Steve Blank, Eric Ries and others have observed that a startup is a fundamentally different type of organization than an established company. Paraphrasing these observations: an established company exists to deliver a product to customers as efficiently as possible, while a startup exists to determine what product to deliver, to whom and how. I believe this observation is correct. Blank and Ries have written extensively about how to develop a product and a company given this truism of a startup’s existence. There is a different but largely complementary school of thought promulgated by Tim Brown, Tom and David Kelley, and others. These texts have, for good reason, had a major impact on how startups develop and launch their first products.
For the most part, though, today’s founders, well-read in the fine points of lean startups and design thinking, go about staffing their companies the old-fashioned way. They generally bring in as many full-time, permanent employees (sometimes additional founders) as they can, so long as the new hires are affordable and productive additions to the team. This focus on hiring is especially favored by technology startups in hiring engineering and design talent.
I submit that there is a better approach. Founders should wait as long as possible to commit to new team members. Better to first develop a reasonable sense of what product a startup is delivering to whom, utilizing temporary staff whenever possible when the founders do not have the skills required to make their initial product and first sales.
In my grade school gym class, we would play different sports seemingly everyday. One class would be volleyball, the next soccer. Sometimes, the gym teacher would appoint team captains who would pick their teams. We all knew who was best at basketball; who were the best running backs for football.
Hiring into a new startup is picking your team before you know what sport you are playing. There are some “all-around athletes” who can be helpful in many businesses, but it’s usually better to find the best-fit people for your product and customer set. This observation holds true across many functions – product management, sales, marketing, and engineering. It is true for founders as well, hence the importance of “founder-market fit,” but a founder is by definition a generalist, and so their functional capability is arguably less important than their domain knowledge.
Put differently, until a business has settled some basic questions (core value proposition, initial sales channel(s), basic product definition), it’s best to minimize hiring. The alternative, a startup with employees whose skills are not the right fit, is all too common: an iOS developer in a company who has pivoted to focus on a web app; an enterprise salesperson asked to use inside sales to land small business customers.
The advantages of waiting to staff up are numerous:
- flexibility: moving from consumer mobile to SMB web (for example) with no baggage
- cost: people are the biggest expense for most startups
- speed: more people require more time to manage, taking time away from customer discovery
- focus: hiring can overwhelm a founder’s calendar and thinking
- efficacy: founders are more likely to hire the right people once they have a better sense of what product(s) they are building and for whom
- patience: finding the right people takes time
A founder reading this post may think: okay, maybe I’ll think twice before hiring sales or marketing help right away, but I need engineers. Developers are typically some of the first employees that a technology startup will add, and no wonder. They are often needed to produce the first version (or even prototype) of a product. They are hard to find, so founders tend to grab them when they can. And the alternative, outsourced development, is expensive and often produces sub-par products because of the difficulty of managing an outsourced team and the misaligned incentives of consultants who are paid by the hour.
Historically, then, there has not been a good alternative to hiring developers right away for technology startups. Often, well-connected founders will tap their networks to get part-time help from otherwise fully-employed programmers. This approach, too, is often problematic, but it can be better than hiring the first capable developer who comes along, which is what most founders have to do.
There are other options. Firms like Originate develop products with startups and take some of their compensation in the form of equity. Innovative organizations like betaworks and Science, idealab, Blue Chilli and others (thanks to David Teten for pointing me to this link) have created processes to generate and productize new ideas using flexible resources. My partners at CoVenture and I also think a lot about this problem and feel we have a good solution for certain founders. We are interested in talking with others who have hit on other models to enable this kind of experimental staffing.
