How to Build a Team for a Startup

Building the initial team for seed stage startups

If you never hire anyone, you’ll be doing all the work yourself. And if you’re doing all the work yourself, you’re really just building a job for yourself rather than building a business that can operate independently of you, and without you if needed.

The Importance of Making Your First Hire

I’ll tell a quick story illustrating the importance of making the first hire. When I was 14 and living in Bradenton, Florida, I built a web site for a lady named Lois. Lois was a flight attendant with Northwest Airlines. She would fly on the international routes to China once a month. She began bringing back freshwater pearl necklaces, pendants, rings, and earrings to sell to her friends. They became quite popular and she would get many requests.




When Lois and I met in the Spring of 1998, she asked if I could build a web site. She incorporated and we set up the merchant account, shopping cart, and ecommerce store. We got listed in the major search engines, which at the time were Yahoo, Lycos, Dogpile, and Northern Lights. Six months in, her company was up to about $5000 per month in sales and about $1500 per month in net profit. She came to a critical decision point. Should she continue to do everything herself or hire her first employee to take over customer service and product fulfillment?

Lois decided that she would give up too much of her profit if she hired someone, so continued to do the customer service and product fulfillment herself. The business continued to grow. By month nine the business was up to about $7,000 per month in sales and $2,000 per month in profit. But after going through some family issues, Lois decided to shut down the business because the $2000 per month she was making wasn’t worth the hassle to her. Lois no doubt lost out on a multi-million dollar opportunity by choosing to shut the business  down rather than taking a leap of faith and hiring her first employee and beginning to scale the organization.

So at 14, I learned the key lesson that as soon as you can afford to, hire your first employee, even if you have to use every single dollar of net profit you have to do it. Hiring this person will enable you to focus on growing the business well beyond its current level.

Hiring Your First Employees

When I started working at iContact in the Summer of 2003, I was sleeping in the office on a futon. I’d wake up at 2pm or 3pm, roll out of bed to the desk and just start typing. I’d work until 7am, go have “dinner” at McDonald’s, then go to sleep and put the schedule on repeat most nights. Only when Erin, my girlfriend at the time, came over would I adjust the schedule a bit. For those first few months, Aaron and I, with occasional help from a couple of friends of ours, were the only ones working on iContact.

Once we hired our first employee, Josh Carlton, in September 2003, suddenly I had to think about having more “normal” working hours. I got an apartment a few miles away and would come in at the very early hour of 11am, way earlier than my internal clock would have told me.

We hired Josh as an intern to help us with picking up the phone when customers would call needing help with iContact. We had put up a flyer at UNC’s Kenan Flagler business school advertising an internship at a “Chapel Hill Software Startup.” We named Josh our “VP of Customer Service.” After a month, we agreed to pay him $1000 per month plus 7% of the company (which was a bit too much, but fortunately we vested it over four years) to stay on and do both our customer service and marketing.  Josh stayed for eight months until his graduated from accounting school and moved to Texas to do a Masters in Advertising.

One of Josh’s first responsibilities was to send out a press release to the local news about the company. The Chapel Hill Herald picked up the story. This article was how we found our second employee, David Roth.

David was a 56-year-old from Brooklyn who had significant business experience as an accountant and a truffles salesman. He joined our team as our VP of Business Development and took a salary of just $30,000 per year and negotiated 15% of the company. David brought a lot to the company by way of the respect we gained from having an actual adult and experienced business person on our team. He led our BD efforts for six years before leaving iContact in 2010.

Our next two hires came in February 2004 when we brought on David Rasch as our lead developer and May 2004 when we brought on Brad Gurley to be our Director of Support once Josh left for grad school. We found these initial hires from sites like LinkedIn, Craigslist, Monster, and CareerBuilder. By May 2004 we had five full-time employees at iContact including Aaron and I. We were a motley crew—four kids in their early 20s and David at 56—rocking it all hours of the day and night.

My Favorite Interview Questions

As you consider bringing on some of your first employees, it’s critical to choose the right people. Let me share some of my favorite interview questions that I might ask a potential employee:

  • What are you passionate about?
  • Tell me about some experiences you’ve had in your life that have been difficult or challenging.
  • What change do you want to make in the world in your lifetime?
  • If you met an alien, how would you describe yourself to that being?
  • Tell me about your failures.
  • Tell me about the goals you have.

