Q: I am a few months into my business, and I am nervous about hiring a team to support my business plan. What is the best way to build [and pay] the initial team?
A: A great team starts with the assessment of strengths and needs. Be honest with your initial assessment. What does the founding team do well? Where does it fall short? Which skills are critical for the success of the venture at this time? What skills can a board of advisers provide? What skills will you need to hire?
Once you know what you need, you should network, network and network some more to find potential candidates. Board members and advisers can give you prime leads and great insights on potential candidates. Here are some things to consider:
Relationships matter. Remember, founding teams are small, spend a lot of time together and are working in a pressure-filled environment. This means compatibility matters, so be sure to assess someone’s fit with the existing team.
Get smarter. Don’t be afraid to hire people who are more experienced, more skilled and smarter than you. In a high growth startup, a single all-star player hired for the right position at the right time can mean the difference between success and failure.
Beware of mercenaries. Pay is always negotiable. Stronger candidates may want more money, but be leery of folks who are looking for cash and are not interested in stock and options. If they don’t believe enough in the venture to weigh their compensation toward the upside, they are not the right hire. You need committed soldiers, not mercenaries.
Offer upside potential. I believe in weighting pay toward upside outcomes. I always wonder why anyone works for a startup if they don’t have a piece of the upside. Established companies usually offer better pay, benefits and security. You can’t attract talented, committed people without giving them a piece of the upside.
If you are going to provide an equity package, be sure to include a vesting clause that plays out over the next few years. You don’t want to transfer ownership too soon, only to discover that the new hire doesn’t fit, doesn’t work hard or simply isn’t competent. Vesting clauses protect you from these common mistakes.
David Deeds is a professor of entrepreneurship with the Schulze School of Entrepreneurship at the University of St. Thomas.