or your investors' networks) and make a list of at least three people currently succeeding in the role you're working to fill. Then, offer to take them to lunch and ask about the types of traits that made it possible for them to grow into their role.
Why put emphasis on finding someone who could grow into the role, rather than just hiring someone who's been doing it for years? Your startup is young, and any role you're hiring for now is likely going to change. Customer success roles may become sales roles. Your front-end engineer might move onto the growth team. The fluidity to adapt to changing roles is essential for a good hire.
Adam Schwartz, cofounder of e-commerce startup TeePublic, recommends hiring candidates who are an “arm's length away” from the role you're trying to fill. In other words: Find candidates who have the basic skills the job requires and are excited about the role, but who may not have direct experience in the role. These hires will come in on day one expecting to grow and will be much more comfortable doing so as the company evolves.
Now that you have money to spend, you can incentivize employees to refer candidates. Pam Hart, head of talent at Flipboard, offers a referral bonus to any employee who suggests someone they ultimately hire. Referral bonuses are common practice for companies with the necessary funding, but Flipboard has a unique approach for paying them out.
All new hires are introduced in an all-hands meeting. The new hire then stands up, walks across the room to the employee who referred them, personally delivers their bonus check, and thanks them in front of everyone.
You don't have to incorporate an icebreaker like Flipboard's, but implementing a structured referral bonus will help support a rich candidate pipeline.
An effective employee referral program is also one way for team members to see their impact on the startup. Matt Walsh, head of talent at LinkedIn, found that 60% of employees wanted to be updated at every decision-point in the hiring process for a candidate they'd referred.
Source: LinkedIn Data
By updating employees on the progress of their referred candidates, the team members are brought in as collaborators, increasing their sense of ownership.
At the same time, be mindful not to become over-reliant on employee referrals, as this has the potential to build a team lacking in diversity. Ragini Holloway, head of talent at consumer financing startup Affirm, limits employee referrals to filling one-third of the company's open positions. The rest come from an even split of inbound applications and outbound recruiting.
As a result, Affirm's team has been able to quickly fill a substantial portion of its open positions without limiting the diversity of the candidate pool.
Blake Watters, former CTO at customer service platform Layer, explains the transition to a post-seed company like this:
"You're a 10-person company. You're trying to move as quickly as possible...Then you get a little bit bigger, and the organization needs more structure, but your inertia can just continue to carry you forward operating in the same way. (You need to say), "Okay, we need to slow down a little and be methodical, because things have changed.”
Obviously, your limited financial runway makes it crucial that you hire methodically after your seed round. However, there is an equally critical reason to be methodical: This is the stage when cultural problems can take shape.
At every new growth stage, there are going to be unique cultural challenges. Because your company is still so small, six new hires could mean doubling your team. If you double your team without a conscious focus on your culture, it can be very difficult to course correct.
In order to keep your rocketship on the right trajectory, remember this playbook:
With all three of those steps in place, you'll have the basic structure to grow your team rapidly and efficiently.
Have more questions about hiring? Check out some of our other guides: