“Entrepreneurship is management.”
– Eric Reis, author of Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses (2011)
When you’ve earned enough recurring revenue, you can grow your startup team and delegate some of your daily workload to others.
But choosing the right employees can be a challenge for many early-stage founders. Those first full-time workers often become de facto cofounders, and poor hires can set a fledgling company back thousands of dollars and many years.
Your team should compensate for your weaknesses and help you grow your startup faster. And while finding the right people for your team is subjective, you’ll find enough general advice about it to help you during early-stage growth. We’ve compiled some of the best advice from experts and other founders about how you should grow your startup team.
How Do You Structure a Startup Team For Growth?
In 2011, thought leader Steve Blank and tech founder Eric Reis invented the Lean Startup Movement. Eric proposed the concept after Steve invested in his social network startup, IMVU, and Eric and his executives attended Steve’s entrepreneurship course.
IMVU has since faded into irrelevance, but Eric’s ensuing book, Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses became the blueprint for building and operating startups during early growth. It has a full chapter on building teams too.
In his book, Eric proposes a theoretical model for a startup team that requires founding members to have the following skills at minimum:
- Visionary: This is usually the CEO, someone who can see the industry’s future and your product’s place in it.
- Hacker/hardware: Someone with the technical expertise to create the product or manage the people who do it.
- Hustler: The salesperson or marketer selling your product and gathering customer feedback.
- Designer: The creative with a vision for how the product looks and how customers interact with it. The designer keeps all parts of the product and how it’s marketed under one creative vision (Jony Ive’s tenure at Apple, for example).
Steve and Eric argue that all of these skills are necessary and an individual employee or founder may possess more than one. However, rarely will any individual tick all of the boxes, and your first goal as a founder should be to hire people to cover them.
The most important takeaway: Hire generalists first – people who can do many things well and adapt as you find your product’s market fit. Once customers buy at scale, you can grow your team past these skills.
Scaling Past the Early Stages of Growth
Let’s say you’ve managed to find product-market fit. If you want to grow your business, you’ll likely need to hire specialists, such as:
- An operations lead (COO) – to coordinate your growing team and business. A product manager might replace this position in the early stages.
- Human resources – to aid in further hiring.
- Sales lead – Particularly for B2B businesses, companies fare better with employees specialized in sales. Marketing is slow and the leads it brings are sometimes unpredictable.
- A chief financial officer (CFO) – As a company grows more complex, it’s harder to keep track of its expenses and taxes. Founders growing businesses (especially businesses they want to sell later) need someone to keep an eye on the books. Any financial errors during due diligence can stall an acquisition.
- A chief technical officer (CTO) – While you might get away with outsourcing code to start, eventually you’ll want total oversight of your product. Your CTO should know your code inside and out and ensure devs work to realistic timelines.
In the later stages of growth for any startup, you’ll usually create new teams for more specific tasks and teams under each category.
How Big Should Startup Teams Be?
In an early-stage startup, you’ll likely employ a small team. Usually, that’s all you can afford anyway, but a small team is best because it makes you much more adaptable. You can change your business model without firing or reskilling specialized employees.
The consensus is that you should only hire the above positions as the need arises. Y-Combinator cofounder, Jessica Livingston, frequently believes the largest expenses at most startups are employee salaries. Below is a quote from her well-known blog post, How Not to Fail¹.
“The problem with overhiring is that it gives you less margin for error. The faster you’re burning through the money you have in the bank, the less time you have to make it to profitability. But startups, because they’re usually both run by inexperienced founders and doing something novel, are exactly the type of thing that takes longer to get right than you expect.”
While interviewing founders for our sister publication, Bootstrappers, I met many founders who agree with Jessica. Some bootstrapped founders (particularly technical ones) can build to over $1 million ARR with just one person and a couple of marketing freelancers.
Does the “Perfect” Startup Team Exist?
The only perfect startup team is the team that’s perfect for your business. You should address these three questions when deciding how to build your team.
Does Your Startup Need a Team?
Not all products need a team. If your business does something simple like recording videos of yourself using apps, you might not need to hire anyone for a long time. However, if you run a highly technical sales-oriented product like a B2B multi-purpose CRM, you’ll at least need a strong tech department and sales team.
Is Speed Necessary?
Startups usually build quickly for two reasons:
- They take investor money from a fund that wants fast returns.
- They want to take control of a large market share before anyone else does.
If neither applies to you, you needn’t feverishly scroll LinkedIn every evening. Just wait until a part of your job starts to take an uncomfortable amount of time and then look for a new hire.
