For startups, hiring is a life-and-death matter. The people that you hire will determine whether your product, this disruptive idea that you have invested blood, sweat, and tears in, will succeed or fail.
The success of a product is often determined by the first people to work on and market the product. Your first hires.
In his book StartupPedia (Bentang Pustaka, 2015), Fenox VC CEO & General Partner Anis Uzzaman explained in detail the company structure that are commonly seen in startups of various stages.
For seed stage startups, in which the company focuses more on developing and launching the product itself, it is common to have only two people running the operations: the CEO and the CTO, backed by a board-of-directors (BOD) and advisors.
As the business grows and the company moves up to become an early stage startup, the team may need to include a CMO and a CFO.
It is not a problem for startups to outsource their accounting and marketing needs at this stage; it is even considered as a more cost-effective and efficient alternative. (For more details about outsourcing marketing teams for startups, please refer to this Academy article.)
Uzzaman gave the example of Dropbox, who started with only two people during their pre-launch stage in 2007. A year later, the company managed to secure more than 200,000 users, and its team has grown into nine people. Its line-up included a Chief Server Engineering Officer and a Chief Client Engineering Officer at this stage.
So what are the factors that startup founders need to consider before making their first hires? How can they make sure that the first hires are the best fit for the company?
e27 sits down with the three companies that have done it successfully.
Fantastic talents and where to find them
There are many places where startup founders can search for their potential first hires, from startup events, alumni networks, references from advisors or investors to even social media.
“We attract employees through a combination of social media campaigns, internal networking, external networking, brand awareness campaigns, and strategic participation in trade shows and events that help us target the right candidates,” explains Zendesk VP Talent Acquisition John Bush, who has overseen the hiring process of hundreds of employees despite only been in the company for five months.
Warung Pintar, an Indonesian New Retail startup based in Jakarta, is one of those startups which founding team met through their own social circle. The company started out with only three people, with first hires that include prominent names in the local startup community such as Sofian Hadiwijaya and Pandu Kartika Putra.
“What attracted them to work at Warung Pintar is the opportunity to create an impact with us,” explains Warung Pintar CEO & Co-Founder Agung Bezharie Hadinegoro.
Blockchain startup Pundi X, which produces various blockchain-based services from point-of-sale (POS) system to even a smartphone OS, has grown from less than 20 people to 150 people within the past years.
In addition to traditional channels such as the founders’ own network, the company also found talents from a rather unique channel: The company’s own Telegram group.
“There are 28,000 people in that group and it is very active. People are talking everyday; discussing a lot of things, mostly our projects. They always have a lot of suggestions,” explains Peko Wan, Vice President and Head of Communications, Pundi X.
“Some community members are so passionate about our projects … At the time we don’t have any head-hunter, so we look into community members that have shown great passion about our projects. We were lucky to get several very talented colleagues from our community,” she continues.
One of the challenges faced by new startups in setting up their team is attracting talents to work in a relatively new and unknown company. Many startups try to do it by offering employee stock options, with the hope that it will instill a greater sense of ownership in the firm (and literal ownership, of course).
This is an idea that Hadinegoro approaches carefully.
“Not everybody is interested in, or even has an understanding of how stock options work. It may work for some certain people, but for the rest it is more about the benefits or the vision. Each person has their own ‘candies’,” he says.
“If you decide to offer it, you should always speak to a legal consultant first. You have to seriously consider whether this person worth the long-term investment or not; whether they will appreciate the stock options system or not,” he continues.
Bush shares Hadinegoro’s careful approach on stock options. While he recognises that it can be attractive for first hires, there are other things that companies should be able to offer as they grow.
“The possibility of large future rewards can be enough to make entrepreneurial employees work hard and invest heavily in the growth of the company at a time where that spirit is critical,” he says.
Also Read: Advice for first-time startup CEOs
“But eventually, as a company grows, founders need to recognise that they must move toward a more balanced total rewards package. After all, stock dilution hinders longevity. It’s a balancing act,” he concludes.
