In a 1983 speech at the International Design Conference, Steve Jobs famously said “It doesn’t make sense to hire smart people and then tell them what to do; we hire smart people so they can tell us what to do.”
For startups making their first hire, this quote certainly resonates. Investing in a new hire is a significant allocation of resources. You want to hire someone that feels like an ally and contributor in the work to take your product to market and scale up to success.
You may have heard of the “hacker hustler hipster” typology in startup hiring. Hackers deliver the technical prowess you need, hustlers power your sales and marketing with a get-it attitude, and hipsters bring the creative, audience-centered, flair. Whether you’re looking for one of the three, or someone with a mix of strengths, identifying the need to make a hire is just the beginning.
Hiring rockstars in 2022 is harder than ever. There are currently only 65 employees available in the workforce for every 100 job openings—and that’s a raw statistic. This ratio predates other limiting factors like geography, required skill set, personal values, availability, and the other essential qualities a startup needs in a hacker, hustler, or hipster.
But a tight talent market during the ongoing “Great Resignation” isn’t the only number hitting all-time highs. There are also simply more employers than ever before. A record number of businesses were formed in the United States in 2021, nearly 5.4 million. Around one-third of those are classified by the Census Bureau as “likely employers,” meaning they are likely to hire employees, if and when the business takes off. The number of likely employers who founded businesses last year is up 37% since 2019.
We didn’t write this post to convince you it’s impossible to make the first hires that will grow your startup to legendary status. But we did write it to give you a foundation in who to hire and hiring best practices. We also hope to inspire the confidence to take your time making hires, even when they’re needed yesterday. Here’s everything you need to know about making the first hires for your startup.
What Roles Does a Startup Need?
There are key positions in a startup company both inside the C-Suite and outside of central leadership. Let’s start with the executives, who may already be part of the team of founders making a hire. Some companies and teams may combine roles into one job function:
CEO at a Startup
The Chief Executive Officer (CEO) is the highest-ranking executive. Simply put, they make the decisions, including delegating authority. The CEO’s core function is preserving vision and aligning goals with strategy. Yet they also must remain adaptive and open. As the impacts of growth and changing market forces present challenges and opportunities, it is the role of the CEO to help the company stay true to and deliver on its mission.
COO at a Startup
The Chief Operations Officer (COO) is responsible for making sure work gets done on a day-to-day basis. At many early-stage startups, the CEO may hold this role as well. The COO boosts productivity through problem-solving and removes barriers where possible. They may also coordinate communications between departments and manage recordkeeping on the financial and/or human resources sides.
CFO at a Startup
The Chief Financial Officer is more than just an accountant or money manager. They also handle relationship development with investors and stakeholders, helping plan for cash to be available for scaling when it’s time to flip the switch. The CFO can also lay the foundation for documentation requirements and other internal processes needed for growth. This is another role that may commonly be held by a CEO.
CTO at a Startup
The Chief Technology Officer (CTO) at many startups relies on coding as a core job function. On lean teams, these executives may be doing the heavy lifting to get the product or service off the ground. Coding, software quality assurance, and soft skills are all important to success in this role as the team gets larger through additional hires. The CTO also guides technology strategy and future planning for scalability.
CMO at a Startup
The Chief Marketing Officer is responsible for a strong sense of brand identity, inside and out of the company. Marketing is a powerful sales enablement tool for lead generation, customer loyalty, and referrals and renewals. The CMO is also in charge of constantly gathering user and customer feedback to drive positioning in the market and support product teams.
These roles may be held by founders who have been involved in the business, or the first job posting the startup makes might be to hire one of these executives to step in and help grow the vision. However, companies need more than executives to scale and thrive. Here are some of the other roles in a small startup organizational structure that might be a first hire.
- Product Director or Manager: This startup leader exists at the convergence of the user experience, the development team, and the needs of the business. They make sure the product is not just market-ready but also needed by the market. They consult on everything from buyer personas to the pricing strategy to sales forecasting and training and beyond.
- Developer: Developers live in the code, not just completing new features, but also fixing bugs and performing software testing. As the startup grows, ideally the team of developers grows too to help each person’s unique proficiencies benefit the team and product the most. But in the early stages of a startup, a developer often needs to go beyond their job scope to get the work done and released.
- Sales: Sales at a startup often relies on convincing the target audience to take a risk using an unproven product. Especially in B2B SaaS, where the function of software is the backbone of many businesses, this can be challenging. Early sales hires at a startup need confidence, persistence, and a deep understanding of the product’s value and unique benefits. This is why many CEOs and/or founders are often part of the selling process in the early stages of a company’s growth.
