As you move through the well-defined phases of startup evolution, your recruiting tactics should evolve in parallel. At all times, you must optimize your talent search and processes for where you are currently, not where you’ve been or where you’re going. Otherwise, you risk spending too much precious capital early or scaling too fast with B-level hires.
Many times, young businesses jump the gun and build robust HR capabilities before they need them. Founders will also outsource recruiting before fully exploring their professional networks for the ideal candidates.
In this article, we discuss how your recruiting efforts should mature with your startup over time.
Forming the Business: Starting With Who You Know
When startups are first beginning, the most important priority is building a founding team of individuals who all share the same dream. Every person should buy-in entirely to the overarching mission and vision of the business.
Although the exact product, service, or target market might change, it’s crucial to have people who are passionate about growing a company and persevering through unforeseen challenges. The founding team is the cornerstone of the startup, the bedrock upon which all else is built.
After establishing the founding team (or “minimum viable team”), it’s time to assess what you need to create an initial prototype or to find your first customers. You should only seek out new talent this early if your founding team is missing crucial skills or knowledge to test the originating business idea.
If you absolutely can’t move forward without filling a gap, recruiting should start with a “who you know” exercise. The founding team should sit down and create lists of moonshot hires - the best possible candidates for the roles that need filling, given the unique business model, market, and employment opportunity.
During this phase, you are looking for complementary skill sets and personalities, in addition to people who quickly grab on to the founding dream. You want to tap only those who you would be inspired to work with over the long term. Any new hires should be incredibly impressive and talented. They should be the best out there for what you are trying to accomplish.
At a time when 90% of startups fail, you can’t afford a wrong step this early in your startup’s life cycle. One bad hire could chart an unintended trajectory for your young business.
You know what you need better than anyone else. You know the personalities of those on the founding team, and you know what it will take to be successful. Start with your network. Go out and find the few people on your own who can help you build your minimum viable product.
Validating the Business: Recruiting A-level Players
It’s time to test your product or service in the real world with real people.
During the validation phase, you must be prepared to iterate quickly and adapt according to customer feedback. At the same time, you’ll likely develop Key Performance Indicators (KPIs) so that you can measure success. On the back end of the validation phase, your startup may begin to attract some interest from angel investors or incubators.
However, capital is still light, and the pressure to only hire top performers remains. The next employees must fit your company culture, as well as understand the vision of the founding team. They should possess a passion for startups and your business, in particular.
What many fail to realize here is the ripple effect that the next wave of hires will create in your startup. As John Collison of Stripe puts it, hiring decisions compound over time. If the founding five members bring in five B-level players, and those people hire five B-level players each, your organization is now 85% B-level players, which is not good.
Those seeking to scale in the validation phase need cost-effective, yet meticulous recruiting help. With a partner like funded.club, you can continue to focus on growing your business while our team takes care of finding high-quality candidates on your behalf. Overall, our services reduce cost-per-hire by 70-80% and take days rather than weeks.
Scaling the Business: Automating Talent Pipelines
After successfully forming and validating your startup’s existence, it’s time to scale. The market is ripe for your product, and you must act fast to capitalize on the opportunity.
It may still make sense to outsource your recruiting to a partner, like funded.club, who has grown to understand your business and unique hiring needs. The advantage of working with outsourced recruiters early (but not too early) is that they can kick it into high gear as soon as you’re ready.
You may also be in a position to build your own recruiting operation. Seed capital and outside investment can help significantly in creating the capacity for your team to take this step carefully.
We strongly recommend that you proceed with caution here. An inefficient and bulky in-house recruiting process will hurt more than help. Bring in someone who specializes in scaling fast-growing businesses and chasing down top talent in the marketplace.
But, don’t rush this step. Hold out for the right HR lead before jumping fully into managing your own recruiting. The right recruiting partner can grow with you without holding you back until the time is right.
