You’re reading this book. But are you sure you want to?
Living through high-growth is highly uncomfortable. And it should be. Founding a startup that scales rapidly is not a common path. If you choose to walk it, you’ll be breathing rarefied air.
We haven’t written Scaling Through Chaos to make the journey easy for you. No one could do that. But what we can do is systematically break down twenty years’ worth of data and insights into how the world’s fastest growing and most successful startups have scaled the mountain, taking the kernel of a crazy idea and turning it into a highly impactful company.
We’ve designed this book and its companion app to be a toolkit for the world’s most ambitious entrepreneurs. We know they—you—are hungry for actionable, evidence-based advice, of the kind you’ll find in the other books in the Index Press series: Rewarding Talent, Destination USA and Destination Europe.
Here, we’re focused on helping you figure out how to find, hire, retain and lead the right people to turn your business into an outlier success. Scaling Through Chaos is packed with original case studies, fresh frameworks and unheard stories about the inner workings of pioneering startups. It’s based on the most extensive research ever performed into the growth of VC-backed businesses—incorporating analysis of 200,000 career profiles at 210 companies, in and beyond the Index portfolio.
What you’ll take from this book depends on the particular challenges you’re confronting. How do you manage hierarchy and process without squashing creativity as you grow? What’s the best way to structure your tech team? How can you make the most of your network without building a monoculture?
There’s no recipe or blueprint for how to innovate. But certain things are tried and tested. What this book gives you is a set of best practices and shortcuts about how to hire people, how to stretch them, how to organize them—all of which helps you achieve scale faster. It relieves you of the mental burden of reinventing the wheel of people management, so you can play with the stuff that demands creativity—things like product, growth and technology. It frees you up to innovate where it matters.
The core message of Scaling Through Chaos is that disorder is the price of transformative progress. Try to stamp it out, and you’ll kill what’s special about your company. The most successful founders accept that discomfort, change and evolution are part of the journey, and that the people who help you get from zero to one aren’t necessarily going to get you over the line at the end. You want to back and support your team, but you also have to value and reward performance over loyalty.
You also need to look ahead, while accepting you’ll always be behind where you want to be. In high-growth, you can never hire and onboard quickly enough to match the demand you’re seeing, and it always feels like you’re filling gaps. Yet you have to get your head above the waterline to be able to look to the next beachhead, the next blocker, the next opportunity that’s 12 months or more down the track.
What you’ll see in this book is that growth is not linear, nor even a hockey-stick. Every single successful company has been through at least one near-death experience. No one goes from strength to strength, and often you need to retrench, regroup, pick yourself up and begin again. The key traits of successful founders are not only brains and brilliance, but also commitment and resilience—waking up every day and giving 200% of themselves, solving impossible problems and starting to see obstacles as learning moments. The best entrepreneurs find ways of getting energy from overcoming difficulty.
Expect to make sacrifices. To scale through chaos, you’ll need to pour your life into your business for at least a decade. It’s not for everyone, and it’s not the only way to be successful in life, business or entrepreneurship. But for those willing to step up, there are immense rewards too. If you choose to ride the rocket, Scaling Through Chaos can help you handle the turbulence.
Martin Mignot, on behalf of Index Ventures
Growth is messy, as any parent can tell you. When organizations grow rapidly, they too become more complex and unpredictable. But often there’s order hiding beneath the turmoil. When you open your eyes, you can find parallel examples of emergent structure and beauty all around us—in nature, art, mathematics and society. With a clarity of purpose and the right people on board, companies can find a dynamic equilibrium that rolls with the chaos but channels it towards success, resilience and creativity, with minimal top-down control.
Beauty in chaos
In 1975, a brilliant young physicist Mitchell Feigenbaum made a startling discovery, after working for 22 hours a day for two solid months. A number kept cropping up in systems that circle around an average state for long periods of time before collapsing into chaos—behavior typical of storms, the stock market and even the human heart during cardiac arrest.
This universal magic number—approximately 4.6692—is now known as the Feigenbaum constant. It describes with uncanny precision the ratio between bifurcations in dynamical systems, and allows us to estimate when they will flip between order and chaos.
Feigenbaum’s constant is one of the defining discoveries in the history of complex systems, helping to account for everything from the shapes of mesmerizing fractal structures like Romanesco broccoli to the growth of human populations. It shows how simple principles can give rise to forms that are at once bewilderingly complex, beautiful and elegant—and how order can exist beneath the appearance of turmoil.
Read more stories of chaos at the end of each chapter
Stories of Chaos
How to surf the edge of chaos
It's all about people
Founders are fired up by the desire to make a positive difference to the world, by honing in on a significant pain point that people experience. They identify how technology offers new solutions to old problems. Through months or years of ideation and bootstrapping, their customers’ needs and product iterations end up consuming most of their waking hours.
Founders spot a big wave and become obsessed with making the surfboard to ride it.
Jan Hammer, Index Ventures
As a consequence, founders are often shocked to discover that, once you have a minimum viable product (MVP) and venture funding, the majority of your time quickly becomes absorbed by hiring, HR and people management. These areas present some of the toughest challenges that you’ll ever face as an entrepreneur trying to build a high-performing organization. To rise to the occasion, you need to embrace a mindset shift from “building a product” to “building a team and a business based on the product”. Your overall time commitment to people-related matters will come in waves rather than being constant, but it won’t drop away as you scale.
The epiphany for me has been realizing that building a great company relies most on leveraging people rather than strategy. Successfully opening a new office isn’t about analyzing a budget spreadsheet—it’s about who will lead it.
Tom Leathes, CEO & Co-Founder, Motorway
The disconnect between founder expectations and reality was a major reason we created this handbook. We know that founders can come from anywhere, and there’s no template guide for becoming an exceptional entrepreneur. Outlier companies are, by definition, built by people willing to make outlier decisions. Yet beneath the chaotic swirl of global startup activity, patterns rise to the surface—patterns that can help entrepreneurs grow their own thriving, and even iconic, businesses.
If you’re a founder who’s ever wanted to know how companies like Airbnb, Figma and Stripe got to where they are today, this book is for you. To set you and your startup on the best possible path, Index has carried out the most extensive research to date into how tech startups with venture funding scaled their teams to build amazing companies. We’ve created and studied a dataset of over 200,000 founder and employee career profiles to map out the journeys of 210 of the most successful tech companies ever built.¹ The insights in this book draw on this dataset, including more than 150 graphs and tables. We’ve enriched this analysis based on our own experience as investors over the past 25 years, supporting more than 400 current and former companies in our portfolio, and by conducting interviews with 60 founders and highly regarded functional leaders.
¹ The analysis in this book covers four business models: SaaS, Marketplace, B2C App and D2C e-commerce. The US represents 70% of the chosen companies with the remainder mostly from Europe. For each of these companies, we compiled the anonymized profiles of all individuals hired, categorizing 9,000 job titles into 16 functions, 29 sub-functions, and five managerial levels. We then analyzed individuals’ roles, joining dates, where they had worked and studied before, and how long they stayed, as well as their internal promotions and moves.
Selection of the founders and operators we interviewed.
Figma
Nadia Singer—Chief People Officer
Amanda Kleha—Chief Customer Officer
Maven
Kate Ryder—CEO & Founder
Gong
Amit Bendov—CEO & Co-Founder
Personio
Hanno Renner—Co-Founder & CEO
Jonas Rieke—Co-Founder & Chief Operating Officer
Maria Angelidou-Smith—Chief Technology & Product Officer
Ross Seychell—Chief People Officer (former)
Remote
Job van der Voort—CEO & Co-Founder
Sam Ross—General Counsel
Notion
Michael Manapat—Chief Product & Technology Officer (former)
Hubspot
Kipp Bodnar—Chief Marketing Officer
Robinhood
Surabhi Gupta—SVP Engineering (former)
Snap
Farnaz Azmoodeh—VP Engineering (former)
Plaid
Paul Williamson—Chief Revenue Officer (former)
Squarespace
David Lee—Chief Creative Officer
Raphael Fontes—SVP Customer Operations
GOAT Group
Yunah Lee—Chief Operating and Finance Officer
Farfetch
Andrew Robb—Chief Operating Officer (former)
Sian Keane—Chief People Officer
Wise
Harsh Sinha—Chief Technology Officer
Joe Cross—Chief Marketing Officer (former)
Spring Health
Joanna Lord—Chief Marketing Officer
Revolut
Antoine Le Nel—VP Growth
Confluent
David Perry—VP Europe (former)
Full list of the 210 highly successful companies we analyzed.
TeamPlan—the companion web app to the Scaling Through Chaos handbook
TeamPlan is Index Ventures’ groundbreaking new tool that allows founders to benchmark their team’s growth against the headcount journeys of these 210 highly successful tech startups, across 14 separate functions in Technical, Go-To-Market (GTM), General & Administrative (G&A) and Operations. How big was the engineering team at 50 headcount, and how did it split between backend, frontend, mobile, testing and developer operations (DevOps)? How many companies had a CFO by 250 headcount? How much team attrition was there between 51 to 125 headcount? TeamPlan helps you answer these questions and more, filtering companies by business model and customizing the visualizations to uncover detailed insights into team scaling, structure, hiring and leadership. TeamPlan is free to use.
At Index, we believe that people are everything, and we spend a lot of our time making sure our founders work with the best possible teammates. But we also know how hard it is to manage a team when you’re in high-growth mode. Our data shows that if you’re scaling up as a highly successful startup, you’re likely to double your headcount year-over-year during four or more successive years. It follows that half your employees will have been with you for under one year at any point in time, which generates massive organizational stress.
A certain level of chaos is healthy.
Lindsay Grenawalt, Chief People Officer, Cockroach Labs
You can pick the most successful high-growth company in the world, and insiders will still say it’s a shitshow.
Andrew Robb, COO (former), Farfetch
You want to surf the edge of chaos, with just enough process to stay upright, but not so much that you can’t flex to catch a passing wave.
Dominic Jacquesson, Index Ventures
We chose the title Scaling Through Chaos in recognition of the inevitable tumult involved in scaling teams through times of rapid company expansion. Like the non-linear systems that are the focus of the mathematics of chaos theory, the complexity of a startup increases exponentially with its size. Its behavior and output can be extraordinary, but also wildly unpredictable. The key challenge, we believe, is to surf the edge of chaos: You want to introduce people, processes and systems adapted to your particular stage of growth so that everyone is aligned and motivated, without quashing the agility and energy that carried you this far. Finding this dynamic equilibrium at any point in time requires flexibility and constant reinvention.
You hit breaking points where you need to actively evolve to succeed at your next stage of scale.
Nadia Singer, Chief People Officer, Figma
How to get the most from this book
This book is neither a manual nor a set of must-do prescriptions. There is no single recipe, no blueprint, for how to build a high-growth business. Yet over our decades of experience in nurturing some of the world’s most successful tech companies, Index has developed unique insights and robust frameworks that reveal what works, and what tends not to. We present this book as an opportunity to learn from how other extraordinary companies approached decision-making. Where there are disagreements and varying points of view, we highlight them.
You’re unlikely to want to read this book from start to finish. Instead, we advise you to use it like a reference resource, dipping into those sections that are relevant to you, your stage and the challenges you face. You might also be interested to look at earlier or later chapters to cover things you might have missed on your scaling journey and to plan for what’s coming next.
The first half of the book is grouped around particular themes such as hiring, People processes and leadership. Within each of those chapters, you’ll find guidance appropriate to your stage of growth, for which headcount is a useful proxy. In the second half of the book, we shift to a focus on the challenges facing particular functional units, with dedicated chapters for each of the three organizational “engines” that you need to build: Technical, GTM and G&A, again broken down by headcount stage.
Alongside headcount, we use the following broader descriptions to refer to different phases of a startup’s journey:
Early/initial phase—When you are starting out and iterating in order to achieve a minimum viable product (MVP), find product-market-fit (PMF, a product with highly engaged users), and then find go-to-market-fit (GTM-fit, a proven strategy for getting your product into customers’ hands). This usually happens between 0–125 headcount.
High-growth—After achieving PMF and GTM-fit, your business is likely to experience a period of hyperscaling, at least doubling in headcount every year. This typically corresponds to 126–1,000 headcount.
Pre-IPO—Having scaled the company, you’re preparing for a successful exit or the next phase of the journey as a larger corporation.
Throughout this book, you’ll encounter many phrases and terms of art related to startups, companies and hiring. Where it makes sense, we’ve explained and written these terms out in full at the first mention in the main text. Sometimes we’ll continue using the whole phrase to avoid an unattractive abbreviation, but sometimes elegance must fall at the hurdle of economy. Where the written out word or phrase is too long or cumbersome, we’ve used the abbreviation after the first mention. If there’s something you’re not sure about, you can always refer to the Glossary at the end of the book.
We hope you come back to this text many times over the course of your journey. At the very least, your time with the book should furnish you with fresh, validated frameworks for tackling critical people and organizational problems; a sense of the break points at which you need to change your approach; and a clear, actionable understanding of your evolving role as a founder.
Evolutions’ Revolutions
We tend to view evolution as slow but ceaseless change— the quintessential process of order emerging incrementally from randomness. Over millions of years, dinosaurs become doves and monkeys turn into humans. Yet the fossil record tells a different story, one of extended stasis disrupted by swift, dramatic transformation.
In the 1970s, the American paleontologists Stephen Jay Gould and Niles Eldredge dubbed this phenomenon “punctuated equilibrium”. It seems to take a major catastrophe—like an asteroid strike—to knock species out of their comfortable balance, and drive the rapid evolution of new traits, abilities and body types.
Climate change has catapulted us into a sixth great extinction. Evidence abounds that species are changing fast in the struggle to survive. The feathers of emperor penguins have become more yellow in the last 50 years to provide better camouflage as sea-ice melts and land is exposed, while galahs in Australia now have larger beaks, because drought makes opening seed pods more difficult.
What comes next? From what we know so far, the winners following periods of calamity tend to be the creative experimenters, testing novel adaptations to extreme conditions.
Read more stories of chaos at the end of each chapter
Stories of Chaos
The Lifecycle of startups
Changing landscapes, consistent challenges
It takes 10 years or more to take a company from idea to IPO—a span of time that encompasses an entire economic cycle. In other words, almost every successful venture-backed entrepreneur has to steer their company through both upturns and downturns in the economic cycle.
For founders getting started today, the focus is on achieving “more with less”, but the objective remains the same—to hire a tight and committed team that can create a product that customers love (PMF), and then find a way to sell it to them (GTM-fit)
Between 2000 and 2020, the time taken by highly successful venture-backed tech companies to scale to 500 headcount has shrunk for every stage of growth. While it used to take these companies more than eight years to get to the 500 headcount point, more recent successes took only five years.
Faster scaling offers benefits by locking out competitors and creating network effects more quickly. It reflects a more dynamic startup environment, with a greater availability of capital. Faster scaling is also the result of a deeper pool of experienced operators who have learned firsthand how to navigate high-growth, together with better software tools and cloud infrastructure to enable it.
Marketplaces tend towards a winnertakes-all modality, so they have to ramp quickly once they hit inflection. Consumer apps and D2C are rarely like this, so scaling needs to be more mindful of burn rate and contribution margin.
Damir Becirovic, Index Ventures
As companies start to see real productivity gains from AI, there will be a question for leaders around how to manage team size. If you have 10 × more productive engineers, do you cut back the team by 90%, or do you reinvest in R&D, taking advantage of these gains to go faster? In customer care, do you push to replace your entire team with AI chatbots, or do you ramp up your offer to VIP-grade treatment across the board? We expect to see different companies adopting different approaches to these decisions.
Dominic Jacquesson, Index Ventures
Higher interest rates have dampened the “blitzscaling” model of growth, while the bar for fundraising has risen in terms of demonstrable traction, user engagement and unit economics. However, companies that meet these criteria are still able to access the capital that fuels high-growth. Given that People (i. e. payroll) is the primary way in which capital is deployed in high-growth businesses, we believe that rapid scaling of teams will persist, albeit in a smaller cohort of the very best startups compared to what we witnessed in tech between 2015–19 when capital was cheap, and radically different from the boom years of 2020–21.
My message today to the very best outlier companies that have exceptional PMF and a distribution engine would be to scale aggressively. But this is very different to the broad majority of startups, who will have to keep expenditure and headcount tight.
Sofia Dolfe, Index Ventures
The other profound change we’ve seen since the Covid-19 pandemic has been the rise and normalization of remote and hybrid working. Companies have adopted very different practices, although there’s been a significant shift back to the office during 2022–24. At Index, we monitor open positions across our portfolio companies, including by location. Roles advertised as “remote” peaked at 32% during 2021, but dropped back to 21% by the end of 2023. Nonetheless, this is still dramatically above the 8% remote roles observed prior to the pandemic. The implications of remote and hybrid working on culture, recruiting, retention and performance are a significant and evolving topic of discussion and study that falls outside the scope of this handbook, but you will find excellent resources in our Further Reading section
The Big takeaways
Across all stages of growth, we have identified six thematic lessons relating to people, organization and leadership that you should keep in mind:
1 Keep your talent density high.
Making sure you have a concentration of truly excellent people from the start is a force-multiplier as you scale. The initial focus is on applying a high bar for hiring talent. As you scale, you need to complement this with strong performance management processes so you can nurture your stars and say farewell to those who hold you back.
