A+ talent - one of the biggest value unlock in startups

Last week, based on our experience, we shared 12 key areas where VCs can collaborate with founders beyond investment. This week, we want to delve into the first one - How senior talent can help founders unlock exponential growth.??

Founders nurture companies like their babies and, like ideal parents, instinctively want to ensure they get every little detail right. However, as companies scale, founders' bandwidth becomes the critical bottleneck and only impedes companies'?growth.?One of?our portfolio companies hired three experienced CXOs at the sub $1M revenue run rate scale, and within a span of less than a year, the company had significant growth in revenue. In our experience, strong talent is the highest ROI investment a founder can make. However, founders often hesitate to bring in high-quality senior talent early on.??

Here are five common concerns we have come across during our conversations with founders:

1. Insufficient ROI: Start-ups are usually resource-starved especially at early stages and founders often believe it's better to invest in multiple junior hires vs one senior hire.
2. Uncertainty?of joining: Most founders have doubts regarding senior talent in large organizations leaving the comforts of a steady role to join a highly uncertain start-up environment, so why even try??
3. Impact on cash: Senior talent generally have high fixed cash component, founders fear they may not be able to match such high compensation. They are also quite worried about the immediate negative impact of this on cash reserves.?
4. The desire for specialists: Founders, especially at early stages, are sceptical of generalists, believing they might not be able to add any specific value.?
5. Cultural Fit:?Start-ups have highly different cultures, teams need to work in a highly uncertain and fast-paced environment. Founders believe hires from scale organizations may not be able to adapt to such an environment.

Talent addition is an essential element of value unlock at startups.?In our experience, here are the benefits of working with senior talent.

1. Growth?has always followed talent. The right senior talent may be able to identify areas of opportunity, unlock potential blind spots for the founders,?and can enable higher scale.?
2. Senior leaders can act as mini-founders and may provide substantial execution leverage to founders, leaving founders with time to focus on strategic priorities that can shape the company's future.
3. Senior leaders often aspire to be part of innovation and the next big revolution. Early-stage companies can offer strong value propositions for working in cutting-edge areas, and talent may be excited about such roles.
4. Compensation can always be creatively structured to balance cash vs equity. In fact, a lot of senior talent may be motivated by the opportunity to create wealth via equity upside.
5. Early-stage companies often are very unstructured and talent can end up having multiple hats. A generalist?with strong problem-solving skills can be a better fit and can multitask compared?to a functional expert.?
6. Ensuring cultural fit is quite essential. Founders need to invest time in screening the right senior talent and building a robust interview process. With the right processes in place, they may be able to select the right talent who can adapt to the speed of their organization and can be culturally fit.

Please let us know your thoughts in the comments.