For those ready to bring on an outsourced recruiting solution, contact our team today. We’d love to talk.
The global startup ecosystem has evolved significantly.
All over the world, agile teams are tackling real-world challenges and operational inefficiencies in new ways. VC funding is flowing more freely than ever in parts of the world that have historically struggled to raise capital.
Silicon Valley is no longer the only birthplace for revolutionary products and services. And founding teams are more diverse than ever.
With the start of a new decade, we wanted to survey the current state of the global startup community to get a sense of where we are and where we’re going.
Global Startup Trends and Economic Value
Today, there are more than 470 million entrepreneurs worldwide.
Every year, people start 100 million new companies. Most in existence today are located in the US or China. However, Latin America had the highest rate of startup employment worldwide in 2017. In Guatemala, nearly 30% of the population works in nascent businesses.
According to Valuer, the top five best cities for startups in order are Berlin, Tel Aviv, Helsinki, Stockholm, and Bengaluru. Several cities in Asia and South America also received nods as some of the healthiest ecosystems for new startups.
Between 2017-2019, startup companies were responsible for $2.8 trillion in economic value. The most valuable startup in the world is China’s ByteDance, which is currently valued at $75 billion.
Today, there are over 390 privately held companies (“unicorns”) valued at over $1 billion. Half of these businesses operate in the US, and one-fourth are in China. The UK and India are each responsible for 5% of the current unicorn pool.
Although the US still leads the way on many startup-related metrics, the rest of the world is catching up quickly. There are now numerous cities across multiple continents that cater well to young businesses.
Technology-focused Startups Leading the Way
Modern startups are addressing challenges across a wide range of sectors.
However, a few industries are getting more attention than others, especially those related to technology services and products. The internet, big data, and AI have all enabled nimble teams to innovate and disrupt larger sectors.
Globally, fintech companies account for 12% of the current unicorn portfolio. The E-commerce, D2C, SaaS, and AI categories trail slightly behind at 11% each.
Y Combinator’s recent cohorts indicate that there is significant interest in the US for SaaS, healthcare, consumer goods, fintech, and consumer media businesses. In China, fintech, blockchain, and ridesharing companies are all finding success. Many startups in India are focusing on education, lodging, insurance, and logistics.
In the 2020s, we’re likely to continue seeing a disproportionate amount of startup activity related to innovative tech services and products.
Capital Funding Still Rising
Startup funding continues to trend upwards.
Both the number of annual deals and deal sizes have increased rapidly, with much of the focus shifting away from the US. In the mid-1990s, 95% of venture capital went to US-based companies. That figure has since dropped to 50%.
Last year, Indian tech scale-ups raised $14.5 billion, a record-breaking amount of funding for the country. Between 2015-2017, VCs invested $24 billion in Beijing-based startups and $5 billion in London-based companies on average each year.
Overall, the number of global venture deals is up 73%, and capital investments are up 231% since 2005. Crunchbase predicted that VC funding would come in at $76 billion across 9,100 deals for Q3 2019 alone.
Access to capital is no longer consolidated to a few hubs. Founders are winning investments all over the world, which means innovation is more spread out than ever before.
What Does This Mean for Startups in the 2020s?
For those who manage early-stage, high-growth businesses, it’s important to recognize the increasingly competitive nature of the startup world. Despite there being more investment and activity, 90% of startups are still unsuccessful. Seven out of ten fail between years two and five of operation.
Competition for talent and funding is high. Therefore, it’s critical to clearly articulate why your vision and business model is unique. Otherwise, you will struggle to attract A-list candidates and keep them interested in what you are doing.
At Funded.club, we help startups and scale-ups hire the right people so that they can rise above the competition without getting bogged down by inefficient recruiting efforts. We understand the challenges of running a growing, young business - you are flying the plane as you build it.
We know you don’t have time to sift through resumes or have the luxury to settle for less-than-perfect hires. Outsource your recruiting efforts until you are ready to build an in-house team.
