Think like an investor: When to invest in experienced hires

Alright, you are a startup founder. You might be working alone. Or you might have a trustworthy co-founder who understands your vision and work style. You probably have a small team of passionate people who believe in your vision and are tirelessly working to make it a reality. This moment in your startup journey is well, momentous. You could be ready to onboard your first experienced hire.

But first, definitions. Who is an experienced hire? An experienced, or senior, hire is typically someone who has deep industry knowledge and will also be directly responsible for the success of the startup. Depending on the startup’s stage of growth, this could be an executive hire or a technical expert. They should be hired to provide the technical or business insight that can move your startup to the next step.

Why hire at all?

As hard as it is to hear, being a startup founder does not automatically qualify you to run a business. While it is likely that they would be CEO by default, founders should examine their strengths and capabilities and be honest about in their business or technical acumen. Admitting there are gaps is not a sign of founder incapability; it is the opposite. It shows an understanding that business needs are growing and that guidance is needed if the business needs to push further. In the early stages of a startup, experienced hires can be trusted advisors and mentors. For a later-stage startup, they can be the trusted right-hand.

Pei Ru, founder of Singapore AI chatbot startup, KeyReply, views experienced hires as a way to plug the knowledge and execution gaps that startups typically have. She points out that experienced hires bring much-needed knowledge of processes and documentation, saving time and resources for startups, who can avoid the pain of figuring out everything from scratch. Shieny Aprila, founder of Indonesian gaming startup, Agate, echoes Pei Ru’s sentiments, “Their feedback gives us a different perspective as it is from someone outside the company. They do not hesitate to challenge our strategy or decisions. This helps us see what needs to be fixed.”

Early-stage startup: If you are still searching for a business model or figuring out your product-market fit, hire a technical expert. A technical expert with deep domain knowledge will help you understand the market you are trying to penetrate. Having encountered the sheer number of technical problems in their career, their depth will be valuable in solving problems, streamlining inefficiencies and will be a trusted reality check on your strategy.  

Later-stage startup: If you are ready to secure more funding or bring in bigger deals, hiring an executive is the sensible next step. This expert can help scale the team from single digits to double digits, help negotiate complex deals and open up the right doors to build investor relations. They can also be invaluable as your startup grows bigger, where their experience with scaling up will guide your startup during decision making.

Treat them like an investment

Treat experienced hires like an investment, in every possible definition. While you are evaluating them, invest the time to know them better. “We meet [experts] many times, share updates, exchange ideas, and where appropriate, talk about things outside the business. We get a good understanding of their values and more accurately know if this person will be a cultural fit with the rest of the team,” Shieny shares.  For Grace Sai of Found8, she was clear that these potential hires need to show they can be their best in a team that was diverse in age, gender and culture. “We do many reference checks - up, down and lateral. We would find out if any millenials reported to them.  And most importantly, we would ask all the referees whether they would work with the hire again. If there was one ‘no’, we would seriously reconsider.”

If there is significant interest in this hire, it’s a good idea to evaluate whether they are a short-term investment or a longer-term investment. For startups that don’t have an established business model, the short-term investment is probably the more feasible route. “During the trial period with our current CMO we did everything together from important client pitches to fun conversations over long outdoor runs. Without the trial period it is difficult to understand if someone is a good culture fit until you interact with her on a day-to-day basis and deal with adversity together,” points out Kyle Wong of Pixelee in his advice to startups on hiring.

Early-stage startup: One of the most important principles of startup hiring is this: Hire for the now. Hire someone only when you are clear you need them. Experienced hires are worth every penny, but it’s for you to decide when to spend those pennies. If a product-market fit is elusive, consider working with a highly motivated director or bring your executive hire on as a consultant. At this stage, managing the burn rate is a priority and the worst thing you can do is hire in anticipation of expansion.

Later-stage startup: Watch out for an enterprise executive who thinks he is a startup executive, The executive skillset to scale a startup is different from what is needed at an enterprise. (Bigger companies typically need skills like organizational design, prioritization and process improvement.) Invest the time evaluating them and ensure there is a cultural fit. Secondly, the lure of a startup for an executive hire who is ready to roll up his sleeves is hardly going to be remuneration. But for you, having an executive on the payroll is a big expense. Don’t be intimidated; for the appropriate hire, that investment will accelerate your growth.

Does experienced hire equal C-suite?

Most experienced hires that join startups tend to be C-suite. But this is not always the case. (Meet Patrick Mckenzie who is a “Senior Individual Contributor” at Stripe but has run 4 companies before joining the company.) Whether or not a startup needs someone from the C-suite is a question of function.

Teo Pei Ru, CEO of KeyReply

Rather than investigating or being awed by a potential hire’s C-suite qualifications, startup founders should be single-mindedly looking for fit. Pei Ru shares her experience of working with a senior hire who had never worked in a startup environment. “Even if they claim to be adaptable, it is still not easy. We worked with someone who used to work for MNCs. But what works for MNCs doesn’t necessarily work for us. We had to do a lot of alignment and there definitely were disagreements along the way.”

Words of caution when exploring fit: Don't confuse the job title for what you need. As we briefly saw earlier, a “VP of anything” in a big company would have a very different job scope than a “VP of anything” in a startup. Seasoned venture capitalist Steven Blank points out that, “...titles in an existing company reflect the way tasks are organized to execute a known business model while in a startup, it might imply searching for a business model.”

It is valuable to distinguish whether the expertise you are looking for is intended to:

• search for a model,

• execute on a model; or 

• scale the existing model. 

Use job titles that define what you are looking for, not about how good they make your startup look.

Parting Words: Let them do what you hired them for

Founders, we get it. This startup is your life. But the reason for bringing in an experienced executive is so you can focus on what you do best. Delegate; let them prove why you hired them. By integrating them ruthlessly into your startup, you can also quickly assess their capabilities and decide if they are still the best option for you. And if they are not, parting ways painlessly remains a realistic option.