- Customer Success: Customer success managers take over once a deal has closed to understand what value customers are getting from the product. Especially in the early stages of a startup, this feedback loop is critical to understanding the strength of your current market fit—and how it could be improved. Other duties include encouraging customer referrals, cutting down the time it takes the customer to receive value from the product, and even resolving support tickets.
These executive and non-executive job functions are essential to any business. But that doesn’t mean each has to be its own role, or that you must force your business leadership to fit into a mold. If one of your startup founders is really passionate about customer experience, maybe they are the Chief Customer Experience Officer. Or maybe you choose to outsource marketing completely, hiring a fractional CMO to consult on strategy. Each startups’ path to viability is as unique as its concept.
Do Titles Matter in a Startup?
This brings us to a question: do the job titles at a startup matter? Fundamentally, yes they do. Job titles have been shown to improve our sense of control, help us feel secure in the workplace, and even encourage us to apply for jobs to begin with. Creating a startup title hierarchy, even for a team of founders, helps make it clear who has authority in certain situations and helps avoid confusion or tension.
However, if you think a job title at a startup will neatly match with the startup roles and responsibilities template, think again. The reason some argue that job titles at a startup don’t matter is because everyone wears many hats and has to be able to jump in where they are needed, even if they are not experienced.
Still, even if you know the CTO is doing the same work as the developers, assigning job titles to each is worth a thoughtful approach. The right job titles for early hires will even make them feel confident in their place at the company as the team continues to grow. Here are a few tips for coming up with good startup job titles:
- Keep job titles relevant to the skills and expertise of the employee.
- Avoid title inflation in the early stages. As the team grows, you can always add job titles.
- Choose something that will be taken seriously by those outside the company.
When to Start Building Your Startup Management Team
Founders create the early framework of the startup team structure the day the business is founded. The vision, competencies, and needs of the founding team set the tone and other search requirements for the hiring journey ahead.
“Do not underestimate how much a programmer, marketer, or whomever you need on your team can help you figure out what to do and how to do it.,” wrote Abdo Rian for Forbes. “Over the years, I found that involving a team or recruit since day one is a huge weight lifted off your shoulders.”
You may not want to start making hires on day one, but the sooner you can start thinking about it, the better. It takes six months on average to fill a vacant position at a startup, meaning you always need to be thinking ahead to the next hire, as well. You have nothing to lose with getting a head start on hiring.
Guide to Early Stage Startup Hiring
Now, on to the practical specifics of an early hiring plan for a startup.
You will know it is time to hire when a pain point, time sink, or gap in your knowledge base is presenting too much of a barrier to growth. Don’t forget the hiring plan must also pay respect to the things which are going well at the business and the elements of culture you want to preserve. And, it’s always best to make a hire with several repeatable processes established and a little bit of direction for the new team member in mind.
It’s impossible to know which employee a startup should hire first because every business is different. Instead, let’s review how to find and onboard talent to meet any need you have.
How Do Startups Get Employees?
Startups get employees through methods like referrals, networking, and job board postings. Each has its own unique benefits and risks.
- Hiring Through Referrals: Hiring through a referral is often preferred for early-stage startup hires, because the referral gives a fast route to understand the candidate’s values and personality. When a trusted colleague or friend says “You have to meet someone,” we tend to take it seriously. The greatest risk of hiring through referrals is that it can limit the diversity and full potential of your team. If you are only hiring people who know people, the result might be lots of people with similar perspectives and/or backgrounds.
- Hiring Through Networking: Hiring through networking is a way to find talent in your area and leverage the community to grow your business. You can draw on your investors and even competitors as sources for talent. You can also hire through social media networking. Posting to relevant social channels and groups about the job may connect you to candidates more organically than through a job board posting.
- Hiring Through Applications: Hiring through a job board or job posting means a lot of applicants to look through, but also exposes you to the full potential in the market. Consider posting on niche-specific job boards for specialized roles like developers or graphic designers. If your existing network isn’t delivering or you want someone with a fresh perspective, this is a great way to meet talent interested in your opportunity.
How Do Startups Hire First Employees?
There are several hiring processes for startups to consider, including:
- Legal Steps to be Allowed to Hire in the US
Being legally-qualified to hire another person requires many steps, such as:
- Get an Employer Identification Number (EIN) from the IRS
- Register with your State Department of Labor to pay unemployment taxes
- Set up a worker’s compensation insurance policy
- Create payroll processes, including withholding taxes from employees’ pay
Consult with a legal professional or experienced mentor for support with these and other steps to be compliant with the law when making your first hire.
- Writing a Job Description
Even if you are hiring through referrals, you should still write a job description for the role in question. Early-stage startup hires often cross-function in their roles but giving each person a job description still achieves several key functions. One of the first is defining what success looks like and the metrics each person should perform to. The job description also sets a scope of generally-expected daily functions and limits to responsibility or decision-making authority. Another benefit of writing a job description is the opportunity to describe where the role fits in the company hierarchy, and even the potential for growth.