Do You Play Well With Others?
Some people aren’t natural leaders and that’s okay. As a founder, if you dislike running a team or can’t rally the troops, be honest with yourself. You’ll either need to keep your product small, work with a CEO coach, or hire someone you like to take care of management for you. A company culture’s effects on employee retention and motivation are well-documented².
How Do You Grow a Startup Team?
Today’s startup teams are increasingly diverse. A growing percentage have a mixture of full-time workers and contractors as well as local and remote workers.
Contractors
Bloated full-time teams are the death of countless startups, so many founders hire remote contractors until they find direction and product-market fit.
Today, you can find remote contractors globally for almost any position you can think of: personal assistant, content marketer, coder, business developer, and more. Many of them live in countries with significantly lower costs of living than the West, letting you operate on even lower overhead.
Here are a few common roles many experts suggest outsourcing:
- Accountants and financial advisors
- Administrative workers
- Attorneys and legal advisors
- Content writers and digital marketing freelancers
- Human resources and payroll specialists
- Web developers, designers, and programmers
How to Find Remote Contractors
While international remote teams can benefit your business, they are often exceptionally difficult to source and oversee. Most businesses need to leverage personal connections or find a third party familiar with locals to act as a go-between.
Fortunately, HR and recruitment agencies that help startups source the best and brightest talent have multiplied in recent years. While traditionally these agencies would make you pay them a cut of every employee’s paycheck, many agencies today charge one-time fees for new hires. We’ve interviewed a handful of these businesses for Bootstrappers.
If you want to find these employees yourself, refer to the many forums packed with workers looking for one-off jobs as well as platforms like Fiverr and Upwork. These can be great places to start trialing potential remote employees.
Full-Time Teams
Once you and your cofounder(s) are sure of your direction, it’s probably a good time to hire full-time employees.
The advantages of hiring full-time employees include:
- Greater daily involvement from employees.
- A lower turnover rate.
- A more dependable work rate.
- A more cohesive company culture.
- Government incentives.
- Local legal protections in cases of IP theft or corporate espionage.
- Easier systems for incentives like stock options.
While traditionally full-time employees have been in-house, today, many prefer the flexibility of a remote or hybrid schedule. The number of office-based teams has scaled down tremendously in the past few years. Sources say 72 percent of tech companies today have remote employees³.
However, that doesn’t mean you can’t hire in-house employees. Two in five tech employees⁴ are reportedly open to at least a hybrid work schedule. And while we’re all getting better at asynchronous communication and Zoom meetings, nothing beats a small office for the sheer volume of easy team interactions around the clock.
Note: Hiring full-time employees outside of your country of operation complicates things. To enjoy the legal incentives of full-time employees, you need to establish an entity within the employee’s country. In these cases, it’s generally more economical to hire contractors.
How to Find Full-Time Team Members
If you’re currently working with contractors you like, congratulations. These are your candidates for full-time employment.
After exhausting your immediate circle, many sources and studies suggest you extend your search to friends and acquaintances of employees, for example.
LinkedIn conducted a study on leveraging weak ties to current employees⁵ when searching for full-time hires a few years ago. They found correlational data showing that established employees often reach out to current acquaintances when new job opportunities appear at their companies. The companies usually hire these acquaintances too.
You can heighten these network effects through employee referral programs – giving employees a bonus if they refer someone the company hires.
Startup Teams and Selling Your Business
The larger your team, the more difficult it is to get your startup Acquired. Large teams are a significant drain on revenue and transferring employment contracts is time-consuming and laborious. Frequently in acquisitions, your entire team can expect a complete restructure or find their jobs on the line within a few years.
If you want to create a great tech startup team to set your business up for growth or acquisition, remember to:
- Only hire as needed.
- Hire to cover your weaknesses.
- Hire generalists before specialists.
- Consider remote contractors before full-time hires.
- Hire people whom you like.
- Hire full-time from your contacts first.
And when you’re ready to sell your business, make sure to list it on Acquire. We’re rooting for you!
Sources
¹https://www.ycombinator.com/blog/how-not-to-fail/
²https://www.sciencedirect.com/science/article/abs/pii/S016726811300036X
³https://velocityglobal.com/blog/remote-work-statistics/#chapter-01
⁴https://morningconsult.com/2022/05/31/tech-workers-survey-office-hybrid-remote-work/
⁵https://www.sciencenews.org/article/linkedin-job-search-weak-ties-relatiosnhips-social-science
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