As a blockchain company, Pundi X faces a different situation with the rest. Wan explains to e27 that many of its employees were also contributors at the company’s recent token sale.
If sense of ownership is something that many startups aim to instill among its employees by offering stock options, it seems like Pundi X employees already have that strong feeling even before they joined the company.
“Some people actually sent their resume several times through different channels … They see Pundi X as a company that aims to bring innovation through the blockchain technology, and they want to be part of it,” Wan says.
A few good apples
What are the qualities that founders need to look for in their first hires? Is there any specific difference with hiring for a company that has been around for a while?
“Rather than trying to maintain a culture that newer employees have never experienced and were not involved in building, leaders should focus on candidates that have positive attitudes, are collaborative, and think differently than them. It’s about zeroing in on the intersection of compatibility and capability,” says Bush.
He even thinks that there is no “perfect mold” that companies should expect a candidate to fit in.
“The idea of ‘culture fit’ is damaging. What’s important is for potential new hires to be able to add value with their skillset and bring a diverse perspective to work everyday. However, do look for folks that share your company’s values, as you want to make it easy for them to succeed,” he explains.
According to Wan, it is advisable for startups to prioritise on hiring senior-level positions, at the beginning of the company’s operations.
“The first hires will mostly be senior hires, if you want to grow your business into another level. Because they are able to point out directions for your company. They will also be the one to spot difficulties or challenges,” she says.
For Hadinegoro, the only way to tell if an employee is the right fit for a company is by letting them start working there. Some people might look good on paper, but they might end up not fitting in with the culture. But companies need to ensure a strict check-and-balance process.
“There has to be an iteration. We implement probation and tight review, and let them know what we expect of them clearly,” he says.
“Don’t keep the wrong people for too long,” he adds.
How about outsourcing your talents? Commonly prescribed especially for marketing and accounting functions at an early stage startup, Hadinegoro believes that it is justifiable only up to a point.
“While it is not wise to outsource your core functions, it is applicable for your supporting functions,” he said.
Bush thinks that the merits of outsourcing should be judged case-by-case.
“But I think early stage startups are more susceptible to culture dilution if they’re doing a lot of outsourcing. That’s a critical time for the baseline of a company’s culture to form,” he says.
“From a culture perspective, outsourcing is likely better suited for mid- to large-sized companies that already have a solid cultural foundation and fabric that are looking to be more efficient in some areas,” he adds.
Pundi X is an example of those companies which outsourced their public relations function on the early days of its operations. They eventually decided to build their own public relations team as it would ensure better coordination among divisions in the company.
“If you decide to hire a public relations agency … You need to make sure that they are always available [when you need them] as they may have several other clients on the pipeline,” Wan says.
Eat, Pray, Code
Ensuring that your first hires are the right fit for your company boils down to building a lively company culture.
For Hadinegoro, building company culture begins with picking the right people for your company, and to have a proper human resource team early on.
“It is not about what you expect of the company’s future; it is about who you are as a founder and the core team. This has become a mean for you to choose the right people and maintain them, so that they will ease the company’s growth,” he says.
There are many different steps that founders can take in order to instill these values to their first hires once they have joined the company.
While there is an emphasis on instilling company values “organically” through daily interactions with teams, vendors, and customers, Zendesk has a tradition of opening its monthly all-hands meeting with a story that showcases company values in action, which is aimed to help new employees understand it.
“The stories are told by long-time Zendesk employees and serve to help newer employees feel better connected to our company values and history. New employees also get a heavy dose of our culture in an immersive new-hire orientation programme which covers Zendesk’s purpose and the vision for the future, hands-on product experience, our culture, and corporate social responsibility,” Bush explains.
Wan credited Pundi X’s growth to the fact that it implements a flat hierarchy of management. This system encourages both the management and the employees to be more actively involved.
“I think the reason why we can grow very rapidly it’s because people are taking initiatives to do what’s right for the company, and this is part of the culture,” she says.