Creating the job description gives the hiring team a chance to agree on commonly-desired skills and qualities in a candidate. In the event you plan to post the opportunity on social media, your website, or a job board, the description will be needed.
- Interview Protocols
Next, it’s time to decide how applicants will be screened. Pre-screening could take place through keyword scanning as well as skills and aptitude tests, which we’ll cover more in-depth in the next section. Many organizations choose to have several meetings with candidates to gauge their fit for the company. Some implement video interview processes where applicants record a short video introducing themselves and/or answering a few screening questions along with their resume. This allows the decision-maker to invest 5-10 minutes in applicant screening and save both parties the time of a phone interview. This is just one example of how interview protocols can be innovated through technology. In the final stages of the interview process, all the key stakeholders should be involved.
Don’t be fixated on the number of interviews so much as ensuring all the necessary questions have been explored. In cases of remote hires who really need to buy into the mission and vision of the startup, taking more than a conversation or two to get to know each other can save friction down the road. In the cases of staff hires, faster hiring processes may be acceptable.
- Skills Assessments and Background Checks
It’s important to test the skills and claims of any applicant. Background checks verify an individual’s resume information, such as certain education and past employment. A background check will also reveal any criminal history.
Skills evaluation can be used as a pre-screening method, like asking candidates to complete a personality assessment or coding test to explore who is bringing the right skills and qualities to the table. In a guest post for Founders Network, Michael Overell describes two trial projects he runs with top candidates. The first is asking them for a list of projects they could complete in 3-5 hours which would add value to the team. The second is asking how they would plan and execute during their first 100 days in the role. Answers to these exercises demonstrate a lot about how each candidate would get the job done in both technical and non-technical job functions.
Skills assessments should demonstrate that a potential hire has the competence to perform their tasks, and the personality to fit in with the team while doing so.
- Salary, Benefits, and Onboarding
Making the offer to a new hire should be documented in an offer letter that clearly spells out the benefits, salary, and employment terms. Make sure to be prepared to dedicate time to negotiation in these processes, especially if someone is having to relocate to take the position. Then, employees must be efficiently onboarded, which includes HR compliance as well as desired or necessary training. Employees will also need the basics like a workstation, email address, access to files and shared drives, necessary software logins and more.
With that, the startup has hired its first employee!
Do Startups Hire Quickly?
There is a stereotype that everything happens fast at a startup, but hiring doesn’t have to be part of it. In fact, a hiring strategy for startups should involve time to make sure the person is a great fit in personality as well as skill set. This might mean letting them meet all the people they will be working under and with, following up with their references, and other vetting strategies.
In today’s tight talent market, the old mantra of “hire fast fire fast” no longer applies. Instead, it’s better to hire with intentionality and invest in the partnerships and collaborations that bring the most potential to the table. This includes confirming you are hiring someone who is willing to put in sweat equity to grow the business from its early stages.
Do Startup Employees Get Equity?
Not every startup employee automatically gets equity. Instead, startup equity by role is the common practice to identify who gets a stake in the company and who takes home a full paycheck.
Startups may allocate anywhere from 5-30% or more of the total ownership of the company to employees. This option pool helps ensure the dilution of each shareholder’s ownership is equal as the company goes. Often a portion of the pool is set aside for early hires and another portion is set aside for later hires. However, the amount of equity on the table for employees also depends on the salaries that need to be paid, and how soon you’re planning another investment round.
What are 5 Key Strategies for Hiring New Staff Effectively?
The 5 key strategies for hiring new staff effectively are:
- Know your ideal candidate, including their skills, proficiencies, personality, and more.
- Involve the team in the hiring decision when appropriate, as well as in welcoming and onboarding the new hire.
- Find new talent sources online and in your community.
- Measure employee performance to give feedback and judge when new hires are truly needed.
- Think ahead to the gaps the next hire needs to fill on the team, and start recruiting!
We hope you’ve learned a lot about making your first startup hire from this guide. Good luck!
Looking for Guidance to Grow Your Startup? We’re NEXT Studios.
NEXT Studios is a venture studio committed to helping founders and visionaries grow businesses that make a difference. As a Certified B Corporation we consider the community outcomes of our investments to be just as important as the financial returns. We work with founders to take their startup from the early stages of a concept all the way to launch and user acquisition. That includes giving founders access to our talent network to support critical milestones like your first full-time hire.
Whatever you aspire to build, NEXT Studios can help. Explore our process that puts your business idea to the test and helps you chart the next steps for growth.