5 Tips for Making Your First Hires
Among the most important decisions founders make are their very earliest hires. This week, Jordan Mazer and Tom Hammer share their tips for getting hiring right.
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Recently we asked a handful of speedrun alumni: âWhatâs the most expensive lesson youâve had to learn as a founder?â
Each replied with minor variations on the same answer: hiring mistakes.
Hiring is among the most consequential decisions youâll make as a founder, especially in the earliest stages of your companyâs life. It is also one of the areas where founders come to us the most often asking for advice.
Today, we asked a16z speedrunâs Head of Talent Jordan Mazer and Head of People Tom Hammer for the advice they most often find themselves giving to founders making their first hires. Hereâs what they shared:
1) Know thyself, and where youâre headed
The first maxim for hiring well is, as with the ancient Greeks, to know yourself and your goals.
Jordan Mazer says that many founders struggle with hiring people who are a good fit, in part because they arenât yet clear enough on what their objective is. âDo you actually know what youâre trying to accomplish?â he asks. âIf you donât, you certainly donât want to bring on a ton of people, because they can take you in the wrong direction.â
Jordan uses the metaphor of a rowboat to describe early stage teams. For new hires to add value and momentum, everyone has to be rowing in the same direction. And the stakes are very, very high:
The automatic assumption that many founders have is that by adding someone to the team, theyâre going to have a positive impact on their velocity. And, they assume, the question is just how positive? They imagine it might be a 2x speed increase or maybe 3x increase.
But sometimes the person youâre hiringâonce theyâre in the boat with youâis rowing the opposite way. So either theyâre neutralizing you or theyâre pulling you backward. Thatâs a totally possible outcome.
There are so many things that can go wrong with new hires. They can make other people upset. They can quit. Any number of things can happen with the wrong person on your team. So if youâre small, and the impact of a single person can literally double your velocity or halve it, or even take you backwards, thatâs a big deal.
So goals matter, but so does your own leadership style. You have to ask yourself: What sort of people do you work best with?
âThe first thing is acknowledging who you are and not just who you want to be,â Jordan says. âThen you have to hire people who fit well with who you actually are.â
Maybe you prefer working with more social types who you can bounce ideas off of and who make the workplace more fun. Or maybe you just want people who lock in and focus entirely on getting the job done. Thereâs nothing wrong with either approachâbut you have to be intentional about selecting people who match your preferred style.
Because the stakes are so high here, Jordan says he often tells founders that âyou probably shouldnât be hiring until itâs excruciatingly painful on your own or without the additional resources.â Because the risk of a misaligned hire is so high, âYou probably shouldnât be doing opportunistic hires at all.â Instead, each early hire has to be extremely carefully considered.
2) Lean on your network
So what are the odds that you successfully bring on a new hire that ends up being a fit for your team? Jordan estimates that âeven the most effective hiring machines are only about 80% accurate.â But that figure represents the best-case scenario:
80%. Thatâs your odds when you know the exact job youâre hiring for, and youâve interviewed 10,000 people before, and youâve seen exactly what works and what doesnât. But any normal person or organization probably has more like a 1 in 2 shot of succeeding on any given hire.
For early stage founders, then, Jordan often advises leaning toward in-network referrals for your first hires. âIf youâre hiring people that you know and have worked with, or who are only one-degree separated, the chance that itâs gonna go well is much higher.â
One upside of hiring from within a closer circle is that youâll know where to look to get reliable referrals when doing diligence on candidates. Even if the candidate isnât someone youâve worked with directly, if you have trusted mutual connections youâll have a better chance of getting honest feedback about the person, which can inform your hiring decision. Even this approach isnât a guarantor of success, of course, but it lowers the odds that youâll be shocked by something that only comes up after theyâve started the job.
The problem with this approach, Jordan admits, is that it doesnât scale. âYou cannot scale that as a hiring mechanism for long,â he says, âbut you can certainly do it for the first two or three people.â
And those very earliest hires are often among the most impactful.
3) Decide on your compensation framework early
One of the toughest challenges for new founders is the question of how to compensate early hires. Whatâs reasonable? Whatâs not?
Tom Hammer points out that even founders whoâve been a hiring manager at a bigger company can feel out of their depth on this topic.
âIf youâve ever touched compensation for other humans at a bigger company, you know that there was actually a whole bunch of work that went into building the infrastructure that you used,â Tom says. âItâs sort of like the invisible water around you at a big company. But somebody had to build that.â
For this reason, Tom says he advises founders to think about their compensation philosophy early:
Every hire you make without building some basic infrastructure potentially represents backwards compatibility complexity that youâre creating in your organization.
For the first ten or so hires, youâre likely hiring a lot out of existing networks, and youâd anticipate a much higher degree of flexibility to get the early team built right. But sometimes you see companies go for years without putting real structure in place, where theyâre just making up salaries and titles for basically everybody in the organization. As a much larger team, cracks start to form and they have to retrofit into some rationalized compensation system. Every single one of those decisions is now a potential renegotiation with somebody.
This is one of those things where you can start feeling the pain of not having a framework long after itâs become a problem. So being thoughtful about how you make compensation and title decisions is one of those hygiene-improving things that I like to pull forward. I encourage founders to build it earlier than is intuitive.
All that said, how do you determine what the right market comp for any given job opening is? Ultimately, you want the people on your team to feel theyâve been treated consistently and thoughtfully.