2 Navigate the “messy middle”.
In every function, you have to shift from early generalist team members who cover a whole range of activities to specialists dedicated to a specific subdiscipline, customer segment or product area. Much of your journey will be about deciding when and how to make these shifts. Hiring and onboarding the right specialists, and doing this constantly, is already a challenge. But you need to do this without losing your startup essence of collaboration, innovation and speed.
3 Introduce people and organizational processes gradually.
It’s great to bring in some process early, but you should start simply. The philosophy is that “something is better than nothing,” and over time, processes can be enriched, personalized and optimized. This applies to many areas, including values, onboarding, training, internal comms, compensation, job leveling and an Objectives and Key Results framework (OKRs).
4 Adapt to your evolving role as a founder while you scale.
You start off as Chief Building Officer. You then become Chief Decision Officer, and ultimately, the Chief Inspiration Officer. Being conscious and accepting these shifts, as well as being deliberate in your transformation, will make you a better leader. At the same time, you need to recognize the special sauce that you bring to the company and not let it disappear—this is what will fulfill you as a leader.
5 Balance immediate with longer term priorities.
You need to be thoughtful about the downstream impact of people-related decisions that you might take today for the sake of expediency. Sometimes accepting the “debt” this incurs is the right thing to do. (For example, heavy early hiring in customer support, rather than focusing on automation.) But other times it is a big mistake. (For example, offering inflated job titles to close early hires.) You also need to cultivate a sense of judgment about when to invest in certain initiatives today that may offer compounding payback tomorrow, such as university recruiting.
6 Embrace change.
Change is the only constant in high-growth environments—changes in products, priorities, people, processes, systems and structures. You need to cultivate a resilient and trusting culture that accepts the need for change rather than resisting it, and where people collaborate to drive success. This is about accepting a measure of chaos and uncertainty at all stages of the journey, and achieving a temporary equilibrium that you need to be willing to throw away when necessary. You want to think of your company like a complex organism or natural system that survives by adaptation and evolution, not a machine that’s constructed to function only in one set of circumstances. This requires role modeling, transparency, consultation, empathy and over-communication. Bring people with you on the journey so they understand the “why” as well as the “what”.
Common early people mistakes
We’re an optimistic, future-focused team at Index. But of course we’ve seen our share of poor decision-making and observed how bad decisions taken early in a company’s journey can damage its prospects down the line. As in other complex systems, the initial conditions for a startup have an outsized effect on its later performance. Here are the “People” mistakes we see most frequently, which we advise you to avoid:
Insufficient focus on talent density
Forming a founding team that lacks technical DNA
Forgetting that no hire is better than a bad hire
Being reluctant to get rid of A-holes or B-players
Insufficiently focusing on diversity from the earliest stages
Over-indexing on loyalty to the early team when you need to bring in more specialized or experienced talent
Mistakes around people and hiring processes
Outsourcing early hiring rather than embracing founder-led recruiting
Assuming others can make hiring decisions and stepping back too soon from personally vetting all candidates
Not spotting when you need to hire an in-house recruiter
Hiring an inexperienced in-house recruiter
Inflating job titles, leading to resentment and attrition down the line
Being seduced by sexy brands on a resume rather than focusing on competencies and fit
Failing to establish and stick to compensation principles, seeing it as a win to hire cheaply, or conversely, by offering a sweetheart deal
Insufficiently focusing on onboarding
Failing to future-proof and not investing upfront where it matters
Being too slow to explicitly articulate the culture you want to build and the values that will underpin it
Not communicating a clear vision, mission and strategy, allowing fiefdoms to develop, which undermine collaboration
Building a tech stack for today’s scale and scope, which absorbs headcount and slows you down when you face tomorrow’s scale and scope
Not recognizing when professional financial and legal advice really matter and are worth the expense
Hiring into the wrong roles
Hiring a senior product leader too early, when the founder needs to personally own the product vision
Hiring a senior salesperson too early rather than embracing founder-led sales
Running key marketing and/or sales experiments through a generalist and therefore prematurely shutting down promising marketing and/or sales channels
Failing to hire into the right roles
Not having a superstar owning early Community and Customer Support/ Experience (CX) functions, leading to an inadequate loop from early user feedback into product and growth
Getting bogged down in operations by not hiring a Chief of Staff or Head of Business Operations (BizOps)
Not recognizing when, and in which roles, you need to shift from generalists to specialists
Reluctance to hire, or to properly partner with, an executive assistant (EA) as a way of creating leverage
Misallocating your time
Spending too much time on low priority stuff for your stage (e.g. attending tech conferences, media appearances, meeting potential investors)
Not investing in building and leveraging a full-stack network of advisors and mentors
Not monitoring or creating space for the physical, mental and emotional well-being of your team and yourself
People challenges by headcount stage
Having a larger headcount is the inevitable consequence of building a successful business. You have a larger codebase to orchestrate, more customers to serve, more products to maintain and cross-sell, a higher volume of data to interpret, and more geographies to cover, among many other things.
Some questions and challenges will remain constant regardless of your size or stage, but mutate and evolve as you grow. For example:
Is my hiring plan for the next twelve months appropriate and realistic?
How can I keep my hiring bar high?
Should I promote from within or bring in experienced talent from outside?
How many direct reports should I have, and who should they be?
Do I have too many, or too few, people in function X?
What level of leadership do I need for function X? What are the differences?
Is too much process slowing me down, or do I not have enough of it?
How do I keep my team aligned around our key goals and milestones?
What management reporting structure works best?
Other people and leadership challenges come into focus at more specific points as your headcount grows. We’ve therefore mapped out a framework for the steps you should be taking, and when you should be taking them, in relation to people and leadership. This is far from definitive, as every startup follows its own unique journey. Rather, the aim is to give you an idea of the sequence of challenges you’ll face and actions you’ll need to prioritize to address them. We’ll turn to every area listed here in greater detail throughout the book.
0
Coming together as a founding team (or choosing to be a solo founder) is the critical starting point to building a company. You’ll need to ensure that you collectively have sufficient “technical DNA” to be successful. You’ll also align as a founding team around a (scrappy) written statement that sets out the type of company you want to build. This includes the values, culture and behaviors you want to embody, as well as the company’s mission and vision—the impact you want to make on the world.
1–10
You’ll focus on creating your MVP and building out product features to move you towards initial PMF. You’ll be cash-strapped (pre-seed or seed only), so keep your team lean, with slow and limited additions to headcount. In pure software startups, hires will mostly be into technical roles. In Marketplace or Direct-to-Consumer (D2C) E-commerce startups, you’re likely to hire more broadly, including GTM and Operations roles. Hires will largely be drawn from the best of your own networks and your second-tier contacts. But you need to be thoughtful about diversity in this early team to avoid groupthink or a clone factory. Every team member will have super close working relationships with each other and with you, so internal comms will be fluid, with daily standups. Objectives are focused and known, but roles will be fuzzy, with the expectation that everyone will step in where needed. Though early, much of your company culture is also established during this stage, so take time to define what you want it to be.
11–50
With solid initial signs of PMF based on user acquisition and engagement, you can obtain significant funding (typically $5–20 million Series A) to support experiments towards developing a scalable GTM motion. With a timeline to hit growth and product milestones, you’ll step up to more systematic expansion of your team across a broader range of roles, including GTM and G&A. You might benefit from an internal recruiter to support outbound candidate sourcing and to embed a more systematic hiring process that keeps your bar high: engaging, screening, assessing, referencing and closing candidates. Your Technical team will split into squads. You’ll also appoint your first non-founder people managers, marking the beginning of hierarchy— with all its consequences, good and bad.
51–125
As you identify a successful GTM motion, you’ll build out a more specialist GTM team to scale it. Founders will step back from interviewing every hire as more managers and team members are approved for assessing excellence and values-fit. Retention will become a challenge alongside hiring, so you’ll need to roll out at least an initial performance management process plus basic manager training. With larger and more complex functional teams, you’ll hire two or three outside executives, potentially one each to lead Technical, GTM and G&A teams.
126–250
With a proven GTM fit established, you’ll rapidly scale GTM teams to take advantage of it, which potentially includes regional or international teams. Above 150 people—a point known as The Dunbar Number—nobody can really know everyone else at the company. People processes will instead need to get more sophisticated, especially when it comes to high potential talent (HiPo’s), compensation bands and internal comms. You’ll need to define your Employer Value Proposition (EVP) and communicate it as part of your talent brand to drive hiring and retention. You might also experiment with internships and graduate hiring. This is often a crunch phase for CEOs as complexity ramps up but you lack a proven executive bench. Appoint and/or substitute an additional two to three executives, probably including a VP People. You may also need your first “Scaler” exec, as opposed to the “Builders” you’ve been working with up until now. That is, experienced “managers of managers” for your larger teams, most likely in engineering or sales. You’ll establish an executive committee and senior management team to formalize and clarify decision-making. Your budgeting and planning processes will become more robust, combining top-down and bottom-up inputs.
251–500
As the company’s reach expands across multiple geographies and/or products, matrix management structures will be needed. (This is where individuals report to more than one boss.) People processes will extend to include career progression frameworks and ongoing people analytics. Human resources business partners (HRBPs) will be appointed to support functional leadership. You’ll appoint an additional two to three executive roles, establishing a solid executive bench. This will probably include a Chief People Officer. This is also the most likely phase where you will see a shift from a co-founding CTO to an outside engineering leader. You’ll need to establish a remuneration committee (Remco) as a subcommittee of your mainboard to monitor and approve decisions around compensation, succession and talent management.
501–1,000
With continued expansion across geographies and new product and revenue lines, you’ll embark on a deeper focus on unit economics and automation. This entails paying down the “debt” built up during earlier growth phases, when you overhired to get critical stuff done. Automation will go hand-in-hand with periodic reorganizations across different parts of the business to optimize efficiency and effectiveness. As you prepare internally for a potential IPO, you’ll need robust and documented processes related to financial, legal, commercial and people aspects of the business.
You’ll have a solid People and Talent team in place, with People processes following a regular rhythm. You’ll introduce systems and processes for talent pipelining, career development, internal mobility, graduate recruitment and succession planning.
Internal promotion will overtake external hiring as your primary means of filling senior individual contributor (IC) and first-line manager roles.
Your high-growth company will now be ready for an IPO. It will still feel like a rollercoaster ride on the inside, but you’ll feel a deep sense of parental pride. You will have brought something extraordinary and unique into the world, nurturing its development into a confident and healthy “teenager” ready to make its mark on the wider world!
Plastic fantastic
The brain’s extraordinary adaptability, known as neuroplasticity, is greatest when we’re young. Based on feedback and self-organization, the brain’s architecture continually rewires itself based on our environment and what we’re learning about it. During certain developmental windows, neural networks form new connections while pruning away weak ones. A child more easily picks up languages or rebounds after trauma compared to an adult, thanks to this enhanced capacity to flex and change.
However, plasticity and learning ability tend to decline with age. Neurons become less dynamic and connections ossify. It becomes harder to acquire skills or recover from brain injuries.
Yet emerging research suggests we can combat this loss by staying socially, physically and cognitively active. Both athletic and mental fitness turn out to be “use it or lose it” abilities. Regular exercise, learning new things, finding meaningful work and maintaining close ties to communities and loved ones all preserve neuroplasticity. Consequently, these factors build cognitive resilience and executive function while lowering the risks of strokes and dementia. Embracing change and striving for purpose, it seems, are antidotes to calcification.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Foundations of Success
Founding Team
As soon as you’ve identified a critical customer need and hit upon an innovative solution to address it, you’ll face your first people-related challenge. Who do you want by your side as you build out your product and company?
Your “founding DNA” has a huge influence on what your short-term priorities should be, as well as having long-term implications for your team and company. Who is on the initial founding team will determine:
Values and culture
Hiring priorities and sequence
Network hiring potential
Choose whether to fly solo or find co-founders
The majority of highly successful startups (71% in our research) have two or three founders. Multiple co-founders aren’t essential, and there are several high-profile counterexamples involving solo entrepreneurs (12% in our research). Nonetheless, most successful founders embrace the belief that they couldn’t have gone it alone.
I had already had a successful exit, and was happy working at Microsoft after the acquisition of my first company, Adallom. I’m thankful that I had great co-founders to push me and give me the confidence to try again.
Assaf Rappaport, CEO & Co-Founder of Wiz
Exceptions that prove the rule: successful solo founders Amazon Jeff Bezos SpaceX Elon Musk Bumble Whitney Wolfe Herd Craigslist Craig Newmark Spanx Sara Blakely Bolt Markus Villig
If you’re building a Software-as-a-Service (SaaS) or Business-to-Consumer (B2C) App business, a pair of founders makes sense as CEO and CTO. For Marketplaces, you might want a third co-founder to focus on operational complexity or to bring specialized industry expertise. For D2C E-commerce, the span of skills extends even further to include marketing and supply chain management. It can be tough to assemble such a broad co-founding team from the outset, so you might choose to go it alone at the start and build the right mix of talent further down the road.
The reality of how founding teams come together is extremely varied. Besides having studied together (e.g. Google), worked together (e.g. Plaid), or grown up together (e.g. Discord), cofounders can be introduced by mutual connections, or even be siblings (e.g. Patrick and John Collison at Stripe). There can also be a fuzzy period as a co-founder finds themselves drawn more deeply into a project before they commit fully. But we find that co-founders almost always join before a company’s first fundraising event (93% of the time). If you’re in the position of actively searching for a co-founder, three significant factors to bear in mind are:
Whether at least one of you is “technical”
The balance of experience between you
Diversity, since including people with a range of perspectives and life experiences is more likely to future-proof your company
My co-founder is one of the most experienced and highly regarded tech leaders in France. Meanwhile, I bring energy, freshness and optimism. Between us, it’s not 2+2=4, but 2+2=10!
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
The equity split between co-founders may or may not be equal, reflecting these varied routes, timings and backgrounds.
Bake in technical founding DNA
At Index Ventures (and pretty much all VCs), we have a strong preference for founding teams that score highly on technical DNA. This might be obvious in the case of pure software companies such as SaaS and B2C Apps, but it also extends to other business models.
Why? Without technical DNA in your founding team, you’ll need to outsource product development to either freelancers or an agency. This will slow down your development of an MVP, as well as the iteration cycle to move you towards PMF. More technically adept competitors pursuing the same problem will be at an advantage. Even if you manage to achieve traction, at some point, you’ll need to bring development in-house. This will create further delays as you hire a Technical Lead and team, figure out how to incentivize them, hope you haven’t made hiring errors, and allow them to get to grips with an unfamiliar codebase.
The value of technical co-founders is backed up by our data. The majority of successful companies (78%) had either a founding CTO or a technical CEO (i. e. having a technical degree or work experience in a technical role). This pattern is apparent across business models, even in D2C E-commerce (56%).
Given the increasing importance of design and growing sophistication of consumers, we are also seeing more technical founders with specific product design experience.
We’re seeing a lot more designers nowadays as co-founders, and even as CEOs. Several generational companies now serve as role models: Linear, Notion, Pinterest, Canva and of course, Airbnb. It’s no longer a case of pure tech or business profiles as founders.
Soleio, Designer × Investor, Dropbox and Facebook (former)
Understand the impact of your prior experience
Many studies have attempted to profile what successful entrepreneurs look like. These illustrate clear trends in terms of age (more than half are 25–35 years old) and university pedigree (almost half attended a global Top Twenty institution). However, at Index we believe that great entrepreneurs can come from anywhere, can be anyone, and can “discover their mission” at any point in their career.
Exceptional entrepreneurs can be younger or older, first-time or repeat. Young university dropouts can be a special persona, with insane maturity. Their insight and confidence can be mind-blowing—usually underpinned by one simple insight, but which is derived from original firstprinciples thinking. On the other hand, repeat entrepreneurs can have exceptional clarity about the customer problem they are solving, the type of company they want to build, and the talent they need to bring it to fruition.
Martin Mignot, Index Ventures
Whatever your background, you need to be self-aware about your gaps and tendencies, and work to fix or complement them. A key difference that influences your optimal route to achieving entrepreneurial success is between:
Less experienced founders
Younger, first-time founders, with limited operating experience
Examples: Dylan Field at Figma; Patrick and John Collison at Stripe; Evan Spiegel at Snap
More experienced founders
Older, repeat founders, with deeper operating experience
Examples: Jason Citron at Discord; Assaf Rappaport at Wiz
Hybrid founders
Either younger, but already repeat founders, with directly relevant operating experience, or a founding team which combines more and less experienced founders
Examples: Melanie Perkins at Canva; Whitney Wolfe Herd at Bumble
Less experienced founders usually need to work harder to secure senior early Technical hires, while more experienced founders benefit from hiring a couple of more junior profiles for the sake of leverage and diversity.
