Building your Founding Team
Having the right team can increase your chances of success. Having the wrong team can make the startup journey exhausting. But, how do you know what's right and wrong when building your founding team?
Your co-founding situation is at the very top of the ‘most important things to get right’ in a startup. But what about your founding team? Well, it’s a close second place. Arguably tied with number one. In classic Sun Tzu style, you can think of it as a general and his army. You need both to be led to victory, and both need to be strong if you wish to stand a chance.
A good founding team will take you further than you can imagine. Sometimes all the way to the finish line. A bad team will crush your hopes and dreams faster than VCs investing in gen-AI in 2023.
“A single mediocre hire in the first five will often in fact kill a startup.”
- Sam Altman, OpenAI
What sets apart a good team from a bad team? How do I find the right people? When do I hire who? What are the most important considerations? How the f*ck do I build a good team? I know I had these questions.
Some people are great at hiring. They get it. They have an eye for talent. Others not so much.
I was the other. Until I made every mistake under the sun, and it cost me. Big time.
As a startup founder, a major part of your success boils down to finding the right people, bringing them into your vision, and engaging them in rigorous debate. In essence, your primary job is to build a team that is intentionally curated, works incredibly well together, and moves at light speed.
It’s hard, but not impossible.
Only once have I built a team that ticks all 3 boxes, and now they’re all leaders of their own destiny (founders).
So let’s talk about the relevant different considerations when it comes to building your founding team.
I’ll focus on the most common hiring questions for early-stage startups:
Who should I hire first?
What should I look out for?
What are some common mistakes?
Where do I find talent?
How do I keep people around
A preface. A formidable team begins with you. If you lack self-awareness, you will never build a great team.
You must objectively understand what you’re good at, what you suck at, your toxic traits, your working style, conflict resolution style, etc. The list goes on.
The difference between the impact of high self-awareness and low self-awareness within startup leadership can be profound. I’ve seen numerous founders having to willingly step out, or be forced out of their business because their toxic tendencies are causing spiraling decay. Take the time to fully understand yourself before embarking on your founder's journey.
Identifying the Right Roles and Skill Sets
“Who should I hire first?”
There are dozens of great founding team combinations, and none are particularly better than others. They’re all relevant to the context of your business and require some thoughtful consideration.
In my personal opinion, the first few hires should often be within engineering and customer success, with yourself in a sales position. Great technical talent is at the forefront of any technology startup’s success, and great customer service can supplement many product pitfalls in the early-stages.
Steve Blank says you need a visionary, hustler and a hacker. But I much prefer Adam Cheyer’s dream team combo; the visionary, the marketeer, the product person and the builder. Considering just how much noise you have to cut through these days.
If your co-founding situation includes these, then you’re off to a good start. If not, then you’re often looking for them in the first few hires.
But once again, let’s look at what the data says.
I pulled the unicorns from Lenny’s Newsletter B2B growth engine post and cross referenced with the founders. The founding team make up is heavily dominated by eningeering, with design, customer success and sales as close seconds. Some companies show outlier positions such as HR/recruitment, subject matter expertise and GTM/growth.
Your co-founding situation will heavily determine the next few hires. For example, if a founder is heavily technical, then one of the first hires might be design or customer success. If you don’t have technical talent among your co-founding situation, then your first hire will likely be engineering.
Regardless, you should look to fill skill gaps where possible early on, keep the team small and tight, and only hire when it feels somewhat urgent/detrimental to fill the role.
You should always run founder-led sales, until it’s appropriate to bring on someone else. But that’s a whole other conversation to be had.
Founding Team Red/Green Flags
“What should I look out for?”
Soft skills, personalities, archetypes and habits are arguably more important than the hard skills early-on. For example, an average react engineer that’s a team player, learns quickly and has tenacity is far more valuable than the greatest react engineer that’s cynical and negative. Optimize for cultural fit first, and skill level second. Compromise on the later, over the former. But find a balance between the two.
Whilst your red and green flags will vary based on your personality and leadership style, there are some common ones you should look out for when building your startups’ founding team.
Green flags
These will vary person to person. Consult your gut on this one. Some examples could be:
Opinionated, yet open-minded: Can they admit when wrong? Can they change their mind? can they entertain other perspectives?
Creativity: How do they approach problems?
Tenacity: Getting the thing done at all costs, just because they have to finish.
Vision-aligned: They buy into and are deeply aligned with the vision.
Asks questions/does their due diligence: Taking a keen interest in the details.
Entrepreneurial history: They understand the environment and journey.
Goal orientated: They have ambitious, and clear personal and professional goals.
Opposite of the red flags listed below
Red flags
Everyone has some red flags. Possibly just amber flags. Make sure you actively seek them out. Because they will come out at some stage or another. Some examples could be:
Lone wolf: Likes to, and has a tendency to work alone.
Blames others: Nothing, including any issues with their professional experience is their fault.
Overemphasis on compensation: Talks constantly about compensation.
Arrogance: There’s a fine line between confidence and arrogance.
Issues on social media: If they have a controversial social media presence, it usually doesn’t mean anything good.