Having some sort of structured way for determining compensation, Tom argues, makes comp conversations feel less arbitrary. Normally, this means leaning on high quality third party compensation data. âAnd if Iâm a candidate, it makes me feel more confident that the team members Iâm going to go work alongside had the same conversation that I did. A simple framework for compensation also allows you to tell a candidate âthis is my best offerâ in a way that ensures compensation at your company doesnât become a product of who negotiated the hardest. This is 100% achievable for even very early stage founders, and surprisingly differentiating because many donât do it.â
4) When making exceptions on comp, know your reasons why
The obvious pushback founders often give, when urged to settle on a compensation framework, is that it feels premature, or even harmful to their chances to land exceptional candidates.
Shouldnât founders make exceptions for the best talent? Tom tackles this one:
The argument people make is: âWe should just go pay whatever it takes to get the people that we need.â And, while there is a logical limit to that point because obviously you also have to care about dilution and affordability and runway impact, Iâm not totally opposed to that logic at the very earliest stages.
If you need to reach for somebody whoâs going to be pivotal to your business, you should know how much of an exception youâre making. Ben Horowitz wrote over a decade ago about how you can only hold the bus for one playerâthereâs only room for one Dennis Rodman on your team. Arm yourself with the knowledge that comes from having quality data. You should know how your offer (or your candidateâs ask) stacks up to the market for similarly capitalized startups.
Then, once you know how much of an exception youâre making, you can do something that I have found to be very, very compelling for early stage candidates, which is you can walk them through how you got to your offer. You can help them add context to the numbers youâre talking. A candidate might be comparing you to a public company salary, not realizing youâre paying generously relative to other early stage startups.
When it comes to early stage startups, most halfway sophisticated candidates who are knocking on your door arenât going to be maximizing for cash. They could go almost anywhere else and make more cash than what youâre going to offer them. What they do want is a sense of consistency, a sense of a real process. And of course, a founder who can tell the story of âwhy us,â which ultimately informs the value of your equity.
Jordan Mazer points out that this part of the conversation actually is still often challenging, when youâre interviewing candidates new to the world of early stage startups. When hiring, Jordan says, you will often encounter people who arenât prepared for the sort of salary cut thatâs often required to join a pre-revenue company.
Most people like to imagine all the benefits of going to work for a startup.
They might say âIâm going to have agency and thereâs going to be no red tapeâ and theyâll name 15 reasons theyâre excited about a startup. And I go, âWhat if you had to give up 60% of your salary?â They often respond with some version of âWell, I have a mortgage and three kids and theyâre all in private school.â Okay. You have to be prepared to make big changes if you donât have enough savings to continue living your lifestyle. A lot of those people end up acknowledging startups arenât a fit for them. They have the realization of âthis is not a welcome changeâ at this point in their lives. I donât know that all of them understand that right away.
I end up explaining to a lot of people, the reality is that you want to go work for a business that has the financial facility to meet its goals. And if your cash compensation is too high, youâre going to become an extractive force on the business such that you actually might stymie their ability to be successful.
Tom says when it comes to this topic, he likes the bring back the rowboat metaphor:
Itâs like if youâre on that rowboat, and youâre stripping wood off of the hull to make a fire to keep warm. As an employee joining a startup, every dollar of salary you take is a dollar you canât spend on growing the business into something as valuable as possible for you and all your fellow owners. So this is why a candidate should care about the business having, as Jordan says previously, the âfinancial facility to meet its goals.â How cold are you willing to stay to get as far across the ocean as possible?
Jordan makes the case that making too large of an exception for a candidate is bad for them as well as for the business:
As a candidate, itâs not good for you either. With early stage startups, these are businesses that have almost no money. So if you meet a founder whoâs willing to pay you equivalent to a big Fortune 500 company, I recommend you reflect on whether that bodes well for you or for the company.
If youâre a founder, you have to be able to tell some candidates that they might be better off at a series C company. I tell many people to consider going to a growth stage business. Theyâre going to earn a stronger base salary and have a more certain outcome.
5) Correct mistakes quickly
Hiring misfires are inevitable. But Jordan and Tom agree early stage founders should in many cases be spending an outsized portion of their time on building their teams.
Tom says that the most common trap he sees founders falling into with bad fits is simply failing to act quickly. Many founders adopt wishful thinking, or hesitate because theyâre worried how theyâll be perceived by their team:
I get founders telling me âsomeone on my team isnât cutting it, theyâre six months in and itâs not working.â For some founders it seems to come down to the difficulty of acknowledging that you made a mistake when hiring the candidate in the first place.
The first mistake you made was hiring them, but thatâs a forgivable mistake, because you can and should adjust your assessment process. The second mistake is the one youâre making every single day you donât do something about it. And for early stage teams, maintaining a high performance bar and strong talent density is so incredibly important, as itâs one of the big competitive advantages of small teams.
Jordan Mazer says that this is one of the toughest lessons founders can learn.
Because the people on your team are so important to your companyâs future, quickly accepting responsibility for mistakes is one of the most important skills any leader can have: âThe faster youâre able to accept that youâve made a mistake and then do something about it quickly, the less hiring is a risk to your organization.â
Thatâs it for this week! Thanks again to Jordan Mazer and Tom Hammer for sharing their hard-earned hiring wisdom with us. Be sure to follow both on LinkedIn for more tips like these.
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Is there a template job offer letter one can use for early hires by a startup in seed stage?