When investors are doing due diligence on a startup, they focus on the financial aspects of the strategy and plan: do they have an interesting business model? What’s the addressable market? Are the growth plans compelling and do they have a credible plan to execute? Every startup is a bet based on a hunch and some smart thinking, yet great attention is paid to numbers, as the be all and end all.
But when it comes to evaluating the startup team – standing in front of investors gripping their pitch deck like an artefact recovered by Indiana Jones – scant attention is paid to the people aspect of the business model. Investors frequently use their gut feel and intuition. This is odd, as you’re backing the team’s idea, their ability to execute and make it happen.
Most investors have never run a fish and chip shop let alone founded a startup, so what do they know about hiring, building and leading a startup team? I’ve always taken to heart the advice of Ben Horowitz, author of The Hard Thing About Hard Things, who said: We knew that if we took care of the people, the products and the profits – in that order – we had a chance of success.
Very telling when the data shows that 60% of new ventures fail due to problems with the team. So, what makes a successful startup team? Let’s apply the Lean Startup thinking to this question. The concept of a MVP is a means of asking the right questions of your product, it’s a process of testing and validation around your business model assumptions. Testing all aspects of the startup business model, not just the product features, is vital, so let’s apply this to developing your ‘Minimum Viable Team’ (‘MVT’)?
Startup teams must move quickly through the forming-storming-norming-performing stages of team development identified by Tuckman, so alignment on vision and values, and having good social skills are vital. If these two attributes don’t exist, team members can begin to feel like rats in a maze, and not see where they’re going, and quickly the team breaks down. While some chaos can be good for innovation, you want to avoid wasted energy and people not utilising their talents fully.
And remember, there is no such thing as a solo entrepreneur. Nobody who’s ever scaled a business from the ground up did it alone. In fact, left to themselves, they wouldn’t have a business. The people you choose to work with have the ability to make or break your venture, so it is imperative that you are selective and strategic about your team.
So how do you choose the right team members for your startup? Here are some thoughts. Around hiring philosophy and strategy, why I focus on personality, and some lessons from Google on building teams.
1. Hiring Philosophy What is your hiring philosophy in terms of its purpose and principles held as underlying attributes that will make a difference?
Rockstars gives leverage You’re looking for rockstar starters who can create 10x more leverage – ‘moonshot thinking’ – than an average folks. The effectiveness gap between team members can be multiple orders of magnitude. In startup hiring there are few shades of grey, go for those that can add rocket fuel to your momentum.
Culture-contributors are better than culture-fitters A startup culture is part of the business model and customer experience. Just like we want people to contribute new skills and ideas, we want people to contribute new culture. Hiring culture-fitters does not make your culture better. The founding team will soon be outnumbered by new hires. They will decide your future culture, not you.
Hire action-takers who can get the job done No business has ever taken off based on an idea, it is execution that transforms an idea into a revenue-generating business. You want to build a team that’s capable of accomplishing things instead of just spouting off ideas. Startups are gruelling. Things move at a rapid pace. Challenges get thrown at you at every turn. It is imperative that you have team members with the agility to deal with problems quickly and efficiently.
Hire for potential and learning not experience Potential and experience are not mutually exclusive, but potential is far more valuable. Everyone usually hires for experience, but for a startup my view is to hire those whose potential can explode, pulling you along with them. Interviewing for experience is easy because you are discovering what someone has done. Interviewing for potential is hard because you are predicting what they will do. Hires with potential are easy to spot: they get excited talking about what they could do rather than what they have done.
Expertise becomes obsolete. To survive and grow a startup must be a learning organisation. The clearest signal of a learner is curiosity. Experimentation is crucial for driving breakthroughs in a startup, so seek curious people, who by definition, love to learn, while experts talk about what they know.
2. Hiring Strategy Take your long-term vision for your venture and map the architecture of your business. Think about the functions that are necessary to give life to your business. The startup phase is temporary. While it’s true that many businesses don’t make it past that initial phase, that’s not what you want your trajectory to be.
Don’t build a team for a startup Having mapped your future organisation, hire people who would be future leaders for each function. This way, when you’re ready to scale your business, there’s far less friction. It’s important that you build a team for the long term, so build your team with the future in mind, not for now or the next twelve months.
Hire people who can relate to customers Customers are not be the sole responsibility of one part of your team, rather every team member should be driven by a desire to engage with them. It’s easy to get caught up in what’s good for your bottom line. Revenue makes all the difference. You should be thinking about the numbers. But if you can build a team that always places your customers front and centre, you’ll have no trouble meeting your revenue goals.