Immediate WFH request*: Good talent understands that in-person collaboration trumps all else (*not relevant if not local).
Opposite of the green flags listed above
Avoiding Common Hiring Mistakes: Lessons for Early-Stage Tech Startups
“What are some common mistakes?”
The first-time founder often makes the same sort of mistakes. This is because the answer is not often obvious. They seem like the right thing to do, but they often result in headaches. Here are a dozen mistakes the first-time/early-stage founder commonly makes:
Hiring too quickly 💨
Amongst the hustle and bustle of the startup environment, it’s easy to get in the habit of moving fast in all aspects of your startup. But hiring too quickly and neglecting the due diligence of the process can and often will get you into trouble. The hidden costs of a bad hire far outweigh the costs of vacancy.
Hiring similar personalities 🧑🤝🧑
Avoid homogeneity in your team at all costs. When all personalities are the same/similar, it stifles creativity, promotes conformity and inhibits new ideas. A variety of personalities promotes rigorous and healthy debate, as long as the personalities aren’t toxic.
Hiring the cheapest 🪙
Now this is a balance, but hiring the cheapest option is often a red flag. It may seem attractive as a cash-strapped startup, but unless they’re the cheapest because there is supplemented equity or other structures, then the cheapest is often a bad move. For obvious reasons.
Hiring to fix a problem, not fill an opportunity 🚨
Let’s say you’ve got a lead acquisition problem, so you decide to hire a growth/marketing guy to come to the rescue. Makes sense right? Wrong. These problems are usually indicative of larger problems, and throwing resources at it won’t likely fix your problem. It’s better to identify early characteristics of opportunities, then hire roles to refine and scale them.
Hiring industry executives 👨💼
Probably the biggest and most impactful mistake–hiring that industry executive with an impressive resume to solve all your problems and catapult you into success. Every first-time founder does this.
But, unless they can prove otherwise, these executives have often been privy to large budgets, complete teams and proven models. Three pieces most startups don’t have access to. You need executors early-on. It’s as simple as that.
Hiring people with no entrepreneurial (or startup) experience 👊
Now this isn’t always the case, but most of the time it’s important. The startup environment is far different to your average. It’s undefined, chaotic and stressful. Your average Joe from an established business will often find this environment frustrating. This has ripple effects on speed, culture and success. Do yourself a favor and only hire people with an entrepreneurial spirit, or direct experience.
Overspending on talent because you’re desperate 💰
One of the most fundamental principles of a startup is hiring at below-market rate because of their lack of capital. Often using alternative benefits to draw in talent, such as equity. There are usually two scenarios where you overpay. The first is when you’re desperate–tight timeline and/or lack of applicants. The second is based on resume–the candidate is warranting above-average comp because of their skills/experience. Neither are good excuses.
Not understanding the role to begin with 🤯
Don’t just hire for the sake of ticking a box. You must fully understand the role, the responsibilities and the expectations. These can definitely evolve, but without these they’ll never be successful in it. Take the time to understand what you need, why and what you expect of it.
Ignoring red flags 🚩
Green flags do not cancel out red flags. But we seem to think they do? “He’s got a huge ego, but he’s very good at what he does”. Yeah, no. Look at the red flags objectively. Will they cause issues for you, the team or the company now or within the next 5 years? What potential issues may arise? They’re often not worth it.
Neglecting onboarding 🛣
Employee onboarding may seem relatively low priority in the grand scheme of things. You might think you can do it as you go. But, onboarding is your biggest chance (and first impression) to engage, inspire and ramp up team members into your company and their role. It doesn’t need to be refined and perfect, but you do need to think about:
How you communicate your vision, mission & values.
How you engage them with others.
How they can achieve success in their role.
On the flip side, a poor employee onboarding process can set the stage with a sour taste, and even lead to regret or resignation.
Being greedy with equity 🤑
Your startup's success relies largely on this founding team, and their ability to figure it out with you. So why would you not give them a slice of the pie? Equity is your biggest asset for attracting, retaining, engaging and motivating your team. Use it, and don’t be greedy.
Whilst you’ll negotiate equity based on the individual, their role and their total compensation, a good guide is between 1% (low), 3% (ave.) and 5% (high) for the first few hires.
After that, you’ll want to switch from a percentage value to a dollar amount of stock. You should expect to carve out about 20% for the first 50 employees.
Bonus: firing too slow 🐢
Within your first 5, you do not have the time to set out a 6 month Performance Improvement Plan or move them into different roles until they are successful. Heck, you don’t even have time to issue 3 warnings. If you’re even thinking of these 2 things, then you’ve made a bad hire. Cut them and move on, as fast as possible.
Sourcing Talent: Strategies for Finding & Attracting A-Players
“Where do I find talent?”
It goes without saying, but the quality of your first few hires will severely dictate the following ones. The very best hiring strategy is that of quality. A-players want to work with other A-players. Take your time early on, bring on the best and watch them bring on A-player after A-player.
Once you have a sense of which roles to hire, how (and where) do you find amazing people? These come down a few strategies, including:
Exhaust your personal network
Looking in the most obvious places first, use your personal network of friends, and former colleagues to look for great people. As a second time founder, you’ll find this much easier than your first venture.
