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What do investors look for in early-stage hires?
All founders know the team slide and the importance of presenting your founding team to investors. What many founders are less prepared for are the questions they receive around their early-stage hires or hiring plans.
Investors are often not only interested in your founding team but in the initial set of employees that you surround them with. Often, this group becomes key parts of the business, leading different aspects of the company.
Most importantly, however, your early hires demonstrate your priorities as a founder and help investors understand how you are likely to operate the company as you move forward.
Here are a few reason you should and shouldn’t hire someone in the early stages of building your business.
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Do:
Hire for missing skillsets: Hiring to fill gaps in your team will not only improve your team but also demonstrate to investors that you have the self-awareness to understand your weaknesses and ensure that they don’t become your downfall.
Hire when you need to scale: Once you have found product market fit and a reliable channel through which to scale your business, it makes sense to hire to help you scale. In this situation, without hiring, you’d leave money on the table and spend your time working on something that works instead of finding other ways to grow and expand the business.
Hire when they pay for themselves: If you have a role where a new hire can help the company earn more than their salary, then that is a great hire. In the early stages this doesn’t need to be something scalable, it can be someone dedicated to cold call or emails at a low salary or a developer providing custom services for a client paying more than that developer’s salary. If they pay for themselves, then hire them.
Don’t:
Hire friends: Many founders like feeling comfortable with the team around them, but this is no justification for hiring friends. Unless that person fits the criteria above, you can’t simply hire them out of comfort or loyalty; while you may be able to justify it as a decision for company culture, the reality is that others will know why they have the job and that creates more problems in the future than any one person can positively impact your team culture.
Hire because you have money: The most significant hiring mistake founders make is raising and then immediately dumping loads of money into hiring. Often, this leads to low-quality hires and a poor onboarding system. Investors are well aware of the problems this causes for companies moving forward. Be very meticulous in your hiring. Just because you have the cash doesn’t mean you need to rush to spend it.
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