​First, the advantages.

One obvious benefit of taking venture capital funding is that you get a major cash injection to accelerate growth. You can use the money to hire new talent, scale products, double down on marketing, whatever you need. VC funding can even help you pay the bills until the revenue engine really gets rolling.

Another advantage of accepting VC money is that you gain access to your investors’ networks. The people who invest in your startup will be motivated to help you succeed, because they have skin in the game. They’ll introduce you to valuable contacts who can help you get your foot in the door with important suppliers, distributors, customer segments, or others.

Furthermore, many VCs are entrepreneurs or former entrepreneurs themselves. They know what it takes to start and build successful businesses. When you partner with VCs, you have their tried-and-true wisdom at your disposal. Also, running a startup can be an isolating experience, so it’s nice to have people on your side who have been in your shoes and want you to succeed.

Successful VC funding rounds also come with exciting press coverage (e.g., TechCrunch features, Forbes articles, speaking opportunities, etc.). As a startup founder, that kind of validation can be intoxicating.

On the other hand...

There are good reasons not to raise VC funding.

As soon as you take outside money, you introduce new voices to the table who often want to tell you how to run your business. While this advice can be helpful, it means you have less control. You are no longer your own boss, which might be why you started a company in the first place!

Keep in mind that investors are also incentivized to push you in the direction that they believe leads to the biggest possible returns. These “pushes” may or may not take you where you want to go. Outside investors can also be flat out wrong about what makes sense for your business. 

Bringing new investors into the mix also dilutes company ownership. After raising money, you will own a smaller piece of the pie that represents your company’s value. The hope, of course, is that the pie grows so large that everyone ends up with much more than they can eat.

On a related note, VCs can dictate when you eat. You may want to continue expanding into new markets and service areas right when your investors are ready to cash out. This kind of tension is not healthy for young companies. 

Finally, VC funding can put tremendous weight and strain on your business. Those who aren’t prepared can buckle under the pressure that comes with trying to reach that $100M or $1B valuation that may not be feasible for your business model. And to be clear, it’s okay if your startup is not meant to play in the sky-high valuation universe. That doesn’t mean your work is not important or meaningful. ​

Startups worldwide are wrestling with the following question: should I hire full-time employees or
work with part-time contractors?

Last year, COVID-19 forced leaders everywhere to tighten their budgets. In many cases, this
meant letting go of full-time workers and plugging gaps with freelance contractors. As the world
recovers, startups are now wondering if they should hire back up to pre-pandemic levels.

After all, many companies have found success bringing in part-time help for specific needs. And
more workers are choosing flexibility over job security. In 2019, 57 million people were doing
freelance work in the U.S. alone.

So, what should you do?

The truth is, there is no clear answer. However, there are certain things to keep in mind as you
determine the best path for your business. We’ll cover all of those here. As always, we want to
make sure you have everything you need to be successful.

The Case for Full-Time Employees

As a startup, there is no substitute for building a talented and passionate team. You need the
absolute best people on your side who are willing to jump into the trenches and bring your
company’s vision to life. Even better, you need partners who are excited by the idea of taking
ownership in a groundbreaking company that may or may not be around in 3-5 years.

It’s hard to find this level of enthusiasm in a contractor. If you want your startup to be the one in
ten that survives, you need all the enthusiasm you can get.

With full-time employees, you can also foster long-term relationships that will produce
exponential returns over time. In other words, you have the ability to create a strong foundation
of institutional knowledge that will transfer seamlessly to new hires.

In addition, teams consisting of full-time employees have the potential to tackle big, ambitious
projects that would otherwise be beyond reach. You can invest significant time, money, and
energy into a multi-year endeavor that could ultimately differentiate your business.

Full-time employees also buy-in more to the cultural side of startup life, which is really important.
They tell their networks about how excited they are to be working for an innovative organization
and help spread the good news about what you’re doing in the world. On the other hand, contractors often work for multiple companies and don’t tend to advocate for any single
organization.

To summarize this section, there are still many advantages to recruiting full-time employees.

The Case for Contractors

Now, the case for contractors.

It’s easier than ever to hire top-notch talent located anywhere in the world. Startups can search
far and wide for specialized skill sets that meet their exact needs. They can hire the best of the
best for short-term, tightly scoped projects, knowing that they don’t have to pay exorbitant
salaries and benefits over the long run.

Startups that are comfortable working with contractors can employ a “plug-and-play” model, only paying for certain skills when needed. If money gets tight, working with freelance contractors can be a great way to keep costs down without pausing projects.

On top of that, some contractors are open to full-time employment should the right opportunity
come along. So...when companies find an awesome contractor who is a great cultural fit and
ready for the startup life, they can confidently make a full-time offer.

In this way, working with contractors can serve as a trial run for your business. You can
minimize the risk of making a bad hire and evaluate people based on real work that they would
be doing for your startup.

So, there are compelling reasons to go the contractor route, even outside of trying times.

The Right Choice Depends on What You Need

At the end of the day, there is no one-size-fits-all answer. In fact, a single startup may take a
hybrid approach and hire full-time employees for some positions and contractors for others. You
may even fill the same position in multiple ways over time, depending on your needs.

The great thing about living in an interconnected, remote work-friendly world is that you can
adapt when circumstances change. Recruiting and hiring is more fluid than ever, which means
you can fulfill your business requirements without worrying about whether or not you’ll make a
major hiring mistake.

To that end, we can help you strategize around the best path forward for your startup. Our team
of experienced recruiters, business mentors, and former entrepreneurs understands how to
build organizations that thrive in the modern world.

Want to talk about your hiring needs? Contact us today.

Many business leaders want to treat 2020 as an outlier marked by exceptional circumstances. While this may be true, there is still a lot we can learn. Resist the temptation to dismiss the hardships you have faced since the spring. Instead, dig in and study how you managed your team throughout the pandemic: 

• What did you do well as a leader?
• What could you have done differently?
• How well was your business prepared for such a tumultuous time?
• How well did you communicate with your customers and team?

 
Getting to the bottom of these types of questions will help you grow significantly. Depending on the size of your group, it might make sense to set up one-on-one meetings with every person to gather feedback. Or, you can host a series of bigger meetings to reflect as a team on successes and failures that were specific to the year. 
 
Get started on this now, as it only gets harder to make the time for such conversations. End-of-the-year goals can be all-consuming!