These founding team profiles can lead to very different cultures. If you’re less experienced and young, you’ll generally have less appeal to (and may have an implicit bias against hiring) older individuals. If you’re older and more experienced, you could face the opposite challenge. Experienced ex-operator founders also have a propensity to build in too much process and infrastructure early on, because they’re familiar with how big companies do things—for example, leveling frameworks and HR systems that are unnecessary at an early stage. On the other hand, more experienced founders are more likely to personally know your targeted early hires—often highly experienced individuals you’ve previously worked with, where mutual trust is high. But your network may be narrow and more homogeneous, with a risk of limiting diversity and creating a monoculture.
Younger founders need to focus on building their network to bring in senior points of view, which includes advisors as well as hires. Older founders can offer mentorship to junior hires, whilst younger founders can offer experienced hires the space to expand and to put their insights into practice.
Adam Ward, Founding Partner, Growth by Design Talent
Did being a repeat founder contribute to our success? Yeah! My first startup was my business school of hard knocks, and I got paid for the privilege.
Jason Citron, CEO & Co-Founder, Discord
Either way, you need to break out of these mental boxes soon. The key is to play to your strengths, but also work at breaking out of the limitations of your background. See Chapter 4 for more detail on making the right early senior hires.
Values, culture and diversity
Define your culture
Every founder has a unique attitude and approach to work based on a blend of personality and personal and professional history. Many founders are conscious of their leadership style when they start their company and have a sense of the type of organization that they want to build. They might make this explicit from day one, with a set of written principles to guide the journey, or it might remain implicit for a while. Either way, it will manifest in every behavior, decision and hire, and will become the bedrock of your company’s values and culture.
While you need to personally role model values through your own decisions and behavior, the sooner you can articulate your values in written form, the better. This is something you can iterate and evolve over time. But by defining and operationalizing your values explicitly, it allows the team, and particularly team managers, to become “culture-carriers”—encouraging or discouraging particular behaviors, providing feedback when there’s a mismatch, and ensuring incentives are aligned with values. Later on, these behaviors can be illustrated through examples within specific teams, such as Engineering, Sales or CX.
Everyone says you should write down your values early on. But I didn’t really understand this until I ran my first startup without having done this work, and witnessed the consequences on hiring and on culture. Then I got it. You have to be really intentional about your culture. From day one.
Jason Citron, CEO & Co-Founder, Discord
Our early culture was very R&D-centric, but we’re now evolving to put customers at the core. For example, we used to have a value of ‘Aim high, build to last.’ It’s now shifted to ‘Commit to excellence’.
Lindsay Grenawalt, Chief People Officer, Cockroach Labs
By articulating your values, they can manifest in your culture and be embedded into each one of your People processes as you scale:
Hiring for values-fit and training interviewers on how to do this
Onboarding and management training to reinforce values and behaviors
Continuous feedback and performance management to catch people doing things right (or wrong), to course-correct, and to weed out A-holes
Rewards frameworks that reflect and reinforce values alignment
Internal comms to celebrate examples of values being put into practice, and to monitor perceptions of how reality aligns with the values
In a company, values are to culture what DNA is to human personality. Values provide a code, which is manifested in a unique and quirky way as companies grow up and interact with the world. Founders are the parents who provide the company’s DNA, and who nurture its employees to enable it to thrive.
Dominic Jacquesson, Index Ventures
Values at Maven
My dad is an entrepreneur, and he advised me to codify values early on. We’ve refreshed them every couple of years since. Initially they were theoretical and principles-based, but as we’ve grown, they’ve become operationalized, grounded in the experience of what we want versus don’t want.
Some have stood the test of time:
“Walk through walls.” Healthcare innovation is hard, so we’ve constantly had to move mountains to make things happen—negotiating with major health plans and compressing timeframes, as well as evaluating how our frontline teams are supporting patients every single day.
“Keep healthcare human.” We’ve always been skeptical that bots can replace doctors. We recognized the importance of human contact early on, and we’ve stuck with this belief.
Other values have evolved to become
more specific:
“Be humble and curious” has shifted to “Continuously learn, including about yourself.” This orients to a more actionable growth mindset.
“Customer obsession” is now “Embrace the service mindset.” This keeps it relevant for internal as well as external teams.
And we’ve added a new one:
“Lead with data.” In the early days, we didn’t have as much data, and now that we do, it increasingly drives our alignment as we scale.
We continuously reinforce our values too:
Monday all-hands include a section on wins to highlight the values that we leveraged to achieve success
Slack channel to nominate team members for our Annual Values Awards, one per team
Values-focused interviews for all candidates, with a recruiter spearheading our efforts to systematize and optimize how we conduct them
Two “State of the Union” speeches I give each year, which always include a section on our values
Posters all over the office showcasing them
Kate Ryder, CEO & Founder
There’s no secret recipe for what your company’s values should be. In fact, trying to cut and paste values from a textbook is a recipe for failure. The critical ingredient is authenticity. You can have a successful culture which is centered on high performance or one that is centered on collaborativeness. What’s important is that the reality of your culture—how decisions are actually made and which behaviors are rewarded—is aligned with what you claim your values are.
There’s no such thing as a perfect culture—that’s called a cult.
Didier Elzinga, CEO & Co-Founder, Culture Amp
This isn’t to deny the existence of toxic cultures, or even “authentically toxic” cultures—places that follow principles sincerely which nonetheless lead to a negative work environment for many people. Overarching ethical, inclusive and legal guardrails are fundamental requirements for any legitimate company.
However, people differ in the type of organization they want to work for. Some thrive in competitive environments, others in fully in-person ones, and yet others prefer conditions of ambiguity. If articulated and expressed clearly, your values should act as signals and filters for the types of individuals that you attract, hire and retain in your company.
Values should involve trade-offs rather than being mere platitudes that everyone would agree with. ‘Move fast and break things’ is distinct from ‘Strive for excellence’.
Sofia Dolfe, Index Ventures
Culture is to recruiting what product is to marketing. A great product attracts customers, while a great culture attracts more talented people.
Hubspot’s Culture Code
Examples of clearly articulated values
1. Patreon—Core behaviors
We don’t like the term “cultural fit” at
Patreon. We look for “culture add” and
“core behavior fit”. We hire people who
bring new experiences, backgrounds
and perspectives to the table. At the same
time, we make it clear that you must
demonstrate these behaviors to succeed
at Patreon:
Put creators first
Be an energy giver
Be candid, always
Move fast as hell
Seek learning
Respect your teammates’ time
Just fix it
From 2018, when Patreon had 100–200
employees.
2. Netflix—Extract from Culture Deck Our high performance culture is not right for everyone
Many people love our culture, and stay a long time. | They thrive on excellence and candor and change. | They would be disappointed if given a severance package but would retain lots of mutual warmth and respect.
Some people, however, value job security and stability over performance, and don’t like our culture. | They feel fearful at Netflix. | They are sometimes bitter if let go, and feel that we are a political place to work.
We’re getting better at attracting only the former and helping the latter realize that we are not right for them.
As the founder, you should revisit your values every year or two, involving a wider group of leaders and trusted culture-carriers so that it becomes more collaborative. You might leave them unchanged, but you might also find it appropriate to add, delete or modify values. And with each iteration as you scale, you should push the envelope further in applying your values to every People process, articulating them into celebrated behaviors relevant for each function, and actively communicating them to your larger and more dispersed team.
No principle is too holy to slay.
Harsh Sinha, CTO, Wise
I’ve interviewed thousands of people, and I have a hidden agenda—I’m studying companies. I’ll ask, ‘How would you rate working at Company X on a scale of one to five?’ If they give a five, I’ll dig in, looking for insights that accumulate into a point of view on each major company’s culture, like what do employees value from each of them, and what patterns drive success? This informs how I steer our culture as we grow. I want our leavers to be praising Gong down the line!
Amit Bendov, CEO & Co-Founder, Gong
Make diversity a priority
From the outset, you need to challenge and interrogate yourself about what “excellence” looks like so as to mitigate against bias. The diversity this creates will ensure that your business stays flexible and resilient over a longer period of time. While diversity is increasingly in the public awareness, doing diversity right is hard.
From day one, we made a conscious decision to prioritize gender diversity within our Technical team. Where many startups might put diversity on the backburner, labeling it ‘something to fix later,’ I was very deliberate about pushing hard for diverse candidate pools from the start. Referrals were a challenge, and I held back some hiring from my own network to ensure we retained a more gender balanced early team. We put a lot of time and effort into writing and speaking publicly, resulting in some amazing and very visible role models and representation externally. This in turn helped improve our EVP and we had many people mention team diversity as a reason for applying. It’s not something you can ever really stop working on, but putting in the effort early makes it self-reinforcing.
Pete Hamilton, CTO & Co-Founder, incident.io
To me, diversity doesn’t only come down to what we typically think of: age, gender, ethnic background. It’s much more than that, including the persona of the people you bring on board. For example, if I’m great at engineering operations, it’s possible that I’ll be drawn to like-minded engineering candidates because I can simply recognize and relate to them much more easily. But I need different personas on my team—the creative kinds, the architects, the fast movers, plus of course the operationally minded kinds. Having this balance, this diversity, allows me to build a stronger team. Broadening your lens in this way can and will extend to other protected characteristics. This attitude towards diversity, by focusing on as many dimensions as possible, rallies the whole company rather than being potentially alienating to a subset we leave out. It helps avoid an ‘us versus them’ mindset, and constantly adds to the dimensions of diversity you are being mindful of.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
As a founder, you might need to be willing to take a bigger risk on diverse candidates. The talent pool is likely to be narrower and it’s naive to think that there are no trade-offs involved in building a more diverse workforce. In the short-term, it might even be the case that you can scale and ship faster simply by picking proven winners.
Going after a diverse workforce may well incur a short-term cost. Hiring velocity could slow down and you’ll have to go to extra efforts to attract and identify diverse candidates. The one thing you should never do is lower your talent bar in the pursuit of diversity. It backfires and people see through it. Instead, focus your early efforts on a small number of diverse hires closer to leadership level. They will really attract diverse talent further down, allowing you to scale up.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
Lots of founders are tempted into the shortcut of hiring a bunch of folks similar to themselves. So they may end up with a load of math geniuses, but basically no cultural diversity. You pay for this approach down the line in so many ways. You need diversity—across age, gender, ethnicity, backgrounds and experiences—from really early.
Danny Rimer, Index Ventures
Challenge your assumptions
We analyzed the tenures of early engineering hires into highly successful
startups based on where they had worked
before. The conventional wisdom is that
candidates with prior startup experience
are more likely to cope with the ambiguity and fast pace of working in a young
and ambitious company. What we found
runs counter to this assumption—engineers who previously worked at venturebacked companies actually had a shorter
tenure than those who hadn’t.
Prior experience in a venture-backed
tech company?
Average tenure (months)
No 42
Yes 37
NB: Prior experience in a company that
was originally venture-backed but is now
exited (e.g. Meta) is classified as “no”.
The lesson is that when you start hiring,
focus on competencies and character, and
not on where candidates have worked
before.
Here are some practical tips about how to embed
diversity in your team:
Interviews are often unstructured in the early stages of building your business. This risks introducing bias, as you’ll inevitably bring your own lens to the discussion and might end up hiring people like you. Instead, we advise using a competency-based interview framework to make sure everyone gets a fair hearing. This shifts the focus away from experience and grades or brands on a resume (which diverse candidates might not bring) to figuring out how candidates achieved their goals. (See Chapter 4 for more detail.)
Alongside competency, the individuals who thrive in startups exhibit hunger, passion and grit. These are characteristics that you’re just as likely, if not more so, to find in diverse candidates. By ensuring that you assess for and put equal weight on these qualities, you will develop a fairer hiring process.
Every time you solicit names of potential candidates, pause and ask if referrers can think of any great diverse candidates you should speak to. Directing your network to think more broadly will yield a wider range of profiles.
Frontload your outreach efforts with diverse candidates, and be persistent. Building relationships will take time. If you spend the first couple weeks of each hiring process consciously targeting a more diverse set of candidates, you will build stronger pipelines.
For some roles, finding a balanced or diverse group of candidates can be very tricky. We advise you to map your overall organization and levels of roles you will want to hire over the next 12 (or even more) months, and consciously target your efforts to build out a diverse pipeline for your future needs.
Monitor conversion rates at the offer stage in particular. Many companies are getting better at pipelining diverse candidates, only to find systemic bias kick in at the final offer stage. The tendency can be to extend offers to the “best” candidate, falling back on biased norms.
Use tools such as Textio to ensure that the language of your job advertisements isn’t putting off the people you are trying to reach. For example, using combative or military metaphors can cause applicants to skew male. That includes checking your outreach message, job descriptions and interview questions.
If you don’t yet have any diversity in your team, draw in your investors or board to help in the hiring and interviewing process.
Define your vision, mission and strategy
Vision and mission are foundational elements in your journey as a founder. While values and culture define the type of company you want to build, the mission and vision set out the impact that you want to make on the world.
There are multiple perspectives on the meaning of a company’s vision and mission. What follows is our point of view at Index, though the time frames can be adapted, and the two terms can even be switched around.
Vision: This is the purpose or raison d’être of
your company, expressing the change you want
to create in the world. It’s what you exist to
achieve over a 10 to 20-year timeframe, and is
your “North Star” to help you decide what you
should, and should not, prioritize.
Microsoft—“Empower every person and every organization on the planet to achieve more”
Nike—“Bring inspiration and innovation to every athlete in the world”
Figma—“Make design accessible to all”
Roblox—“Build a human co-experience platform that enables billions of users to come together to play, learn, communicate, explore and expand their friendships”
Mission: This is an internal statement of what the company aims to achieve over a three to five year horizon. It should be both ambitious and measurable, allowing employees to link their individual contributions to top-level company goals. For example, “Be a top three global CRM leader with $5 billion revenues.”
Strategy: This is a very specific and quantified plan with a three-year timeline. It’s a set of actions that will take you closer towards fulfilling your vision and mission. It can be segmented into annual (and then quarterly) objectives that guide planning, prioritization, investment, budgeting and goal setting.
Having a purity of purpose expressed through your mission allows you to shape even your commercial targets in reference to their positive impact, rather than becoming mercenary and cynical. For example, “When we win, good things happen’ and ‘Move fast because better healthcare can’t wait!
Kate Ryder, CEO & Founder, Maven
As you scale, your public vision and mission won’t remain the same. Success will enable you to widen your horizons and become more ambitious. When your company is still young and small, a grand vision can come across as somewhat absurd and confusing, especially when stated on a signup page or job description. There’s only one group of individuals who are really interested in hearing your shoot-for-the-sky ambitions right from the start—VCs. But recognize that what you say in an investment pitch isn’t going to be the same as what you say in a sales meeting with your first, or even your hundredth, customer.
Our mission has evolved. It started out focused on women’s health, reflecting our early services around pregnancy and postpartum. This naturally led us to address related issues including miscarriage, infertility and family building support for same-sex couples. Over time, our patients wanted support around pediatric health and encompassing support for dads, such as sleep coaches. Our mission now covers women’s and family health, but I stood firm with retaining our focus on women. Menopause support is now our fastest selling product.
Kate Ryder, CEO & Founder, Maven
More than meets the eye
Before internet memes, in the 1990s there was Magic Eye: books featuring hallucinatory 3D images floating above kaleidoscopic colorscapes, only visible once you relax your focus. The series was a runaway “viral” success, selling more than 40 million copies worldwide.
These optical illusions known as “autostereograms” date back hundreds of years, but enjoyed an unlikely revival after the 1970s, thanks to the Hungarian-American neuroscientist Béla Julesz. While working at Bell Labs on the problem of how to recognize camouflaged objects in pictures taken by spy planes, he realized that two patterns of random dots could create the illusion of depth.
His finding showed the workings of “stereopsis” or depth perception, caused by images landing on slightly different locations on a person’s retinas. Dimensionality, it turned out, didn’t even require a recognizable image. Instead, the brain was capable of matching hundreds of near-copies within an apparently chaotic repeating pattern, creating the experience of depth for the viewer.
In the 1990s, new computer algorithms catalyzed an explosion of autostereogram art. Today, modern digital techniques can translate nearly any 3D form into an illusion complete with photorealistic details and thousands of layers. Beneath the chaos, it’s always worth looking for quietly recurring principles—only visible when one peers deeper, more slowly, and a bit aslant.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Hiring people
Start with founder-led recruiting
Make the most of your network
Your network as a founding team has a major influence on who and how you hire. If you previously worked at a tech or high-growth company, you might know exactly which engineers or designers or marketers you’d like to work with. Hiring from your network makes hiring decisions less risky, and can give you strong conviction to compensate these individuals sufficiently to pull them in.