That way, you know you’re getting the best of the best, and you can focus your time and energy on scaling your game-changing business correctly.
If, like us, you believe in rainbows, unicorns, 10x developers and hungry sales hackers, come and join our club! Start a chat or book a call to receive free hiring tips from startup veterans with >20 years experience in HR and recruiting.
- Recruit the Best, Think Long Term
Startups face unique challenges when it comes to recruiting. Finding the right talent is time-consuming and burdensome, especially for smaller teams with limited marketing budgets and lower salary payouts. It can take startups weeks or months to open new positions, interview candidates, and finalize hires.
And because early-stage companies are relatively unknown, they may not have a reputation in the open market. They have to work harder to capture the attention of potential job seekers.
Once applications come in, leaders can’t afford to waste hours sifting through low-quality resumes when they have so much else on their plates. Given these realities, teams should be focused on growing their business, not on recruiting, which is a specialized skill on its own.
In the startup world, there is also little room for recruiting errors. Companies can’t bring in mediocre teammates if they intend to disrupt or transform the status quo. Additionally, potential hires not only need relevant skills, but they also have to fit culturally with the rest of the group.
With today’s professionals jumping quickly between opportunities, it’s difficult to retain talent long enough to get young businesses off the ground.
In short, recruiting and retaining good people at startups is hard. Hiring talent is never risk-free, but it weighs more heavily on early-stage companies.
We did some research to see what the best of the best had to say about recruiting for startups and scale-ups. Over and over, we heard the same advice spoken in different ways. Even as the startup ecosystem has changed, two broader tenets still ring true:
We extracted these themes from the following video interviews and compiled a consolidated version for you to share with your group:
Hire the Best
Without fail, startups must hire the best talent for their specific needs and vision. Not everyone is cut out for the pace and ambiguity of young companies. Those who are looking to scale operations for innovative services and products need employees who can charge forth with little guidance.
Startups need people who aren’t just looking for a paycheck. They need personnel who are passionate about building great companies. Once businesses grow beyond a certain size, founders can’t be involved in every decision. They have to delegate to others, which is much easier when everyone on the roster is an all-star.
Don’t settle. Although it may take longer to find the right people, the effort is worth it. So much of a company’s success depends on the talent involved. Give yourself the best chance to be one of the 10% of startups that survive by hiring well.
Think Long Term
Startups live in the tension of addressing the urgent versus planning for the future. It’s easy to focus time and energy on putting out daily fires. However, you can’t neglect the long-term trajectory of your business.
Hiring decisions, especially for the first 10-50 employees, compound over time. The people you bring in execute your strategy and help you fight through the unique challenges of building a company from scratch.
Your hires also go on to recruit others and have a major impact on how you scale over time. If you recruit a B-level player, that person will likely recruit 3-5 other B-level players throughout his or her tenure. Before long, your company is filled with average talent that performs...average. And average isn’t good enough.
Work with Funded.club
For fast-growing startups, hiring the best and recruiting for the long term are extremely hard to do effectively alongside all other critical needs. After 20 years in recruiting and 5 years in startups, Ray Gibson set up Funded.club to provide startups and scale-ups with a cost-efficient way to grow their teams with the right people. As entrepreneurs, we know what it’s like to be in your shoes.
Our expert recruiters work closely with you to develop an ideal candidate profile. We run all of the marketing and advertising for your open positions. Through our selection process, we’ll identify 3-5 exceptional individuals for your team to interview and manage every step after that, too. Overall, we set you up for success without burdening your team or burning your capital.
If, like us, you believe in rainbows, unicorns, 10x developers and hungry sales hackers, come and join our club!
Start a chat or book a call to receive free hiring tips from startup veterans with >20 years experience in HR and recruiting.
Ray Gibson is founder and CEO of Funded.club. He brings 20 years of experience in recruiting across Europe, North America and Asia and 5 years running his own startups.