What I find is if someone is not passionate about the change they want to make in the world, they’re often not going to be a great team member. I want to find people who are passionate about using their life to make a difference in the world—a change that is in alignment with the change that we want to make as a company through our mission.

If you can create a team full of passionate individuals who want to achieve something together that makes a difference in the world, you’re going to have a much more higher chance of success.

How to Recruit Really High Quality Talent

Let’s talk about how to recruit. You could recruit via existing team members and their friends and referral networks. You could recruit via competitors. You could go to online job posting boards like Dice, Monster, CareerBuilder, or CrunchBoard, or social networks like LinkedIn.

You could go to your investors’ contacts and relationships and find ways to get referrals from people who are your advisors and mentors. You could also pay a corporate recruiter, although often that’s pretty expensive and out of reach for most startups.

You could work to get press about your product or company that can help you reach more people and create a pipeline of hundreds of applicants.

Often the best team members are the ones who are currently employed. From time to time, certainly people will be unemployed who are great quality candidates. But if you want to get people who are at the top of their game, the set in their fields, you’re likely to have to recruit them directly from another position.

You need to spend particular time and effort recruiting your C-level team (your chief technology, finance, and operations officers, and the heads of your departments). Effectively, they are the leaders of your company whom everyone else in your team will interact with. They set the stage for the company’s culture. Therefore, you really want your C-level executives to be passionate about the change that you’re passionate about making. You also want to spend extra time making sure they are competent individuals who are great leaders and managers.

You want your team to be made up of Jedis—people who are compassionate, highly competent, and working hard to make a positive difference in the world.

Initially, when you recruit your team, you may be limited by whomever you can attract to your startup. But as you start to have capital and recognition, think about how you can provide goals that motivate and encourage your team, and are also achievable.  Make these goals quantitative and numerically driven, and give your team frequent feedback.

The Importance of Quickly Letting People Go Who Don’t Work Out

At the end of the day, if someone isn’t working out—if their skills aren’t sufficient for the job or they’re just not doing the job as well as you need—let them go. Free them up to do something they are good at. Do it with compassion and try to help them to find their next position. But don’t surprise them. Give them feedback along the way through frequent job performance appraisals and immediate response anytime you notice something that isn’t quite up to the standard you’re looking for.

At the end of the day, you need to have a team of A players who are passionate about making a difference in the world, and you need to focus immediately—as soon as you can afford to do so—on building that team.

Building an Advisory Board

Surrounding yourself with individuals much more experienced than yourself, who have already achieved what you want to achieve, is critical to your ability to quickly learn what you need to learn in order to succeed in building your business. I strongly recommend spending some time identifying people who have already done what you want to do and reaching out to them. Invite them to coffee and lunch. Probably 2 out of 10 people you reach out to will say yes. You can double this success ratio by getting an introduction from someone you know who also knows them.

Take these potential mentors out to lunch and tell them briefly what you do and then ask them questions. Don’t try to sell them on anything or convince them to invest or join anything yet. At the end of the first meeting, tell them you really enjoyed meeting with them and ask if you could meet again in 2-3 months once you’ve made some further progress. Almost everyone will say yes to this request if made in person, simply because they know that so few people actually follow up in these cases.

Two months later, follow up and schedule a second lunch or coffee. At the end of the this second lunch or coffee with your prospective mentor, you will have done what only 5% of the people who have ever asked them for help have every done. You have met with them twice. At this point, ask if they’d be willing to meet with you once per quarter. If you want, you can also ask if you can list them as a member of your informal advisory board on your website or in your investor deck. Now, you’ve got them, and as long as you curate the relationship carefully over time, they will always be available to you as a mentor and guide.

The mistake most people make in building an advisory board is asking people to join something formal with a defined commitment after one hour of talking. Most busy people don’t have time for another formal commitment, except to individuals they’ve known for years. So build the relationship over time and then ask for an informal commitment. As they get to know you and your business and see you actually doing what you say you’re going to do (something 98% of people do not, for some reason!), they will be more and more willing to help you. Why? Because they get the benefit of giving back and perhaps being able to brag to their friends that they were part of something that became successful at the very early stages.

Source: Startup guidence, .INC, Entrepreneur

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Startup
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