The downside of this approach is that you might create a team lacking in diversity, or without the “zero to one” skills you need to get something off the ground. It also doesn’t expand the envelope of your future referral network, and can create an “us versus them” mentality when you bring in anyone outside of your own circle. Having a mix of genders, backgrounds, experience and networks really helps. See our section in Chapter 3 for concrete advice about how to improve diversity within your business and offset the risk of a monoculture when hiring from within your network.
I used to be wary of hiring friends, but I did it loads, and whilst I have lost one or two, it ultimately worked out very well.
Matt Schulman, CEO & Founder, Pave
Hires from your personal network are primarily choosing you and your mission. But you also need to think about their three to five year career aspirations to know how to sell your opportunity to them. How will it take them closer to their goals?
Our first 10 hires all came from our direct network or from our second-degree network. We couldn’t offer them safety, but we could offer them impact, and they were all already working either at startups or as freelancers, so they knew and accepted the risk.
Job van der Voort, CEO & Co-Founder, Remote
Hiring from network—incident.io
All three of our co-founders had strong networks. I personally had a list of about 10 folks I thought were truly excellent, and who had said to me over the years, “If you ever start a business, let me know.” Half of these were unavailable when we started, having moved or started their own businesses. But it was natural for me to tap the other half. We were very open about our position, saying, “We have no funding currently and no master business plan, but if we did have the money to pay you, would you be interested?” Two people immediately put their hands up, which was a huge vote of confidence. I was asking them to give up cushy jobs, so I did a lot of anti-selling actually. I didn’t want to sugarcoat the challenge ahead or let them down if things didn’t work out. We all knew each other, having worked before at the same company, so I was very conscious of the potential culture trap. But honestly, the advantage of my early team being people I could trust out of the box definitely outweighed the risks.
As an early stage founder, I’d encourage others to do the same. Your job isn’t just to mitigate risks, but rather to move fast and to maximize upside for the business. We offered them a lot of equity to make up for substantial pay cuts, and they accepted once we had a term sheet, even before we had the funds in the bank. Overall, for our early team, we aimed for 50% founder network, 25% secondary network, and 25% non-network, which mostly came from inbound candidates.
Pete Hamilton, CTO & Co-Founder
Winning means securing the talent to write better code. Your competitors aren’t just companies tackling a similar problem space to you. They also include every startup, bank and big tech company that is competing for top engineers. So if you know great people, grab them.
Simon Lambert, CTO, Birdie
Expect half your early hires to have experience in tech companies
When we analyzed startup hiring trends, we saw that the proportion of early startup hires with previous tech and VC-backed company experience has risen over time. That tracks the wider growth of tech ecosystems in the Bay Area and beyond. Individuals with these backgrounds are more likely to be comfortable with the ambiguity and fast-paced change that you need to accept in a startup. Our projections for the next generation of successful startups suggest that you should aim for 50–60% of early hires to have experience working for VC-backed tech companies.
Be your own recruiter
Few startups hire an in-house recruiter ahead of raising a Series A, and only 10% of the companies we analyzed had hired a recruiter by the time their headcount hit 10. You’re unlikely to be making many hires, and you’re trying to preserve capital. Hiring a recruiter might make sense if you’re a solo founder, given your lack of bandwidth. But you and your co-founders always need to learn how to pitch your company effectively before you can hope to teach someone else.
Founders often underestimate the amount of time they will spend recruiting. Especially as a solo founder. You’re endlessly sourcing, pitching and assessing candidates, with no-one to share the load with.
Zabie Elmgren, Index Ventures
There were days when I’d spend six hours in a small, insulated phone booth, doing interviews from 7 am. ‘Pete’s booth’ be came a bit of a running joke on the team. I only wish I had installed a fan!
Pete Hamilton, CTO & Co-Founder, incident.io
Using recruitment agencies can be helpful to broaden your lens, but be careful who you work with, and don’t rely on them to solve your hiring challenges.
The biggest reason that outside recruiters succeed (or not) has to do with the clarity of the briefing from the founder. If you’re an experienced founder, you can probably do this better.
Adam Ward, Founding Partner, Growth by Design Talent
I spent loads of time and money on agencies and contractors. It felt like a silver bullet, and they sounded so convincing. But it utterly failed. They didn’t internalize our value proposition and couldn’t sell us when we were still a nobody. Only you can do it in the very early days.
Matt Schulman, CEO & Founder, Pave
The takeaway is that you have to be personally proactive in identifying, and engaging with, potential candidates. This founder-led recruiting strategy involves a mix between:
Secondary network—“friends of friends” including angels, investors and other people you know and trust
Cold outbound—searching for specific profiles from specific companies on LinkedIn (you are advised to become proficient at using LinkedIn Boolean search), and then reaching out directly
Inbound—cultivating an inbound flow of interested candidates through social media, blog posts, media presence, etc
Our first tranche of hires were split between our direct network and our secondary network (particularly via angel investors), plus a few intentionally sourced from outside our network, to keep diversity of thinking and backgrounds and to avoid any cliques developing.
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
When asking for referrals, be as specific as possible. Having a job description can help with this, and being concrete makes it easier for people to think about relevant profiles. Assess how well the referrer knows the candidate whom they are introducing, how confident their recommendation is, and also how high their standards are.
If you identify candidates who are connected to your network, ask for an intro rather than reaching out cold. This gives you a much greater chance of engaging them, as does using email versus InMail on LinkedIn (which few engineers check regularly). When pitching candidates, sell your experience and your mission, and also mention any high-profile angels or VCs that are backing you.
When you’re leveraging referrals to build a candidate pipeline, apply a scoring approach. Ask three questions: How well do you know them, how recently, and for how long? Weigh these to generate a signal strength score. Also ask how they’d rate the individual as a percentile of all people they’ve worked with.
Adam Ward, Founding Partner, Growth by Design Talent
When you reach out cold to potential candidates, they will probably look you up and assess whether you’re credible and worth talking to. So ensure you look the part. Your own LinkedIn profile (personal and company) needs to sparkle. Make the most of any high-profile angel investors or advisors that are already supporting you. If you’re technical, your GitHub commits should be complete and up-to-date.
When founders reach out cold to talent, the common mistake is to make it about themselves. Wrong! Make it about the other person—‘I saw your commits, that you did X, that you know Y.’ Link what the person has done to what you have, or to what you’re trying to do. Say that you’d love to connect with them around this shared interest rather than just, ‘Let’s have a coffee.’ Or even worse, ‘Are you looking for a job?’ The initial challenge is simply engagement.
Adam Ward, Founding Partner, Growth by Design Talent
I’d never hired anyone before I founded Maven and couldn’t rely on my own network. I looked for people from companies with cultures of excellence, including a tough boss. This was more important for me than the sector. You have to take risks with early hires, and I had to hustle for every single one. But they all came with values that were aligned, so it worked well.
Kate Ryder, CEO & Founder, Maven
You need to be thinking about the hires you’ll need in six months, not just the immediate future. Particularly for roles outside your comfort zone, you want to meet candidates as soon as possible to help you calibrate the standard you should be aiming for, followed by building a pipeline of potential candidates.
Set a goal for yourself—‘I will have two conversations a week for pipeline roles that I need in the next phase’.
Bryan Offutt, Index Ventures
Pave—Top three founder-led hiring tips
1. Leverage your broader network. “Every single night, I’d spend one or two hours sourcing on LinkedIn. I went through all my first and seconddegree connections, asking each of them for three talent intros. It was incessant, but as a result, almost all my hires were made through my wider network, despite having only worked for two years prior.”
2. Embrace your imposter syndrome. “Yes I’m young, but I’d just state this upfront and then focus on what I could offer. I don’t believe in puffing yourself up—good talent will see through it.”
3. Power-referencing. “To close candidates, I used what I call a ‘Preemptive 360.’ I’d take multiple references, and on every call, I’d ask, ‘If I have the chance to work with X, what’s the best way of ensuring their success?’ I’d dig in, and take copious notes. I’d then package this into detailed feedback on my offer call, including how we can put it into effect when they join. It blows candidates away, and I’ve had a 100% close rate using this approach.”
Matt Schulman, CEO & Founder
Inbound recruitment is closely tied to your overall brand strength, and is rarely a significant source of hires at this very early stage. The same thing applies to university recruiting. We’ll discuss both in more detail in the next section on build ing your recruiting engine.
Look at your overall team composition
Analyzing the hiring patterns of successful startups offers templates for how to approach teambuilding, which vary by business model.
On average, 4.5 of the first 10 hires are in technical roles, with 3 in GTM, and the remaining 2.5 split across G&A and Operations.
The best SaaS and B2C Apps startups focus more on technical roles, representing over half of their first 10 hires. By contrast, early hires in Marketplaces, especially in D2C companies, skew more heavily to Operations. Hiring into G&A roles is consistent across the four business models.
It makes sense to have more Technical hires in SaaS and B2C Apps, given the software orientation of these companies. Marketplaces and D2C need Operations hires early, reflecting the need to spin-up supply chains or to manage supply and demand dynamics.
TeamPlan—Explore our entire library of 210 highly-successful startups for more detailed insights into team structure, experience profiles, and hiring plans at this 0–10 headcount phase, and beyond.
SaaS businesses require the most engineer-heavy technical teams. In SaaS and B2C Apps, we also often see a designer at this early stage. It’s rare to find hires into both design and product roles, but it’s also uncommon to find neither role. In D2C, you’re more likely to see a brand designer hired before a product designer.
When it comes to early GTM hires, you’ll probably want to think about marketing first. It’s the most common role, accounting for nearly half (45%) of initial GTM hires across our analysis. Within business models, Marketplaces and D2C tend to make more early hires in GTM roles (3.0). This isn’t surprising, since marketplaces require the acquisition of both suppliers and end customers from the outset. D2C businesses skew heavily towards marketing, while SaaS startups are more likely to make an early sales hire.
Operations roles can be hard to clearly define, with many possible job titles. But ops roles are most common in D2C (2.5), followed by Marketplaces (2). The clearest ops function to optimize for in the early days is CX. In D2C, you also see early hiring for supply chain roles.
G&A hiring was clearest for a business operations or admin role, and possibly into either Talent or Finance.
Hire great people with high potential
It’s critical to maintain a really high hiring bar early on, as stressed by many of our interviewees. This will set the tone for all future hiring, which will ultimately determine your company’s success. Be aware of the roles and functions where you know how to assess candidates versus those where you’re flying blind. Where a role is outside your comfort zone, ask your investors or angels for help.
Over time I realized that what you
identify in interviews as a candidate’s
interpersonal strengths and weaknesses
tend to be amplified in reality when you
hire them. You get the very best version
of people when they are being interviewed,
as they are on their best behavior! So any
yellow flags on the interpersonal
side are probably red flags in reality.
Trust your gut.
Jason Citron, CEO & Co-Founder, Discord
It’s easy when you’re interviewing to project onto a candidate what you want and hope to see. Especially when you’re desperate to hire for a role.
Ara Mahdessian, CEO & Co-Founder, ServiceTitan
Ironically, the more your product is tapping into an underserved need, the more you can get away with a weaker initial team and still gain traction. But this can give you a false sense of security. At some point competitors will catch up, and if you haven’t embedded a high quality bar, they will overtake you.
Bryan Offutt, Index Ventures
Your hiring bar not only relates to skills and competencies, but also to the type of culture you want to nurture in your team. That means your practical early hiring decisions will run alongside very fuzzy criteria concerning attitude, diversity and values. It’s critical that your hiring filter explicitly includes qualitative criteria such as grit, mission alignment and values-fit. If you don’t pay careful attention to all these elements, you could end up with a group of individuals working at cross purposes rather than a high-performing team.
You could meet the five absolute best product managers that exist but even then only two might be right for the culture that you’re building.
Charlotte Howard, Index Ventures
Secure some early senior hires
There’s no perfect recipe in terms of seniority mix, but you want to avoid being overly skewed towards a young and inexperienced team, as this limits your ability to develop more junior talent and to extend your referral network.
I always had a picture in my mind of how I wanted to structure our engineering team. The end goal is a balance in terms of seniority, but which route do you take to get there? Junior hires are easier to find and hire than senior ones, so you could build a junior-heavy team quickly, but we did the opposite. Having senior people who can work more autonomously early on takes a huge load off you as a technical founder, allowing you to focus on other high leverage activities, like hiring. One of your goals as a leader is to accelerate your team and an advantage of the senior-heavy team is that when you do hire junior engineers, rather than throwing them into the deep end with less support, you now have experienced people in the seat who can mentor, coach and guide them. We had access to some exceptional senior people through our network, so this approach worked well for us.
Pete Hamilton, CTO & Co-Founder, incident.io
Pragmatism tends to take over— who can we hire now? But you want to rebalance this with thoughtfulness around sequencing between senior and junior hires, to optimize for leverage, skills and diversity.
Adam Ward, Founding Partner, Growth by Design Talent
If you’re a less experienced founding team, your access to experienced talent will be more limited. You won’t have as deep of a network, and it will be tougher to convince more senior candidates to work with you, unless you’ve got exceptional traction and high-caliber investors. In that case, your best approach may be to lean in hard to hiring an experienced VP Engineering, who can then help you make the transition through access to their network and credibility. This was what happened at Brex and Vise, for example.
Even so, the composition of your early team
will probably still reflect to some extent whether
you are a more or less experienced founding team.
This tendency is reflected in our analysis.
As experienced founders, our early hiring
drew heavily on our network, including
individuals we’d met in the military’s cyber
intelligence unit, which was also great
for trust. But we were clear about the risk
of creating a homogeneous environment
and expanded into other talent pools as
soon as we could.
Assaf Rappaport, CEO & Co-Founder, Wiz
We also found that, on average, one of the first 10 hires made by successful startups was at an executive level (C-suite or VP job title). Solo founders are, unsurprisingly, most likely to bring in early executives (1.5 out of the first 10), with the most common executive hire being a CTO (when there is no co-founding CTO). However, early executive hires are found across a broad range of roles. This partially reflects specific business needs, but it can also be the result of opportunistic introductions to candidates who are exceptional, available and willing to make the leap and join you when you’re really early. But you don’t want to overdo it. Generally, we advise you not to hire more than three executives by the time you reach 50 people.
We were introduced to Brad by an Index
Partner. He was a Senior Finance Leader
at Dropbox, which was highly relevant
to our space. I asked myself, ‘What would
I need to believe that he could achieve,
in order to make this a good hire?’ My
thesis was that if he could help us close
20 customers, it would be transformational.
This quantifiable framing helped me
to make the leap. He has now become our
COO, and co-owns our Sales and
Customer Success functions as well as
client operations.
Michelle Valentine, CEO & Co-Founder, Anrok
But avoid job title inflation
It can be tempting to offer candidates inflated
executive-grade job titles to help close them,
particularly when you can’t afford to pay high
salaries at this early stage. For example, you might
consider offering the CMO title to a hesitant
candidate with great credentials but only
six years of prior experience and limited team
management.
We estimated executive job title inflation by
comparing the prior experience of employees
with CXO titles at the 50 and 1,000 headcount
stages. This suggested that 30% of executives
hired during the “first 10” stage are the beneficiaries of job title inflation, having less than six
years of prior experience. This level of job title
inflation persisted through to 50 headcount,
although it then narrows as companies scale further. Adjusting for it, we find that 70% of startups hire between one and three true executives
by the time that headcount reaches 50.
Our strong advice is: Don’t offer inflated job
titles to your early hires. It sets the wrong expectations about the authority that these individuals
will have in the company. It can cause friction
with existing team members, fueling an unhealthy arms race as more people ask for bloated
job titles. It will also create problems down
the line, when you need to hire someone with
true executive credentials. Nobody responds well
to being demoted, even if it’s just a title. Instead,
offer early senior hires a more generic “Head
of” title, and generous equity compensation to
secure them.
Avoid too much loyalty to early hires
Your capacity to build a healthy and high-performing culture is related to your ability to retain
exceptional talent. For the first 10 team members, our data suggest you should expect them to
stay with you for a little less than four years (44
months). Across functional areas, tenure tends
to be shortest in GTM roles (3 years). Given that
tenure at later scaling stages drops to two years
(for 251–500), this is evidence that you should
expect higher commitment from your early hires.
However, the scaling journey for successful
companies is a long one. In high-growth, expect
five to six of your 10 initial hires to remain by the
50 headcount threshold, dropping to three by
250, and just two to three if you cross the 1,000
employee mark.
These findings have two implications. First, while
early hires will undoubtedly have a critical impact
on forging your early cultural norms, it’s not
essential that they remain as culture-carriers
through your scaling journey. You need to work
against the tendency to be too loyal to early team
members, as the company’s needs will usually
move on from what they can offer.
Letting go of early team members whose
skills or abilities no longer match with
the company’s needs can be emotionally
challenging for founders. But not letting
them go is unfair to the rest of your team,
if it’s holding up progress.