The same people may have reservations on joining your startup. This is where you use the equity ticket, go the extra mile and quite literally beg.
If they won’t directly, ask for referrals and recommendations. Creep into that 2nd and 3rd degree network.
Use recruiters*
*Only good ones. Recruiters can be such a fantastic channel to source the very best. After all, it’s their job right? Just make sure you develop a relationship with the recruiter, vet them and communicate openly and honestly. There are plenty of sharks out there.
While their fees might be high, it’s a small price to pay when it comes to the success a great team can bring you.
Develop a thought-leadership or industry authoritative voice
Cold outbound is hard. Warm inbound is much easier. Take your time to develop an authoritative industry voice or thought-leadership in a particular domain. This will pay off over time. Use this as a magnet to attract great, like-minded people.
Produce and publish content where and whenever you can.
Be heavily, and clearly vision and mission oriented
Great people are obsessed with 2 things; working with other great people, and working on interesting problems. The clearer and more refined your vision, mission and goals are, the more you’ll attract the right people.
Be extremely public about this. Shout it from the rooftops. Put it on a billboard. Do what you have to do to amass followers of your mission.
Go the extra mile and stand out
It goes without saying but a standard 3-stage interview process, offer, then contract is the absolute bare minimum. It’s an employee's market right now. You have to do what you can to stand out. Get creative.
“We see the actual offer stage as a big place you can stand out. We do a Zoom to surprise the candidate with everyone from their interview panel to share why they’re excited about the candidate potentially joining.”
— Julianna Lamb, Co-founder and CTO of Stytch
Bonus: depending on position, you can find A-players among sports majors and industries. Especially in sales. If two industries are alike, it’s sports and business.
If you’re vaguely familiar with how sports teams operate, you know that the following holds true.
Every team member has a role that is their primary concern.
You’re only held accountable for your performance.
You’re trained to have the agility to switch up your play as the game changes.
Competitor analysis is a vital part of your training.
You never lose sight of your driving force.
They’re often goal orientated, fit, healthy and ambitious. You can find incredible, undiscovered sales talent in sports/health focused degrees at universities. Give it a go.
Retaining your Founding Team: Strategies for Long-Term Employee Engagement
“How do I keep people around?”
So you’ve hired a team of A-players? Right on. Now you have to keep them around. In the early days, the turnover of good people can be extremely costly or even life threatening for the survival of your startup. Things are undocumented, knowledge in heads, and teams joined at the hip.
Time and time again, I’ve seen one good person neglected, suppressed and destroyed by startups and their founder(s). They end up leaving and rip others out with them. This will often result in an early death of your beloved startup. So how can you avoid this?
Culture
Building a great culture is at the forefront of employee retention. The word ‘culture’ is thrown around a lot, and means something different to every organization. Your culture should be molded based on your values, otherwise it’ll never be genuine. Culture is made up of four pillars:
Passion: Is the reason work doesn’t always feel like work and why the long hours feel worth it. It’s what defines the existence of the business and acts as a great motivator for the team.
Personality: Is what makes the startup unique – what cannot be found anywhere else.
Agility: Is the ability for knowledge and information to flow at a pace that greatly improves all aspects of the business. It’s the more visible factor as it can be identified in the way workers work, offices are organized and brainstorming sessions are carried out.
Authenticity: Has to do with the freedom and respect of each individual’s own identity. Bureaucratic companies tend to have processes for everything and a strict decision-making chain. The opposite is within the startup culture values.
“Although company culture is something that is worked and adapted over time, it is heavily affected by the personalities of the founding team. There’s no right or wrong with culture, it is simply a combination of natural personality in addition to proactive work to push the culture in the desired direction and maintain certain values.”
– Joel Gascoigne, co-founder/CEO of Buffer
But what are some critical values that every great startup needs?
Open communication: Creating an environment where communication of all kinds is welcomed and encouraged, whether good or bad.
Responsibility and trust: Letting people be responsible for their parts, and trusting them to do so.
Equity and ownership
I mentioned this as a tool for attraction, but when structured properly, this is also a perfect retention tool. Vesting employee equity over a period of time (e.g. 4 years) can be a powerful tool to keep them engaged and motivated for years to come.
Learning, progression and challenge
The best talent seeks continuous improvement. They have a deeply ingrained growth mindset. You need to feed this constantly but ensure constant growth, learning and appropriate challenges. If they feel as if they’re going backward, they’ll seek new challenges immediately.
Celebrate wins, frequently
In a tough environment, take every opportunity to celebrate the smallest of wins. Both on an individual and team level. If people don’t feel appreciated they will not want to continue to perform at their best.
This post is dedicated to Salvatore Garozzo, a former boss of mine and Australian startup founder who sadly took his own life. Sal brought together an incredible team whom many have gone on to found successful businesses and achieve at the highest caliber in their respective fields. Please take this as a reminder to check on your founder friends, and to always support each other. It can be a lonely journey, with many ups and downs. We’re all in it together ❤️
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Tim