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Texts with Founders: Avoid Hiring Too Early
Navigate external pressure focused on vanity metrics
Welcome to Texts with Founders — tested tactics for early stage startups. This is a free newsletter designed to give an inside look at how I work with other founders.
If you’re exploring starting a company take a look at the upcoming cohort of On Deck’s Founder Fellowship.
You will feel pressure to hire—especially after raising. Most second-time founders will tell you one of their biggest mistakes was hiring quickly—too early and too much—at their first startup.
Several forces conspire against you in encouraging you to hire early:
Hiring can feel like progress even though it’s not getting you closer to product market fit
When you have funding, there is a natural inclination to spend it
Some investors will try to push you to hire because they think this is a sign of a growing startup
Social / Status Pressure to Hire
Many people consistently mistake headcount size for progress or success. A common question people ask at social events is, “How many people are at your company?” Some ask because they believe it is a proxy for how serious you are as a startup. It’s good to remember that Instagram had a 13-person team when it sold to Facebook for $1B.
Cynics might dismiss the Instagram anecdote as an extreme outlier. They’re right that it’s an outlier, but they’re wrong to think startups should aspire to anything less than outlier performance. Anything less is settling for average. That’s no good because the average startup dies.
I’ll give another quick (anonymized) story from a company I work with that exemplifies outlier headcount performance. They raised $2.5M during the bubble of 2021, but unlike most companies of the era, they made no hires. They methodically chipped away at a complex problem faced by the customers they wanted to serve. It’s been two years since their fundraise. They recently hit $1M ARR and a viral coefficient of >1—all with a team of 4.
Combat social pressure by reminding yourself that headcount is a vanity metric and focus on what matters: customers.
Investor Pressure to Hire
The pressure to hire often comes from the people who invested in your company.
This is tricky because you might feel they invested in your startup specifically so you could hire.
In reality, they invested to own a piece of your business in exchange for helping you grow it. Increasing the size of your team is not necessarily the most effective way to grow your business in areas that matter—especially in the early days.
One junior investor told another founder I work with to “avoid being so afraid of firing people that you don’t learn to hire.” The investor assumed it was a given that the founder should start hiring. Their advice was irrelevant because the actual question was whether the founder should be hiring at all.
Put me in the camp of hire slow, fire fast, and in the early days, don't hire at all unless you *need* to.
The best way to resist pressure from well-intentioned investors is to tell them you wish to stay as nimble as possible for as long as possible. Show them you have a plan for how a small team can accomplish big things.
It would be easy for an industry outsider to believe that the more people working at a startup, the more can get done. It turns out that the opposite is closer to the truth; startups that stay small tend to be far more productive.
In the early days, momentum is everything. Activities that do not directly create or increase momentum are likely a distraction.
If you’re building something of importance, it cannot be only the founders forever. Eventually, you’ll need to hire. Some successful startups build out their teams earlier than others. The thing many great startups have in common is that they hire when it makes sense for their business—not because they raised a bunch of money or they think it makes them look more impressive.
The best reason to grow your team is due to customer demand is forcing you.
Texts with Founders is entirely free.
If you feel these resources might benefit someone you know please text or email them about it—would love for this to be of service to even more founders.
Customers understand before investors do - And some investors will never understand.
The Benefits and Downsides of Responsiveness - Where it can help and where it can backfire.
Raise the round behind you - Avoid a drawn-out process and optimize for the best investors.
Conditional Commitments - Why they aren't commitments and what to do about them.
Avoiding Gossip - Nimbly navigate an awkward scenario.
Handling Inbound From Investors - Avoid distractions and keep potential investors warm.
No identifying information is shared in texts.