Jan Hammer, Index Ventures
Second, the data reinforce our belief at Index
that you should treat leavers graciously, which
includes generosity in terms of their stock options. This is particularly true for your earliest
hires, who took the biggest career risk (and often
big pay cuts) to join your company. They may or
may not stay with you long enough to fully vest
their option grant (which is usually four years),
but you should make it as easy as possible for
them to exercise what has vested, such as by extending their exercise period. This is also more
likely to make them motivated long-term ambassadors for your mission and talent brand.
When we became a unicorn, I got all 12 of
my first hires together for a celebratory
dinner. I wanted them to know how much
I appreciated them, even though some of
them were no longer working at Maven by
that point.
Kate Ryder, CEO & Founder, Maven
Don’t be seduced by sexy brands on a
resume
You should figure out your own GTM motion
before you focus on hiring individuals from
proven winners. Too many founders and investors believe that if you simply hire a bunch of
super experienced folks from a proven winner
(e.g. Stripe or Uber), any company can and will
figure out a way to scale rapidly.
We’re skeptical, and see a major risk for most
startups in following such advice. It will make
you waste time trying and failing to hire from
a narrow and overfished pool of candidates. If
you’re lucky enough to be able to afford overhiring in terms of experience, you’ll then face
the problem of having too many chiefs, plus disappointment and attrition, without furthering
business traction.
There’s a small group of well-known companies (e.g. YouTube, Facebook, WhatsApp, Supercell) which did manage to scale extremely fast
thanks to virality or low-friction distribution
channels. Occasionally a startup can still unlock
a highly innovative GTM motion or channel that
allows for a hyperspeed growth trajectory. But
this is rare, and most often it comes down to luck
combined with an openness to experimentation.
Neither of these factors is associated with hiring
from proven winners.
Most startups fail at hiring because they
overvalue experience, and undervalue
aptitude. They think that experience will
save them time. In reality, there’s a high
conceptual overlap between roles, but low
practical overlap.
Kipp Bodnar, CMO, Hubspot
While you’re hunting for GTM-fit, you need to
make different types of hires. This doesn’t mean
you don’t hire top people—it’s just that what
a top person looks like isn’t necessarily about
their pedigree or experience. It is definitely
about smarts. Grit and a growth mindset are more
important than fancy but established brand
names. Motivation and hunger matter too, especially for individuals who don’t have a shiny
resume, but who are highly aligned with the
mission and to whom you can offer a step-up role
with wider responsibilities than they may have
had previously. It’s best to build a blended team
that includes all these personas.
It’s a strong signal when your early hires
are awesome, even in non-core functions
such as BizOps or CX. Stripe got Harvard
grads into these roles, who were desperate
to join us, and these folks scaled super
well. Stripe also built a mythos around
the quality of their team, which sucked
in further top-tier talent.
Gabriel Hubert, Co-Founder, Dust and Product Lead (former), Alan
Having said this, once you have a proven GTM
motion and shift into execution mode, then you
can and should skew to hiring individuals with
proven experience and pedigree around that
motion. They will enable you to scale faster,
because they know what best-in-class looks like.
But make sure to keep some mavericks around,
who will continue to test and experiment, on
both the Product and GTM side.
Embrace big shifts in hiring as you scale
Adjust your hiring mix
Initial hiring tends to be slow and deliberate, as
you focus on crafting your MVP and driving
initial user engagement and proof points. But
once you’ve demonstrated sufficient signs of PMF
to raise a larger (Series A) round, the pace of
hiring tends to ramp up significantly.
Having top-tier investors like Index has
made hiring much easier. Especially as we
scaled globally, in regions where we lacked
recognition. Top candidates will follow
the VC’s brand more than your company’s.
Assaf Rappaport, CEO & Co-Founder, Wiz
The phase between 11–50 headcount marks the
beginning of hierarchy—that is, you will need
to appoint managers or team leads who aren’t
founders. In every organization, this transition
has a dramatic and unavoidable impact on internal communications, engagement and behavior.
Having hiring managers who are not founders
also requires multiple adjustments to your
approach if you are to maintain talent density
and values alignment.
Founders should still remain involved with
every single hire during this stage, and hiring
will still absorb up to a third of your time. Even
for hires who will not be your direct reports, one
of you should be interviewing final round candidates in order to validate the hiring bar and
values-fit, and to help bring candidates over the
line. Any instance where you reject a finalist candidate should lead to a detailed debrief with the
hiring manager, to help them calibrate and adjust
their assessment methods.
Your team will change not just in size but
also in composition as you scale. The overall
emphasis moves from “building a product” to
“building a business based on the product”. This
shift will be reflected in your team hiring mix at
each further stage of growth: expect a lower
proportion of hires into technical roles, while
G&A and Operations hiring picks up. However,
there are significant differences between business models.
TeamPlan—Explore our entire library
of 210 highly-successful startups
for more detailed insights into team
structure, experience profiles, and
hiring plans during this 11–50 headcount phase, and beyond.
Technical hiring starts and stays highest for pure software businesses (B2C Apps and SaaS). In more
operationally-intensive business models (marketplaces and D2C), technical hires drop to below one
quarter of the total when total headcount grows beyond 250.
GTM hiring ramps up with growth in SaaS companies—reflecting the build out of sales teams with
individual quotas that only slowly increase. However, GTM hiring drops slowly and steadily across
all the other business models, where marketing activity primarily drives growth. Marketing scales
through greater operational leverage—increasing external spend faster than the growth of the
internal team.
G&A hiring creeps up consistently across all business models, reflecting the balancing act between
the need to build stronger support functions whilst avoiding excessive overhead.
Operations hiring also increases across all business models, but the differences are dramatic. Operationally or logistically intensive companies (such as Marketplaces and D2C) skew strongly towards
operational team growth. This is somewhat necessary to manage massively expanding transactions/
shipments/support tickets, etc. However, you need to continuously look at innovation and automation
to reduce reliance on adding headcount.
Chapters 8,
9
and 10 provide much more detailed
guidance on how to scale each of your Technical,
GTM, G&A and Operations teams, and their
appropriate level of leadership by stage.
Shift towards more-and more stable-ICs
Your hiring mix will also shift towards an increasing proportion of ICs relative to managers.
This demonstrates managerial leverage—individual managers overseeing steadily larger teams.
But it also masks a richer distribution of specialist and senior ICs. The shift is summarized below,
and looks similar across functions and business
models.
Specialization is necessary with scale,
but it’s also a productivity killer. I expect
most of my team to be generalists, able
to take on other roles in the company.
And the more senior you are, the more
of a generalist you need to be too.
Harsh Sinha, CTO, Wise
Alongside the shift to hiring more ICs, you also
need to balance hiring purely ambitious superstars with ICs who are satisfied in their role. This
contrasts with your early hires, each of whom
you want to have the potential to progress and
develop rapidly. However, as you scale, roles become more defined, and you need continuity and
stability within them. Not everyone is suited
to continuous promotion and ever-increasing
responsibility, which is fortunate because you
will no longer be able to offer this.
Hiring ambitious rockstars into every role
flames out—there’s only one ball to pass
around! Teams need roles, and they also
need people happy in these roles.
David Lee, Chief Creative Officer, Squarespace
Build your recruiting engine
Bring in some “People people”
With the growth that follows early signs of
PMF, you simply can’t sustain the founder-led
recruiting approach. During the 11–50 headcount stage, you need to let other people on your
team source and assess candidates, including an
internal recruiter. Along with financial capital,
human capital is one of the two main ingredients that will allow you to scale. The only way
to access and make the most of it is to create a
recruiting machine within your company. The
key to maintaining excellence as you step up the
pace of hiring, and step back from owning it
yourself, is to create a People and Talent team
that provides a consistent, structured and robust
hiring process.
Your People and Talent team will ultimately
cover two core functions: talent acquisition (i. e.
“Talent”, covering recruitment and hiring), and
talent management (i. e. “People”, covering people/human resources issues). Hiring needs to be
your priority at this early stage, since attrition
should be low (less than 10%). This means you
should actively avoid implementing any complex
HR processes. Moreover, there’s a big difference
between a great recruiter and a great HR person,
and there are few individuals who excel at both.
So stay focused on the hiring side, without expecting your internal recruiter to be capable of
growing into a Head of People. You can instead
hire a separate VP or Director of People later on
to oversee recruiting and HR, when retention
and talent management become more pressing.
We recommend focusing on a Head of Talent
or an experienced internal recruiter (five to seven
years of prior experience) as your first hire into
this area. The rule of thumb for triggering this
hire is that you should have a plan (and funding)
to hire more than 20 people over the following
12 months, with a sustained pace of scaling
expected beyond that.
In practice, this usually means soon after
you’ve closed your Series A (or Seed+) funding
round. If you fail to make this hire and leave
recruitment to line managers, you risk missing
critical product and GTM milestones, simply
because you lack the human capital to deliver
them. Alternatively, you could end up relying too
heavily on agencies, which ultimately is not a
scalable approach.
The objective of this first recruiter hire is to
help the rest of the team spend their time wisely,
only involving themselves in the steps where they
can make a big impact, such as conducting technical interviews, helping to close a hot hire, or
initial outreach to passive senior candidates. Your
internal recruiter should also be able to set up a
stronger overall hiring process by executing on:
Talent branding
Applicant tracking system (ATS)
implementation
Enforcing consistent job descriptions
Defining and monitoring hiring processes
Training interviewers
Streamlining the offer process
Crafting compensation offers
Coordinating the use of agencies
Hiring a second, more junior, recruiter
They should also be able to cover some of your
early people-related tasks, many of which are
adjacent to recruiting anyway, such as crafting
offers and offer letters for candidates and establishing basic onboarding steps for all new joiners.
Depending on the individual’s preferences and
skills, they may also be able to handle other
HR-related issues. Alternatively, if you have the
metrics and funding to be confident of growing
beyond a one year horizon, you may opt to hire
a more experienced Head of People with a strong
recruiting background, who can then find a more
junior recruiter to report to them.
In our analysis, highly successful companies
had either hired one to two recruiters by this
stage, or, equally likely, they had one experienced
People Lead plus (sometimes) a recruiter. Your
internal recruiter should report directly to the
CEO, or alternatively to the COO.
Reformist thinking at Cockroach Labs—hiring a Chief People Officer super early
I already had 10 years of recruiting and
HR experience at Google, GV and Yext
when I joined Cockroach Labs as employee #12.
I had worked closely at Google with
Spencer and Peter, the co-founders of
Cockroach Labs. When they said they
were going to start their own company,
I knew it would be something special,
so when they asked me for in-house
recruiter suggestions, I put my own hand
up. I even coached them on how to conduct their interview with me!
As second-time founders, Spencer
and Peter had a strong sense of the type
of company they wanted to build, writing a five-point “cultural manifesto”
before they had even incorporated. My
job was to bring this to life.
Hiring a highly experienced People
and Recruiting Leader this early is
unusual, but it signals just how big an
investment you intend to make in your
people. Your early hires determine your
ability to hire A+ players later on, so getting it right is paramount. That was the
bet they took with me.
I’ve enjoyed every single day of my
8+ years working here.
Lindsay Grenawalt, Chief People Officer
It’s better to hire an internal recruiter with previous high-growth startup experience, as opposed
to an agency or bigger company background. This
ensures they appreciate the difference between
working at a larger company with an established
brand, versus somebody who knows how to sell
a company to passive candidates who may never
have heard of it. Not to mention that they’ll be
familiar with joining a somewhat chaotic setup
with little structure or process.
You want someone who’s totally comfortable
with being hands-on and working alone for at
least the first year. Other must-haves include
direct experience of technical hiring, and of implementing good recruiting processes, systems
and reporting. Experience of international hiring, senior hiring, and building and managing
a recruiting team are nice-to-haves.
Areas to explore when hiring your first
Head of Talent or experienced recruiter
Beyond values-alignment and hunger/passion
Volume hiring experience in a fast-growth environment
Experience and interest beyond pure
recruiting—e.g. employer branding,
referral programs, interview training
for hiring managers
ATS implementation
Hiring for diversity
Interview scheduling and general
admin efficiency
Auditing and revamping current
recruitment processes
Technical hiring experience—dig
into technical hiring chops, since these
are the toughest roles to fill
Senior hiring experience—Head/
Director level? VP/CXO level?
Experience building and/or managing a Talent Acquisition (TA) team
International hiring experience
Compensation familiarity—cash and
options/equity
Hiring analytics—grasp, appreciation, interest?
HR/PeopleOps experience, beyond
pure recruiting—e.g. onboarding, or
managing visa applications
If a candidate is less experienced,
their potential to grow and likely
trajectory
If a candidate is more experienced,
their willingness to go back to a
frontline role, and their desire/capability to take on the broader
People role
Your first internal recruiter will carry
your employer brand. They need to lead
with storytelling and brand to engage
with the right talent, rather than narrowly
focusing on ‘filling roles’.
Sandra Schwarzer, Index Ventures
Even if you’ve found an experienced internal
recruiter, they’ll need to adjust their hiring lens
to your specific values, mission, quality bar and
skill-sets. Calibrating expectations is therefore
essential. Great recruiters can deliver reality-checks to hiring managers about what experience-profile is viable to pursue and close with
candidates, given your brand and budget limitations. You’ll need to take calculated gambles on
junior hires where necessary, while raising focus
and budget to land senior hires where it really
matters. Watch out for inexperienced hiring
managers being nervous about hiring individuals
more experienced or older than they are.
My favorite metric at the early stage is the
pass-through rate, i. e. what proportion
of candidates who pass the recruiter’s first
screen then make it through the hiring
manager’s first interview. This focuses
attention on recruiter and hiring manager
calibration, which is super important.
It shows up whether the briefing around
scope and spec has been effective. Whether
candidates close out after this point is of
course important, but involves many other
factors which are trickier to control.
The calibration metric is the fundamental
building block for success.
Alex Duell, VP People (former), Cutover
An alternative approach to hiring an in-house
recruiter is to work with a contract recruiter or
recruitment process outsourcing (RPO) company.
These are external recruiters who embed with
your team on-site over a six-to-12 month period,
and are paid a mixture of retainer and percentage
fee per hire. Working with an RPO offers immediate access to an assured quality of recruiter,
who gets to know your team and your culture
more intimately than a traditional agency. This
can make sense if you urgently need to get on
with making two to three hires per month, but
are uncertain of your hiring velocity in six to 12
months’ time.
Your recruiting team will continue to grow
as hiring volumes accelerate, with People teams
scaling in line with overall headcount. For more
information on the structure and composition
of these teams at scale, see Chapter 10.
Invest in your talent brand and candidate
experience
Your “talent brand” is the message you broadcast
into the world about what your company stands
for and what it’s like to work for you. Activities
that enhance how your product is perceived in
the market will therefore enhance your talent
brand, creating a flywheel for attracting good
candidates.
However, the reality is that your product
brand will be almost unknown in the early days,
and you’ll have to lean on creating a great candidate experience. Startup life is chaotic, but you
won’t get A-grade candidates over the line if they
don’t feel they’re being treated as special. You
also risk receiving poor Glassdoor reviews, which
more than 50% of candidates will check before
deciding whether to interview with you. The
basics really matter here—responding promptly
if candidates contact you, showing up on time
for interviews, and being warm and polite.
Beyond this, make sure your communication and
feedback, including to unsuccessful candidates,
is rapid and clear.
Like it or not, every candidate you
interview will impact your company’s
reputation. And every candidate can
be a source of valuable insight on how
to improve the candidate experience.
So promptly seek candidate feedback on
the interview process. If the news is
bad, wouldn’t you rather get it directly
from the candidate in a form you
can address rather than from a negative
Glassdoor review?
One of our portfolio companies asks all
new employees 30 days in, ‘To what extent
is the job what you expected it to be?’
This gives a great read on your recruiting
process to see where you might be over
or under selling the opportunity.
Zabie Elmgren, Index Ventures
Personalized and special touches can take you
into the “exceptional” category. Remember that
this level of effort absorbs time, and won’t happen unless you as the founder set the bar and
emphasize its importance.
One of the best examples of candidate
experience I’ve seen is a candidate who
mentioned during an interview that they
loved board games. When they got the
offer, it came in a package with an unusual
board game. The candidate was thrilled.
While this approach may not be scalable, it
demonstrates the value of getting to know
the ‘person’ and not just the ‘professional’.
For example, if a candidate enjoys the outdoors, go on a hike together. And so on.
It makes a huge difference when you’re an
otherwise unknown entity.
Sandra Schwarzer, Index Ventures
Must-do early steps for talent branding also
include setting up clear and up-to-date careers
pages with consistent messaging, across your
own site plus on LinkedIn, Glassdoor, etc. Also
establish a standard approach to all of your
job descriptions, including your company
description.
