Attracting top talent as a startup

I recently contributed to a LinkedIn article about how startups can compete with larger companies for top talent. These collaborative articles are a great way to learn some basic concepts and then get different perspectives from contributors. I love chatting with founders, sharing some lessons and comparing notes. LinkedIn calls this a "Top Voice" in startups; I call it commiserating. However, I thought this topic merits more in-depth coverage.

Let's get started with something that is almost too obvious to bother stating: people make startups happen. While there seems to be an obsession in the media with founder stories, the reality is that everyone in a startup has a big hand in the company's success... or its failure. In fact, I'd say that's one of the most compelling reasons to join a startup -- or a reason to stay away, if you don't want this level of responsibility on your shoulders.

Startups offer a very different set of trade-offs compared to larger companies. In particular, BigTech over the last decade has coddled employees and thrown incredible compensation packages, perks and prestige at them. While this may be changing, in practice startups continue to compete with bigger companies for talent. So, what is a startup founder to do?

Having interviewed, recruited and hired lots of people both at large companies and startups, I have some perspectives that I can share.

The first rule about competing with incumbents, which typically have much more money, people and clout, is to not compete on their terms but on yours. This starts with you, the founder: you need to be actively involved in the process, not just by defining the headcount and roles, but engaging with candidates directly. For a key position at my current company InOrbit.AI I drove the selection process, personally reviewing over 100 applications and talking to +12 people, meeting multiple times with some and ultimately closing a candidate. Is this a huge time commitment? Absolutely. Is it necessary? I believe it's critical.

This gives you an opportunity to include the irreplaceable founder's touch in every contact with candidates. That's not to say that you're the only one who should talk to the candidates (that would be a huge ??) or that this shouldn't be a team effort, but if you're thinking "I have people for that", then you're doing it wrong.

A big benefit you have is being more flexible. Rather than focus on the work a candidate will do for the company, figure out what the company can do for them. For instance, if they value learning, tweak the position to play to their strengths while also allowing for stretch/growth. Have the executive team super engaged, sharing their respective experiences and expectations, so the candidate can get a feeling not just for the company direction but the people behind it.

Another key aspect is focusing on impact. Granted, most people with a modicum of ambition would like to think they have some impact at work. As someone who has worked in several of the better know BigTech companies, I got a chance to be part of massive product launches. But, to some extent, it always felt like I was part of a big machinery that would keep churning whether I was there or not. Without dropping into false modesty, I can say that there were a few moments in my corporate career where I felt that I personally directed the flow of things in a way that wouldn't have been possible without me -- and it felt awesome.

Now, I get to feel that way every day. And, especially in the early days of a company, this is a gift you can share with your team. In fact, you'll have to, because every single team member, through their action or inaction, has an impact on the trajectory of the company almost daily. The trick is to find people who thrive in that kind of environment. The standard shorthand for this is to hire missionaries not mercenaries.

However, many inexperienced founders I've met are afraid of 2 things:

1. hiring someone who knows more than they do, and
2. the compensation conversation

For the former, the key is to get over your own ego. Of course you want to hire people who know more than you do; that's how you elevate the company. Beyond knowledge, you want to hire people who share your vision, your drive; you want people who will bring their own ideas and make the company better for it.

A related point is culture. This is too often used to hire people just like everyone who is already there, which isn't what you want. Don't get me wrong: a great culture is a huge differentiator. But a culture is not something a founder creates by printing a few posters with aspirational quotes. Some companies use 16 principles or 20 mantras that nobody can remember, but which are sometimes weaponized and used to suggest that someone doesn't fit the culture. In reality, company culture is built every day by the people there, and it should be a living, breathing thing. So rather than hiring for culture fit, try to think about culture add. What new perspective will a candidate bring to the company?

When it comes to discussing comp, there's a time and a place for it. You can provide some broad ranges to avoid wasting everyone's time (note that this is legally required in some locations, and a good idea regardless), but the reality is that in startups, the role should adjust to the person more than the person adjusts to the role, so it's not always clear in advance what the exact role will be. If you or the candidate are not at least 93% sure that it's a fit, then it's premature to discuss in more details. No amount of money will make up for a bad fit, and if the fit is great then both sides will be more willing to stretch to make things work.

Here, again, I would advise against trying to match the tactics at large, established companies, including huge salaries and costly perks. At startups, cash is king. Cash literally determines how long the company will be around. So, as a founder, it's your responsibility towards everyone involved with the company (employees, contractors, investors, customers and partners) to make sure it will continue to exist and deliver value. That often means paying at or around market, instead of aiming for the 90th percentile as some bigger companies do.

On the other hand, you have something that very few large companies can offer: the opportunity to grow the price of shares (or stock options) by 100X. Yeah, I know, that sounds bombastic. My advice is as follows:

1. be generous with stock grants,
2. spend the time to make sure that candidates are well informed about how to value stock and that they understand the sometimes opaque terminology (strike price, FMV, secondary offerings, stock grants,)
3. be transparent and share information about valuation based on recent investments, about number of shares outstanding and fully diluted, etc.
4. make it easy for the candidate to make their own assessment of the potential future value, eg providing different scenarios based on comparable firms,
5. and, most importantly, make sure that they understand the extremely limited liquidity that these options have -- they should not rely on them to survive.

This last point is critical. You don't want people to join due to a misunderstanding, and more importantly if your team members are worried about paying their bills, they won't be as productive as they could be. When I have this conversation with candidates, my standard phrase here is to tell them "don't buy the Lambo yet."

This is still very fresh in my mind because we recently expanded the InOrbit team with two world-class members. I won't get into all the details, but I can share that, while each case was different, they were both coming from larger companies. The conversations we had were as much about what they wanted to accomplish, what made them super engaged with work and understanding how well the company values represented their own. Yes, there was some discussion about comp and we landed in a good place by looking at the overall package and the value (not just the cash) that they will get. Most importantly, our package allows them to share in the success of the company; the success that they will be helping create.

If as a founder you are overwhelmed by all of this, I encourage you not to shy away from it. Accept that it's not easy but, like many other hard things about building a company, with effort you can get good at it and then it will become a competitive advantage. Because you're not just competing against larger companies; you're also competing against countless other startups, all trying to grow their teams.