When you’re just starting off, you may not have the resources to hire a large team so that everybody may be involved in the sales and marketing functions, including direct interaction with potential customers, so ensure that your team is equipped with the right capabilities.
Avoid homogeneity in your team There is a natural bias to hire people ‘like us’. Fight this bias. Hiring similar means we value repeatability and efficiency over creativity and novelty. Hiring different brings the sparks and catalyst of leverage. You will naturally want to hire people you connect with. Fight your instincts. Don’t default to ‘she’s like one of us’.
Homogeneity is dangerous. Everyone will have the same blind spots and will inherently have similar strengths and weaknesses. There’s no one to create balance. You also want there to be some degree of pushback and debate within your team.
3. Focus on Personality Simply, what sort of people did we want in your team alongside us on our startup journey? I’ve developed this simple framework, a combination of attitudes, character, and behaviours, to check for personality fit:
- Openness: look for free spirited, open-minded folk who will enjoy the startup adventure and new experiences – the highs and the lows.
- Conscientiousness: A startup can be a bit chaotic and disruptive, so look for people who are organised and dependable.
- Extraversion: hire energisers, live-wires who tend to be more sociable and keep noise and energy levels up – not office jesters, but people who keep the lights burning
- Agreeableness: High scorers for this trait are often trusting, helpful and compassionate. Empathy is an invaluable trait to have when building your startup to balance the searing ambition.
- Emotional stability: People with confidence don’t tend to worry often. Hire them!
We are social creatures, and a deeper understanding of who we and others are can be valuable for working with others. You can build a more effective MVT using personality traits as part of your hiring decision.
In terms of the attitudes and behaviours, these maybe summarised as follows:
They would much rather act than deliberate Generally, startup business plans are less useful as things change so quickly. Before the plan shoots out of the printer, things have changed and is outdated. Stuff happens. Few startups resemble their original plan, they pivot to meet the needs of their customers. Great startup employees are the same way.
They have an appetite to get out of the building Great start up people obsess over the customer, they understand calories are best spent making a real difference for customers. Every business has finite resources. The key is to spend as much of those resources as possible on things that matter to the customers. Fretting over trivial things doesn’t help anyone.
They don’t see money as the solution How do you take limited resources and turn them into something remarkable? That’s also true of the best startup employees. They’re remarkably resourceful. They’re constantly looking for creative ways to make the most of the resources they have.
4. Lessons from Google Google has established a suite of practices when building their teams based on rigorous analysis, ‘Project Aristotle’, which identified what underlying factors led to their most effective teams. Over 200 interviews were conducted across 180+ teams over a two-year study. Some 250 attributes were identified that contributed to both success and failure.
Their hypothesis was that they would find the perfect mix of individual traits and skills necessary for a stellar team. Turns out they were dead wrong. The researchers found that what really mattered was less about who is on the team, and more about how the team worked together. Here are the top five elements to an effective Google team, in order of importance:
Psychological safety Psychological safety refers to an individual or team’s perception of the consequences of taking a risk, a belief that it is safe for risk-taking. In a team with high psychological safety, teammates feel safe to take risks around their team members. They feel confident that no one on the team will embarrass or punish anyone for admitting a mistake.
Dependability On dependable teams, members complete quality work on time and don’t shirk responsibilities. Perfection is not optional. The enemy of great is good. In a remote working team, this is extremely important. Always trust your teammates are doing their best work with good intentions.
Structure and clarity An individual’s understanding of job expectations, the process for fulfilling these expectations, and the consequences of performance are important for team effectiveness. Goals can be set at the individual or group level, and must be specific, challenging and attainable. Google uses OKRs to set and communicate goals.
Meaning Finding a sense of purpose in either the work itself or the output is important for team effectiveness. The meaning of work is personal and can vary – financial security, supporting family, helping the team succeed, or self-expression for each individual, for example. The self-directed employee takes responsibility for her own decisions and actions and says We can figure it out.
Impact The belief that your work is making a difference is important. Seeing that one’s work is contributing to the organisation’s goals can help real impact. The most precious resource is the passionate and persistent human mind.
Henry Ford once said, Why is it that every time I ask for a pair of hands, they come with a mind attached? In a startup, minds dramatically amplify the value of hands and they become even more powerful when they’re able to engage with likeminded, stimulated others in the team. You have a strategic plan called ‘doing things’, so set down your hiring philosophy and strategy make the hiring focused on this. And don’t rush, AirBnB spent five months interviewing for their first employee before they hired someone.