Fundraising announcements offer a parallel
opportunity to appeal to talent, demonstrating
that you are in growth mode and giving you
a chance to highlight the skills that you are looking for.
Every fundraise, I do a blog post
showcasing where we’ve come from
and where we’re going, to show the
continuity in mission and vision since
day one and illustrate the exciting
evolution of our market.
Kate Ryder, CEO & Founder, Maven
Early talent branding tips from Growth by Design Talent
Is your mission visible on your website, and on your LinkedIn page and profile?
Is your product proposition clear?
Is it clear that candidates can apply
through links under the job
description?
Does your whole team show they
work here on their LinkedIn profiles?
With a consistent description and
pictures?
Have your advisors and investors
listed you on their LinkedIn profiles?
Do you have your advisors and
investors visible on your website?
Do you have Crunchbase and
AngelList profiles?
Adam Ward, Founding Partner
As you scale past 125 headcount with a larger
volume and variety of roles being hired, and
greater bandwidth in your recruiting team, you
should enrich your careers site. The aim is to offer
potential candidates more insight into what it’s
like to work for your company in general, and
also in specific teams or roles. Careers sites should
highlight your company’s mission and values,
bringing them to life through storytelling copy
and video testimonials. Separate careers pages
can then be created for different functions, allowing you to showcase the opportunities on offer
in more depth and detail, and how these tie back
to your mission. A dedicated engineering blog
showcasing the technical challenges your team
faces and the solutions that you have applied can
likewise enhance your technical talent brand.
This collateral can be repurposed for use on
external career sites such as LinkedIn and Glassdoor, for career events that you attend or host,
and to apply for prestigious People awards (for
example—Great Places to Work) to further burnish your talent brand.
Candidate experience is still an important
element in your talent brand, and by this scale
you will have sufficient data to track it more rigorously. Implement a candidate Net Promoter
Score (NPS) process, systematically messaging
all candidates who have gone through your
recruiting process with a request to provide feedback and an NPS score—the likelihood that they
would recommend the company to a friend or
colleague. Given the vast majority of these will
constitute disappointed candidates, an NPS
which is above zero is very healthy. Likewise,
you should closely monitor Glassdoor reviews,
and address any negative feedback promptly.
By this stage, you’ll need to be bringing in
specialists, many of whom will come from larger
companies. You’ll therefore need to broaden and
adjust your own employee benefits to bring them
in line—things like health insurance, parental
leave and enhanced pensions. This will simultaneously strengthen your ability to hire a more
diverse workforce by providing a positive signal
to candidates about your overall culture. These
changes will also be important in retaining
your existing talent. Overall, they mark a shift
in emphasis from focusing on your talent brand
to a broader consideration of your EVP—your
holistic promise or offer to candidates in exchange for their time, skills and experience.
You need to reposition your EVP and
your talent brand at each stage to attract
different talent profiles.
Nadia Singer, Chief People Officer, Figma
Success at boosting your talent brand and EVP
will be a force-multiplier for attracting talent in
the first place, but also for keeping candidates
excited through your assessment process, and
improving your close rate when you extend offers.
Broaden your sourcing efforts
Candidates can come to you in one of three ways:
Referrals—from employees and your wider
network (investors, angels, advisors, etc)
Outbound—sourced candidates (via your
internal team or external agencies)
Inbound—candidates who apply directly
for open roles that you promote
There’s a saying in Silicon Valley that as you scale
your company, you end up “hiring by thirds”
between these three sources.
Referrals
If you’re generating amazing employee referrals,
it’s only a good thing. You can expect up to onehalf of hires to come from referrals between
11–50 headcount, dropping to a third as you scale.
It’s crucial as your team expands that you keep
widening your talent pool, to drive diversity and
to deepen your collective referral network.
Sustaining successful referrals requires formalizing a referral program, with a more systematic approach to drawing out recommendations
and introductions from your team. This may
include monetary incentives, but the most important thing is to design and manage your referral program effectively. If people feel that their
referrals are falling into a “black box”, or that
they weren’t paid when they should have been,
it can cause a lot of damage. Referrers should
also be recognized for their support.
Ideas for enhancing quality and volume
of referrals
During onboarding, ask all new
hires, “Who have you worked with in
the past who you think is a 10/10?”
Don’t tie this to specific roles that
you’re looking for now—you simply
want a quality bar for potential
pipeline candidates.
Score all referrals using a combina tion of closeness, recency and
conviction.
Introduce a referral bonus for
candidates who end up joining the
company. This could be extended (for
challenging or senior roles) to candi dates who make it through to a final
round interview, or who have a diverse
background.
Maintain a centralized database of
all referrals received, tagged by role,
source and referral score.
Ensure a stellar candidate experience for your referred candidates—this
will keep more referrals coming.
Fast-track referred candidates with
a high score directly to an in-person
interview, for improved efficiency and
candidate experience.
Set a KPI and/or incentive around
referrals for your recruitment team.
Referrals are the lifeblood of early
businesses, generating 50%+ of hires.
Kira Busman, Index Ventures (former Recruiting Lead, Datadog)
We introduced $15 k referral bonuses
very early on. We were willing to spend
$25–30 k on an agency, but referrals
lead to many of our strongest hires.
Cheaper, more efficient and better results—
it was an obvious decision to us.
Pete Hamilton, CTO & Co-Founder, incident.io
Outbound
As you hire into new and more specialized roles
and functions, you’ll rely more on outbound
sourcing. Between 11–50 headcount, outbound
will typically make up the other half of your hires
(next to referrals). This will increase to twothirds between 51–250, before dropping back
below one-half as your inbound candidate channel ramps up. The effectiveness of outbound
sourcing is closely tied to the skills of your
recruitment team to uncover relevant candidates
and to pitch your company. It is also multiplied
by the strength of your talent brand, by increasing how receptive and engaged candidates will
be when you approach them.
Inbound
Organic inbound applications from candidates
are the direct result of a higher-profile product
brand, and more active steps to convert this into
a strong talent brand.
Inbound applications are usually something
that startups focus on cultivating later in their
scaling journey, once they’re more established.
However, some startups spot an opportunity to
activate this recruitment channel earlier on, especially for technical roles. They might be consumer
apps that rapidly generate a wide reach and connect with the zeitgeist. Conversely, they could
be more specialized developer-focused tools or
open-source projects, for which a technical audience has a natural affinity. You might blog or
post about engineering challenges to lean into
these opportunities and drive inbound interest.
Inbound candidates will be of more variable
quality than either referrals or outbound sourcing. They require plenty of filtering, but allow
you to widen your candidate pools further.
Creating an inbound talent funnel-two examples
Our first 10 hires all came from our network as founders. But from early on, we
were super vocal on social channels and
through the media about remote working. For example, we made our company
handbook public. This drove more and
more inbound applications from mission-aligned individuals. They were almost
all passive candidates who had made an
exception for us.
We hired a recruiter (who later became our first People Leader), and one
of her main tasks was to help us filter
and manage this inbound volume. We
wrote very clear job descriptions and
were clear on what we wanted, so filtering was a matter of methodically applying these criteria.
Job van der Voort, CEO and Co-Founder of Remote
We were successful at optimizing inbound
right from the start. We relentlessly
blogged and posted about the internal
workings of our product team and what
we were building, as well as creating a public changelog, which we publish to every
single week. This really helped with
self-selection and filtering, allowing candidates to map their motives to our goals
and how we work even before applying.
You should plant these seeds early
on. While we made a couple of very early
hires this way, the ROI has mostly been
from these efforts compounding over
time. We are now 70 strong, and we still
repeatedly hear from folks who have
been aware of us from the very beginning,
but were just waiting for their right
moment to apply.
Pete Hamilton, CTO & Co-Founder, incident.io
Prepare to hire people with more
experience than you
When your team is small, you are filtering for
hires who are comfortable with ambiguity and
in the near absence of process. But as you achieve
PMF and then GTM-fit, you need specialists out
of larger companies who can implement and
manage processes at scale, and you need to adjust
your hiring accordingly. You also need to get
comfortable with hiring folks who are much more
senior and experienced than you are, respecting
what they have to bring but not being afraid to
challenge them.
Many of the best founders learn everything from first principles. The downside
is that they lack pattern recognition,
and evaluate candidates relative to their
own knowledge of an area. So if they’re
engineering experts, their hiring bar
for engineers is incredible. But in other
areas—Sales, Marketing, People—it
can be ludicrously low. You actually need
to hire the best people into the areas that
you’re least familiar with or excited about.
So calibrating your bar is everything.
Danny Rimer, Index Ventures
Use final round founder interviews to keep
raising the bar
While founders need to step back from the day-to-day of hiring, they should continue to conduct
final-round interviews for all new hires through
to at least 100 total headcount. This serves two
important purposes:
Ensuring you maintain control over your
hiring bar, both for values-fit and for
technical competency.
Providing opportunities to feedback to
hiring managers when they bring forward
candidates who don’t meet your bar. It’s a
red flag if hiring managers fail to step up
candidate quality following clear and
repeated feedback.
Personio—Tips for founders on
conducting values-fit interviews
Do them for everybody before
extending an offer up to 500 head count, and keep doing them after that
for all senior ICs and managers.
“In the early days they took 60
minutes, then I got it down to 30
minutes, and now it’s just 15 minutes.”
Run them in two hour batches
back-to-back, as regularly as needed
(e.g. monthly or bi-monthly).
Use a template form to make them as
efficient as possible (Hanno uses
Personio’s own HR software for this).
Questions asked:
| “Why have you taken the decisions you have in each step of your
career?”
| “Imagine you have a blank sheet
of paper: what are you looking for
in your next role?”
| “Describe the role you’re now
applying for, as if I didn’t have any
idea what it was?”
| “What will you bring to the role
that will enable your success? And
what do you need to learn?”
| “What’s an example of your
collaboration with others?”
Complete the form in real time,
including your hire/no-hire decision.
Take into account how long it has
taken to make the hire, and be tougher
when you’ve been looking for longer
to counteract urgency bias.
On a few occasions, accept that
you’ll be in heavy-sell mode, where
you’re convinced that you have an
incredible candidate.
I analyze these interviews periodically.
I am rarely neutral, and still say a ‘hard no’
to 35–40% of candidates. Basically,
if you’re uncertain, it’s a no.
Hanno Renner, Co-Founder & CEO
As you scale past 100 headcount in high-growth,
it will become impossible for you as founder(s)
to keep conducting final round interviews for
every role. You’ll need to empower certain hiring
managers to make the final call on hiring decisions without your input. Only do this for hiring
managers who have proven their hiring bar
matches your own. This will start with junior
roles in your larger teams, and will gradually
widen to other entry-level or early career hires
across all functions. You should continue to conduct final round interviews for any senior hires,
all the way through to reaching IPO scale.
We still annually revisit our hiring
process and filters. For example, tightening
our scorecards from general attributes
to role-specific ones, and refining what we
want to achieve in each interview stage.
Lindsay Grenawalt, Chief People Officer, Cockroach Labs
Your Talent team should oversee both the interviewer and hiring manager training and qualification process. However, it needs executive
oversight, which means you—unless and until
you have a strategic People Leader or COO to
whom you can delegate it. Founders can stay
closely involved in various ways:
I track who interviewed every hire and
retrospectively look at the retention
and success of the hires they made. I use
this to decide who to allow to make
final calls on hiring decisions.
Eléonore Crespo, co-CEO & Co-Founder, Pigment
I interviewed everyone we hired through
100 headcount, and continued beyond
this for EPD candidates in particular. At
200 people, I’m still actively involved in
hiring every product manager and
senior engineer.
Matt Schulman, CEO & Founder, Pave
In the early days, you get to spend an hour,
and often much more, with each candidate.
You have time to build conviction. As you
grow, your time as a founder to interview
for the wider team drops to 30 minutes or
even 15 minutes. It becomes really hard
to make a proper assessment. So I am clear
to my team that my point of view should
not be overly weighted. Concerns that I
flag need to be very specific, and should
cause them to pause and double-check.
But they shouldn’t always be treated as
an instant veto.
Michelle Valentine, CEO & Co-Founder, Anrok
When we got over 50 people, I gradually
stepped away from hiring. Particularly
for our largest teams: Engineering and CX.
We were very clear on our culture, and
the type of people we wanted. So my early
hires knew this. For high-impact roles,
or to help with closing, I would still
interview, but it took up much less of
my time overall. Expressing who we want
versus don’t want is critical—writing
it down clearly, sharing internally, and
keeping up with this messaging.
Job van der Voort, CEO & Co-Founder, Remote
We didn’t spend enough time designing
a process to ensure the hiring bar was kept
high. We assumed that the execs we’d
hired would come up with something better
than us, and we stepped back from hiring.
That was a big mistake. We hired too many
people, with plenty of mis-hires.
Anonymous
Recruit graduates
Graduate entry-level recruits can be a great asset
to your company and provide exceptional talent.
This is especially helpful for technical roles.
Graduate recruits are also great for:
Diversity—Younger cohorts of computer
science grads tend to be more diverse.
Cost—Junior engineers are cheaper.
Leverage—Junior engineers can get excited
about work that more senior folks might
not want to do.
Career development—Provides more
experienced engineers with mentoring
opportunities and a path towards
management roles.
Alignment—Homegrown talent carries
more of your company DNA. A deeper
understanding of your products,
customers, systems, values, mission
and colleagues.
It’s worth prioritizing university recruiting when
you’re struggling to find the right technical talent.
It can be a particular advantage if you’re located
in a major city or tech hub—your location will
be a draw for graduates and interns, and you’re
likely to face more intense competition for experienced talent anyway.
If you’re ambitious, you’ve got to think
about talent with a three to five year
horizon. If you’re focused exclusively
on immediate hiring needs, you’ll forever
be talking to lower quality candidates.
You need to think about a scalable
long-term pipeline, and that means
bringing in junior people.
Simon Lambert, CTO, Birdie
If and when you do introduce a university recruiting program, our advice would be to:
Recruit in September/October for start
dates in May/June.
Target students who tried big tech
internships, but got bored.
Focus on a single university where you
have links as a founding team (e.g.
MongoDB focused on Brown, and
Dropbox on MIT).
Know where you stand when considering
candidates who would require visas to
work for you permanently.
Aim to become the coolest brand on campus.
What do you need to do to stand out?
Offer to do a guest lecture if you are close
to one of the professors, or to give a talk
for the most relevant club or society.
Platforms such as Handshake are also making it
easier for startups to access university talent,
reducing the traditional barriers to entry.
University recruiting is vital for highgrowth companies. When I joined Airbnb,
our engineering team was 60 strong, and
we already had dedicated UR support. You might expect
it to be a seasonal activity, but it’s actually
a year-round effort. We focused on
partnerships with universities, engaging
with events like the Grace Hopper
conference, and building our internship
program, which involved a strong return
offer process. You’ve also got to build
your on-campus brand.
You can only introduce and ramp up graduate
recruiting in line with your ability to offer mentorship and close coaching. This means having
experienced engineers who are willing and able
to make time. They can be encouraged to do this
by explicitly using internship programs as a way
of testing and improving their people management skills. Start small with two interns (so they
can support each other), and define a standalone
project for them, overseen by a single experienced
engineer as mentor. The emphasis should be
on creating a positive intern experience. The
following year you can step it up, involving more
mentors and interns, with a clear intent and plan
for converting successful interns into permanent
hires afterward.
Be systematic about assessment
Alongside a solid recruiting engine to underpin
your overall hiring capacity and capability, you
need to be systematic about how you judge candidates’ suitability for each individual role.
Use a variety of candidate assessment
methods
Write a rich but concise job description, including an evaluation framework:
What competencies are must-have or
nice-to-have?
What personal attributes are must-have or
nice-to-have?
What prior experience is nice-to-have?
(We advise that you never apply prior
experience as a must-have criteria, to keep
your candidate pool wide)
What is the relative weight of these
different factors?
What is the expected and budgeted
compensation range?
The job description is used to source pre-qualified candidates through outbound channels. It
should also be used to qualify applicants from
referral and inbound channels.
Screening interviews should be conducted
remotely with all qualified applicants by pre-approved interviewers, although a founder should
conduct them for more senior and passive candidates. You might also skip the screening step
for referred candidates with a very high referral
score to accelerate them through your process.
To maintain diversity among the people
you’re hiring, your recruiter should set
expectations about the diversity pool for
a given role, by reviewing a sample of
candidates through a LinkedIn search, for
example. Realistic diversity targets can
then be set, and trade-offs made between
increasing the diversity slate versus the
likely speed or difficulty of closing the hire.
Steady and incremental sustained targets
for your pipeline can be more effective
than focusing attention on a couple of
specific hires.
Alex Duell, VP People (former), Cutover
The primary aim of screening is to minimize false
negatives (i. e. wrongly rejecting credible candidates), as this can severely shrink your pipeline
and reduce diversity. The secondary aim is to
reduce the interview burden for the rest of the
team by filtering out ill-suited candidates who
don’t meet the minimum requirements or who
don’t align with the company’s values.
Some pointers for things to find out in a
screening interview:
Test for dealbreakers early—Ask some version
of the most important questions in the first
screen.
Vet for must-have competencies early—Ensure
that all on-site candidates meet the
minimum qualifications.
²
Ensure that any questions
you ask around compensation are within legal
constraints, and accept
that some candidates may
prefer not to answer them.
For candidates who progress past screening to
an interview with the hiring manager, ensure
that every candidate is asked the same set of core
questions, so that you can directly compare their
answers and evaluate all candidates fairly.
Craft questions based on your desired
competencies and behaviors, systematically
addressing each one.
Include situational questions, where you
can really dig into the contribution made
or the behavior exhibited in a relevant
scenario.
For candidates who make it through the
hiring manager assessment, ask each
additional interviewer to focus on specific
(and different) aspects of the role, so that
you can collectively cover more ground.
Wherever possible, mirror on-the-job work
in assessments.
Don’t conduct more than six interviews per candidate. Research shows that after five interviews,
there are diminishing returns on the outcome.
Candidates can come across really well
by preparing for a certain set of predictable
questions. You need to get past this and
test whether they were deeply involved in
their prior roles. So follow up with
non-obvious questions such as, ‘Why do
you say that?’ or by asking for specific
examples.
Michelle Valentine, CEO & Co-Founder, Anrok
Test for values alignment
It doesn’t matter how excellent a candidate is at
what they do. If they’re not at home in the culture
you’re creating, this will become a problem. Some
formal questions to test this might include:
When you’ve worked at your best, what did
your manager and the organization do, and
what did it feel like?
Discuss a situation where a colleague or
stakeholder did something that you
disagreed with from a values perspective.
What did you do about it?
You should also convert each of your company
values into one to three competencies, and translate each of these into two to three specific, role-relevant behaviors to assess during interviews.
We have developed a set of questions to
probe for fit with our core values of
humility, empathy, drive and collaboration.
For example, how do they answer a question
about areas where they could improve?
There’s a case study for every role too,
and if candidates clearly spent only an hour
preparing, they’re out immediately.
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
Successful candidates should be aligned on company values, plus be culturally “additive”—they
should bring something novel or different in
terms of their experience, background, or way
of approaching problems.
Involve more team members in hiring
Select and segment your interviewers thoughtfully upfront for each role to be hired. Which
individuals will need to work most closely with
them, both within and across functional teams?
Who has a veto versus not? This prevents blockers and friction later. As much as possible, include
relevant team members upfront in specifying the
role and deciding how you will assess candidates,
so that they trust the process and the ultimate
decision. For early senior hires where compensation could become an issue, also involve investors early.
The sophistication of this process will be
limited by how new so much of your team is. It’s
not feasible to conduct countless interviews,
assessment hoops and referencing when you only
have a handful of individuals who are sufficiently
onboarded to do any of them. You need to be
systematic but realistic, and to create a mechanism for widening the pool of team members
you trust to assess candidates.
Evolution of the technical hiring process
at incident.io
We hire approximately 1% of those who
apply, which is an indication of our hiring
bar. This is enforced by our Talent team,
who apply a rigorous first-filter on technical roles. This focuses on some semi-formalized engineering values. For example,
we expect every engineer to be happy
jumping on customer calls, and therefore
to be great communicators. We try to keep
our fundamental tools “boring”, but use
them to create amazing experiences, a
great filter for candidates who will trend
towards over-complicating things. We aim
to respond super quickly to feedback
rather than putting everything on a backlog, often turning around great ideas in
hours. So we put a lot of emphasis on judgment, taste and intuition over process.
In terms of engineering team involvement in hiring, the first rule is that being
good at your job is not the same as being
good at hiring folks who will be good at
your job. There are good and bad interviewers—that’s just how it is. We never
want candidates having a poor experience or saying, “My interviewer didn’t
really make an effort,” and we want
clear, insightful and objective interview
feedback wherever possible.
Interviewing is a privilege, and needs
to be taken seriously. Don’t set any expectation that everyone needs to get
involved. Lots of companies end up making too many people interviewers. Even
if picked carefully, without sufficient
training, they will make mistakes, and
your hiring will suffer both false positives (hiring bar set too low = mishiring)
and false negatives (hiring bar set too
high = missed opportunities).
We run a very structured pool for interviewers in our technical team—what
we call hiring pods. You need to be approved to join an interviewer pod, which
is for a specific stage of the process rather
than the whole thing. We distinguish between pods for first-screens versus coding
challenges versus on-site interviews (system design) versus culture interviews
(which is very limited beyond the founders). We optimize for depth of experience
at each of these pods, and limit approval
for any given individual to two of these
pods. For each pod, we have a pool of employees—approved, ramping and pending.
We have a target for building each pod to
X individuals, based on working backwards from our hiring plan for how many
we are going to need. Getting approved
for a pod involves a minimum of three to
four shadowed interviews, plus three to
four reverse-shadowed, with feedback
after each one from an already ramped
interviewer. Critically, we only allow one
person ramping per pod at any given point
in time. This ensures training density,
over a two to three week timeframe. By
the end of this ramping period, interviewers have seen a wide range of candidates
and are much better calibrated. It’s shortterm pain for long-term gain.
This approach also makes the workload manageable across the team. It can
definitely limit hiring pace, but this is
marginal, and it’s critical to stick with it.
The mechanics of the pods are managed
by our Talent team and managers monitor
the interview load and the pending/ramping cohorts.
Internally, we’re clear that both shipping and hiring are equally valuable, but
that hiring isn’t mandatory, which allows
individuals to self-select on whether they
see interviewing as a “tax” or as a “privilege”. Interviewing is also limited to
employees who’ve been with us for at least
three to six months. This means individuals have time to understand the expectations of the team, decide if they want to
be involved in hiring and know what to
expect of the process before they engage.
Pete Hamilton, Co-Founder and CTO
Your aim should be to extend your pool of approved interviewers to seven or eight in total by
the time you hit 50 headcount. This pool will
need to grow further as you scale. You should
also introduce specific “bar raiser interviews”
by identifying and training team members by
function who exemplify technical excellence in
their area.
Ensure each interviewer in the panel knows
their focus areas, and that these always reference
back to the competencies and qualifications for
the role. Ideally select a panel to reflect the diversity at your company, though be mindful not to
tax under-represented employees with more
interviews than others.
As interviews conclude, collect blind feedback from each interviewer as soon as possible,
using a standard template:
1–2 sentence summary—i. e. pros/cons,
strengths/weaknesses
My focus areas were _______ and the
evidence I got was _______.
My recommendation is: _______. Use a
consistent scoring system, such as the
four-point “strong hire, weak hire, weak
no-hire, strong no-hire”.
The open questions I still have are _______.
A “strong no-hire” from an experienced and
approved interviewer should lead to an automatic
rejection of the candidate. A “weak no-hire” rating should prompt a detailed discussion about
the areas of concern for the hiring manager to
consider, and likewise for a “strong no-hire” from
a less experienced interviewer.
Anti-sell
Anti-selling is an approach where you actively
try to put off a candidate from joining you, pointing out the various risks and downsides that it
would involve relative to other opportunities. It
sounds self-destructive. But the worst possible
outcome is to go through the entire process of
interviewing, closing and onboarding a new hire,
only to find out shortly afterward that their
motivations and aspirations aren’t aligned
with the company or the role. Just don’t introduce anti-selling into the process before you’re
confident that a candidate is bought-in and
excited about the opportunity.
I truly feel that Wiz is an amazing place
to work and learn, but I encourage
candidates to explore other options. I’m
confident that they’ll end up even more
convinced that Wiz is where they should
come. I don’t want them to come with
doubts. It’s much better that they discover
any before they join us.
Assaf Rappaport, CEO & Co-Founder, Wiz
Take references but don’t
overly rely on them
References are key inputs for decision-making
when done effectively, but they shouldn’t crowd
out the evidence you’ve already gathered internally through interviews:
Agree on references with the candidate
rather than taking them informally, to
avoid compromising confidentiality.
This is an opportunity to get evidence, but
it is just one data point.
Hiring managers should own reference
taking, not the recruiter.
Establish the quality of the referee—how
long have they known the candidate, in
what capacity, and how recently have they
worked together?
Select multiple referees reflecting differing
relationships with the candidate: former
manager, direct report or peer.
Ask targeted questions based on the role
requirements.
Ask questions based on any uncertainties
or inconsistencies from the interviews.
This is also an opportunity for the hiring
manager to determine how best to
motivate the new hire, and to better
understand what will enable the candidate
to flourish. You can position the
conversation with the referee as an
opportunity to learn how to best onboard
the candidate, which helps to promote an
open dialogue.
Leave a good impression on the referee.
They are likely to give feedback to the
candidate too, so you want them singing
your praises if you extend an offer.
Three references is optimal, so that you
can triangulate the feedback you receive.
This might be tricky for junior hires with
little work experience, and conversely
for executive hires, you might take more
than three.
Consistency around specific areas of
positive feedback offered for a candidate
is a strong positive signal. Similarly,
consistently voiced concerns around
specific areas are a yellow flag. Inconsistent
feedback is worth addressing directly
with the candidate.
Questions to get the most out of
references
Can you describe your working
relationship with Person X—how
closely you worked together, for how
long, etc?
| Validate the information the
candidate gave you.
Person X told me about the work
they did on project Y while working
with you. Can you tell me more about
the role they took in this project, and
who else was involved?
| Validate claims by the candidate
around the scope of their responsi bility on a key project, and the
impact they had on it.
Is Person X likely to miss something
previously in their remit, which isn’t
part of the role (For example, managing
a large team)? How can I best make up
for this loss, if Person X joins my team?
| What you offer won’t entirely
mirror the role(s) they have had
before. Will they miss it in terms of
personal fulfillment? Will they
struggle to execute without it?
The role I’m discussing with Person
X includes element Y, which I don’t
think they’ve had to do before. How
easily do you think they will get up to
speed, and can you suggest anything
that would help them specifically,
given their learning style?
| Gauge how adaptable they are,
and how you can effectively
onboard them
Did you have any reservations about
Person X taking this job, when they
explained this role and our company to
you? What were they?
| Ask a forcing question to draw
out the referee’s own view on
whether they think this is a good fit
between person and role, which can
be enlightening.
What was Person X’s most challeng ing work relationship that you saw?
What made it so tricky?
| Understand what conditions or
personalities might prove to be
problematic, and how you might set
up the role to avoid these.
How can I get the best out of Person X
in conditions of ambiguity or an environ ment which is fast-moving and fluid?
| Check their fit with the reality of
high-growth startups.
How can I recognize when Person X
is under stress?
| Equip yourself to intervene early if
you spot similar signs after they join.
Where do you think Person X could
improve as they continue in their career?
| Seek out development opportuni ties for you to be aware of.
Is there anything I’m missing or which
you’d like to add before we wrap up?
“Backchanneling” refers to the practice of eliciting feedback from individuals that the candidate might know, without telling the candidate
that you are doing it. This is a gray area ethically
in the US, and is actually illegal in many other
places. It’s also high-risk—candidates could find
out about your backchannel effort and withdraw
from a process at the perceived breach of trust.
Even worse, your backchannel might get back to
the candidate’s existing employer, creating a hostile situation.
I got a negative backchannel last year.
Technically the candidate was a very strong
match, and he did well in our process.
The backchannel feedback that he was
performance-managed out of his role didn’t
seem right. He was kooky and I determined
that he had been judged unfairly as a
result. I’m glad I did, as he’s turned out
to be one of our best hires.
Anonymous Founder
Having said that, backchanneling does happen a
lot. The alternative is to target individual references with the candidate’s consent. However, be
specific in your requests. For example, say that
you’d like to speak with any of their past bosses,
and ask if this would be an issue. If you sense
hesitancy, explore why this request might uncover
something unexpected or if the candidate has
anything to disclose in advance.
Background checks by a third-party service
are almost always a requirement in regulated
sectors such as financial services. Basic checks
are relatively cheap and straightforward but
rarely provide any additional value. Advanced
checks are rarely worthwhile.
Handling references well can be particularly
consequential and challenging as you’re building
out your executive team later on in your scaling
journey above the 50 headcount mark (also see
Chapter 6
for insights on taking references on executive level candidates).
Be thoughtful about offers and closing
Once you’re convinced that you want to extend
a job offer to a candidate, you need to decide on
their compensation package. There are four factors to balance when crafting a compelling remuneration offer:
Benchmarks for the role in question (e.g.
from Pave, Radford, your recruiter or your
investors), alongside a clear-sighted
assessment of whether your target
candidate is at the higher or lower end of
this range.
Consistency with peers already in the
company. You should never make an
exceptional offer without a strong
rationale that reflects the actual market
value of a candidate. It will only breed
resentment internally.
What you need to offer to close the
candidate. It’s getting harder to gauge this
as it becomes less accepted (or legally
allowed) to ask candidates about their
current compensation. But you can ask
about their compensation expectations.
Risk/reward balance for the candidate,
particularly between base salary, variable
pay, and equity elements.
Incorporate specific elements the candidate
highlighted during interviews. For
example, extra flexibility for caregivers or
a budget for coaching.
Once you have a People team that can conduct
external benchmarking, you’ll want to create
some form of compensation grid, indicating minimum and maximum base and bonus cash ranges
for each function and level. This will make offer
preparation much easier, although you’ll need to
carefully level all the candidates. Startups generally implement such a grid between the 126–
250 headcount stage. An equivalent grid is
recommended for equity compensation. Your
Talent team will work with the hiring manager
to prepare the final offer.
Index Ventures’ Rewarding Talent handbook and OptionPlan web app offer
benchmarked equity grids that you can
apply across your team.
In all cases, offers should be extended verbally
rather than in writing. At earlier stages, this is
likely to be led by the hiring manager, moving
to the Talent team when you are larger (which
avoids the hiring manager having to handle follow-up negotiations or questions around benefits,
equity, etc). The advantages of a verbal offer are:
More personal—The offer is likely to
land better.
Start date—This can be discussed and agreed
upon, including any potential delays.
Gauging excitement—You’re trying to get
a read on the likelihood that they will
accept and any hesitations they might have.
You can also check the status of any other
interview processes the candidate is
involved with, and whether you’re their
preferred choice or not.
Reconfirming immigration status—This
should have come up during interviews,
but it’s your chance to ensure that the
candidate has the necessary visa to work
for you, or to sound out what might be
involved in getting a visa approval.
When it comes to closing talent, it’s
critical to focus on the complete package,
and the full story that makes this
compelling. This includes the growth
opportunity for them personally, your
company’s culture/mission, the uniqueness
of your product, and a compelling
compensation package. Don’t overly focus
on one aspect to ‘sell’ a candidate; Ensure
you’re reminding them of all the great
things that you are offering.
Kira Busman, Index Ventures (former Recruiting Lead, Datadog)
While it’s not advisable to put a hard time limit
on responding to your offer, you can phrase it in
a way that implies urgency. For example: “We’d
love to know your answer by the end of the week,
to help us plan our next onboarding cohort.”
If a candidate plays for time around
responding to your offer, the likelihood
is that they’re engaged in another
recruitment process that they’re more
excited about.
Dominic Jacquesson, Index Ventures
The verbal offer can be followed up by a very brief
written email outlining the key terms: job title,
start date, and cash compensation. References to
equity and benefits should be high-level to avoid
potential legal pitfalls (i. e. if you update your
benefits policy ahead of the individual starting).
However, you might share an employee stock
ownership plan (ESOP) calculator, if you have
one, to demonstrate the potential value of your
equity package, particularly if you’re working
with Pave or an equivalent third-party tool.
A powerful way to improve candidate
excitement and likelihood of acceptance
is to get the individuals who interviewed
them, as well as their prospective
colleagues, to send congratulatory notes
expressing excitement about the candidate
joining the company. The trick is to send
these as soon as the offer has been extended,
rather than waiting for it to be accepted.
Mark Fiorentino, Index Ventures
Only once the individual accepts your headline
offer should your People team prepare a formal
contract. Detailed company policies (employee
handbook) or ESOP documentation should only
be shared if requested to avoid over-burdening
candidates with paperwork to review, if they are
already at the point of signing up.
Negotiations with candidates below executive level should be limited to a single round.
Increases should never step outside of your compensation grid ranges for the role. There should
also be a strong rationale to justify any increase,
to avoid potential bias. For one thing, it’s been
established that men are more likely to negotiate
at the offer stage than women. A good rationale
might be a candidate who is walking away from
an imminent bonus due to your preferred start
date, in which case you might agree to a starting
bonus. Lengthy negotiations will inevitably corrode the relationship, either making it more likely
that the candidate will reject your offer, or that
they won’t onboard effectively.
Beware of hiring managers keen to
uplevel a candidate in order to match
their compensation expectations.
It never works out.
Isaiah Baril-Dore, Index Ventures
You should monitor offer acceptance rates, with
the following benchmarks:
Excellent >90%
Green Light 80–90%
Yellow Light 70–80%
Red Light <70%
The main (controllable) reasons for low offer
acceptance rates include:
Compensation package—The offer is not
sufficiently compelling.
Timing—Your company is too slow in
getting offers out to candidates.
Poor communication—The offer is not
delivered in a way that makes the candidate
feel excited and special.
Damaged employer brand—For example,
the candidate further reviews your
company on Glassdoor or Blind, and gets
cold feet due to what they read.
Evolve your onboarding process
Onboarding can get overlooked in high-growth
startups, given how challenging and time-consuming hiring is. There’s a risk of treating “offer
accepted” as the definition and endpoint of success. But effective onboarding is a key determinant of an employee’s subsequent engagement,
impact and tenure. It should be the first “People”
process that you define and implement across
your company.
As with the approach to recruiting, the
onboarding process should become steadily more
sophisticated and tailored as your team grows.
For your first 10 hires, you’ll be closely involved
personally in every employee onboarding, and
the relationships and systems in your company
will be fairly simple to navigate. Onboarding
can happen mostly organically. At the same time,
these early hires won’t expect a perfect process.
However, once your team expands, and particularly as you approach 50 people, things will
look very different. You might be onboarding
four to six employees per month, and will need
at least a systematic approach to the basics, with
clearly defined internal roles and responsibilities, split between a hiring manager, the People/
Recruiting team, and IT. Expect onboarding
to take 90 days as a general rule, and at least
a year for executive hires at later stages of growth
(read more about onboarding senior hires in
Chapter 6).
Here are some elements of a good, basic
onboarding plan to work towards:
Post-acceptance and pre-start
Identifying and fulfilling IT requirements,
including any reasonable adjustments (e.g.
related to disabilities)
Agreeing and creating email address (for
pre-scheduling), access rights to relevant
internal systems, and inclusion in relevant
comms groups
Setting up on payroll, benefits and
expenses systems
Applying for visas if required. Offering
extensive support in case of relocation
Sharing pre-reading, e.g. company
handbook, benefits program detail,
current OKRs
Shipping a welcome pack, including swag
Assigning an internal buddy and/or
mentor, and ensuring that contact is made
Identifying relevant third parties—
customers, vendors, partners, freelancers—
who will need to meet the new hire
Pre-scheduling critical first week and first
month meetings
First week
IT “live” setup opening access to key
systems
Hiring manager one-to-ones; Setting a
30/60/90 day plan
Further one-to-ones with key colleagues
Office tour
Team lunch
Training on function/team-specific
internal tech/tools
Lunch with buddy and/or mentor
First month
Lunch with the hiring manager’s manager
Company-wide new joiner session
with founder, covering your history,
mission and values. Include an “Ask me
anything” session.
Company-wide new joiner sessions
covering who’s who, what’s where
(knowledge base), generic internal tools
(e.g. Slack), and internal communications
protocols
Company-wide (or function-specific
at larger scales) new joiner session focused
on product demo plus an overview of
your sector
Day spent with CX, observing and
understanding customer feedback
Three months
Visits to other offices where relevant, to
ensure relationships can be forged with all
key individuals
Formal review with hiring manager.
An opportunity to gauge employee
satisfaction, engagement and fit. We also
recommend making it clear to hiring
managers that if things are not working
out by this point, they are expected
to make decisive action and terminate
employment.
I have an internal strategy document that
I update every six months, so it really
reflects our latest thinking. Reading this
is a core part of onboarding, and more
substantive than a presentation.
Michelle Valentine, CEO & Co-Founder, Anrok
It could take six to 12 months to embed this solid
but basic onboarding process. You may want to
add some extra elements, either to personalize
your approach or to streamline it. However, don’t
introduce these at the expense of getting the
basics right.
Onboarding overall will be owned by your
People Lead (if you already have one) or else your
internal recruiter or your office manager. They
can liaise with the relevant hiring manager for
each new person onboarded, with responsibilities
for each element divided between them.
As your team scales further (above 125 and
towards 250), you’ll likely need to introduce
group onboarding elements for your larger functional teams—typically Engineering, CX and
Sales, each of which could be adding multiple
employees per month. Ramping targets should
also be defined, such as how quota goals for salespeople should step up. You’ll need to blend in
office-specific elements as you expand geographically, alongside company-wide, function-wide
and role-specific. These elements snap together
into a complete plan which can then be scheduled
and shared with the new joiner, and supported
by a workflow tool—ideally integrated into your
human resources information system (HRIS)—
with time-triggers and reporting capabilities for
your People team.
While the onboarding process necessarily
becomes more systematized and process-driven,
it shouldn’t become impersonal, which is something the hiring manager should be responsible
for. Beware, too, of stripping out elements that
support new employees forging relationships
outside their immediate team. Initiatives such as
company-wide cohort onboarding can be costly,
but do a lot to create trust across the company
and prevent siloed thinking by function or office.
All stars
What’s at the root of excellence in team sports? Conventional wisdom focuses on star talent. However, a complex systems approach suggests greatness arises from allowing complementary pieces to dynamically self-assemble. Take NFL coach Bill Belichick of the New England Patriots, who won the Super Bowl six times—the most of any head coach in NFL history. Belichick was renowned for his specific and exacting standards. He drilled his recruits on any scenario that could crop up in a game, and was adept at finding and nurturing gifted but undervalued players—fitting them to roles that made the most of their strengths without exposing their weaknesses. Among Belichick’s mantras for his players was ‘Do your job’— don’t falter in the face of adversity, and do the specific task you’ve been assigned—and ‘Don’t be an automaton’— master the principles, and flex your play to the situation you’re presented with.
Belichick’s system was amplified by his synergistic partnership with Tom Brady, widely considered the greatest quarterback of all time. Playing together over 18 seasons in what came to be known as the ‘Patriots’ era’, Brady’s talent and leadership humanized Brady’s toughness and rigor. Together they won the respect of the whole team, and nurtured a culture of constant self improvement and team success over individual glory. Star power, it seems, is less about the individual ingredients, and more about creating a cascade of positive feedback loops that allow collective excellence to organically emerge.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Managing and retaining people
When your team is small, almost your entire
focus is on talent acquisition and onboarding.
But as you scale, retaining and developing your
employees becomes key to success. This evolution
mirrors how your GTM focus needs to broaden
from new customer acquisition to customer
retention and account expansion.
Two-year tenures have become common
in VC-backed companies, with the
expectation of a revolving door. Even
for ICs, if it takes six months to onboard
fully, and your last three months are
distracted with interviews you’re doing
elsewhere, that leaves just 15 months of
full-focus engagement. Which is simply not
enough time to make a dramatic impact.
Harsh Sinha, CTO, Wise
Each of the People processes that we discuss in
this chapter evolve with scale, becoming more
sophisticated in line with company needs, your
People team’s capacity to meet the new demands,
and the overall organization’s willingness to
embrace change. But you want to avoid introducing too much process ahead of time. Smaller
companies are flatter by nature and staffed by
generalists, so they don’t require the same nuanced
approaches to leveling, performance management
and competency frameworks that would be
appropriate in enterprise settings. If you introduce these too quickly, the culture you’ve cultivated may reject them. They can also encourage
your team to navel-gaze at precisely the moment
you need to remain customer-focused.
Adopt a product mindset with all your
People processes: user-research, MVP
first, monitoring engagement and adoption
metrics, and a roadmap for improving
over time.
Ross Seychell, Chief People Officer (former), Personio
I joined Figma when our headcount was
160. At that size, it’s much easier to make
decisions and move quickly on things like
leveling or compensation—your work force
and executive team is smaller and you
can be more nimble. Today our headcount
is over 1,000, and forming these policies
takes a lot more exploration, time and rigor
to define and implement — with the
hope they’ll successfully scale as your
organization grows.
Nadia Singer, Chief People Officer, Figma
Performance management and leveling
Alongside maintaining a concentration of people
with high potential, you need to learn to manage
out individuals whose performance or values-alignment fall short. It’s hard, but if you don’t do
this, you weaken the whole team. Even more
importantly, you should keep close tabs on who
your emerging stars are, so you can offer them
projects and opportunities that will stretch and
challenge them.
Embed a culture of continuous feedback
Below a headcount of 50, you don’t have the time
to introduce a formal performance review process. Instead, it’s more important to foster a culture of continuous and real-time feedback by your
People Managers. Managers, particularly first-time managers, will benefit from training on how
to give feedback and have difficult conversations
(probably using a professional trainer), as this is
such a fundamental management skill and a common shortcoming. Training is also a healthy reset
for externally-hired, experienced People Managers, particularly if you can blend in material tied
to your specific culture and values, and the managerial behaviors you want to model. Do you want
particular recognition and reward of individuals
who go the extra mile for customers, for example,
or those who support hiring or diversity goals,
or who innovate in their role?
Formalize performance reviews and
feedback
As you step over the 50 person mark in your
company, and through to about 250, you should
institute simple and consistent performance
reviews across the company. The format is up to
you, though a 45-minute, one-to-one session is
common. High-growth startups typically do
these every six months, followed by a promotions
review. Both manager and employee should prepare in advance, and ideally solicit input from
other relevant colleagues. The purpose of these
conversations is to complement, not to replace,
the real-time feedback culture outlined above.
I’d emphasize a continuous performance
feedback loop, rather than storing up
for annual or bi-annual conversations.
Otherwise you get drag, especially in
high-leverage teams and roles.
Jonas Rieke, Co-Founder & Chief Operating Officer, Personio
Performance reviews should strike a balance
between an open evaluation of recent performance
on the one hand and development goals for the
period ahead on the other. They should be a chance
to have a broader conversation about how the
employee is feeling about their role, their manager
and team, as well as their future at the company.
There are two key objectives for a performance management process:
Company perspective—Keeping the bar
high to increase talent density. Identifying
underperformers and A-holes to weed out,
and HiPo talent to nurture, stretch, retain
and leverage. Also providing objective
evidence to drive compensation reviews
Employee perspective—Offering
employees clarity about how their
performance and potential is viewed, and
guidance on how performance can be
enhanced, together with open discussion
about their professional and career
development
Be open about what a performance review is,
and is not. Don’t pretend that you don’t link pay
to performance, or that you don’t have expected
or forced-rating pools. Hiding the truth can and
will backfire.
Ross Seychell, Chief People Officer (former), Personio
It’s important to note that big differences of
opinion exist when it comes to performance
management. Some leaders are big proponents
of explicit numerical performance ratings, while
others feel that these cause more harm than good.
What follows is one example of a system that
we’ve seen work well. But you might rightly feel
that an alternative approach is more aligned with
your own values. Whatever you choose, the
important thing is to foster a high-performance
culture—something that often got lost in the
boom years of 2020–21, when simply holding on
to employees became the key objective.
A basic three-point rating system, openly shared
and discussed in the review meeting, can be an
effective balance between overly finetuned performance scores (with four, five, or even more
rating categories), and having no ratings at all.
Three-point ratings should reflect the typical
distribution of scores we would expect to see in
a startup team:
Ratings from managers (and founders) must first
be collated and discussed in a senior team meeting for calibration. The output of this session
provides a more objective way of identifying
HiPo’s, as well as highlighting weaker team members. It should also surface whether individual
managers appear to be too soft or too hard in
their team evaluations.
I force my team every quarter to pick
out our top five and bottom five people,
to drive us to take action.
Anonymous Founder
This ratings-based approach forces an explicit
acknowledgement between manager and employee about how their performance is viewed.
By removing any room for doubt, you prevent
problems down the line. And by making it transparent that the large majority of the team will
be rated “in line with expectations”, you remove
the stigma of this being viewed pejoratively as
“average” while also reinforcing a high-performance culture.
If an employee has been rated “below expectations”, this indicates that something has to
change—either performance or expectations—
otherwise there’s no long-term future for the
employee at the company.
When it comes to visualizing organizationwide performance, we recommend segmenting
your team into the following nine-box grid structure that we’ve developed at Index:
As your team grows beyond a headcount of 250,
your People team should have capacity to add
more sophistication into the performance review
process, with features such as:
Reviewing, rating and guiding individuals
separately on performance against business
goals and company values
Tighter alignment to team and individual level goals or OKRs
Richer articulation of what values mean in
specific functions or teams, and for specific
levels of seniority
Competency frameworks for specific
teams/functions for a more finetuned
assessment of specific development needs
and goals. These could be enhanced
to become level-specific as teams grow
even larger
Formalized peer assessment
360° assessments (i. e. combining upward,
downward, and peer assessments)
Recording of performance review info and
ratings in your HRIS
Closer integration into promotion and
bonus cycles
Moving to an annual cycle, with biannual
reviews restricted to newer or less
experienced team members
Reinforcing the fundamental importance
of continuous feedback between managers
and their teams, and making training more
team-specific
The introduction of competencies usually
starts in engineering, where teams are
large and there’s a big need to keep
your technical skills relevant. There
are also fairly industry-standard and
publicly available frameworks.
Ross Seychell, Chief People Officer (former), Personio
Create job titles appropriate for your
stage (leveling)
When your team numbers in the hundreds, rather
than thousands, you really want to avoid a big
tech-style system of complex levels. Such systems
are over-engineered for your needs, and can breed
a culture of entitlement and expectation of promotions, which takes the focus away from delivery and customers.
However, from early on you should have a
clear and consistent approach to job titles. There’s
no point in reinventing the wheel, so we recommend the following approaches.
Up to a headcount of 50, you might just have:
ICs (e.g. Engineer)
Senior ICs (e.g. Senior Engineer)
Heads (e.g. Head of Engineering)
Founder titles (e.g. CEO, CTO)
Letting go of “Head of” job titles
Many startups that hire functional leads
early on use “Head of” titles. This can be a
neat solution as roles are more fluid and
the organization is flat. It avoids an overemphasis on status, and allows you time
to see which of these early leads might
have the potential to step into more
senior or executive roles later. However,
by design, “Head of” is also ambiguous,
both internally and externally. How much
authority does this person actually have,
and how credible are they when dealing
with external parties (customers, media,
etc)? How willingly will senior candidates give up more traditional executive
titles (VP, SVP, CXO) in favor of the
“Head of” title that you are offering?
By the time you step over 125 headcount, you should have transitioned
entirely to more conventional leadership titles, leveling any “Head of” individuals appropriately.
As your headcount grows beyond 125 and up to
250, we recommend the following richer framework for leveling and job titles. Crucially, this
involves a specific "IC track” that allows for
career progression for top people who aren’t
suited to management roles:
We’ve worked really hard at developing
career trajectories that don’t involve
managing people. We’ve got separate IC
tracks to enable this, with equivalent
pay bands. Do this across all functions,
although the earliest teams where
you’ll need it will probably be in
Engi neering and Sales.
Job van der Voort, CEO & Co-Founder, Remote
Between a headcount of 251–500, you’re likely
to need one or more of these additional job
title layers:
SVP
Senior Director
Senior Manager
Super Senior IC (e.g. Principal Engineer or Strategic Account Executive)
By the time you hit a headcount of 1,000, you’re
likely to have introduced all of these distinct title
layers. But if you’re using any of these job titles
below 250 headcount, you’re probably creating
artificial promotions to soothe egos, rather than
layers that are truly justified.
Introducing a leveling system—where compensation and seniority exists within IC bands that may
be richer than pure job title distinctions—is never
easy, but can be beneficial somewhere between
251–500 headcount for the following reasons:
Compensation benchmarking against more
finely tuned external data sources such as
Radford or Mercer.
Career progression ladders, particularly for
ICs not following a management route.
This is well-established in engineering, but
the principle is important in all functions
as teams grow in size.
Performance management alignment, so
that feedback on progress and promotion
potential can be more clearly stated, both
to individual employees and when
comparing across the function or company
as a whole.
Futureproofing, as the need for leveling
will increase as your team grows. If you
haven’t introduced it by the 500 headcount
mark, it will become much harder to do so
later on.
This need will emerge sooner in your larger
teams, so you might introduce leveling in phases.
I’m glad we set up a formal leveling
framework pretty early on. It didn’t involve
specialized ladders by function, but we
had a generic ladder which we improved
over time. It particularly helped to
avoid compromises around job titles,
which can become toxic, while offering
opportunities for individuals to grow.
Lindsay Grenawlat, Chief People Officer, Cockroach Labs
While you have 20 or 30 engineers in
your team, don’t think about leveling.
Focus on achieving product-market-fit.
Nothing else matters and is simply
a distraction.
For any new hire, compensation involves triangulating between three elements:
What are the market benchmarks for
the role?
What do you need to offer in order to land the candidate?
What are the internal comparisons and
benchmarks, to ensure consistency and
fairness?
Your goal is to achieve harmony between these
three elements to bring the candidate across the
line.
The golden rule is consistency. Imagine
that your whole team’s compensation
information is leaked internally. If your
reaction is, ‘Oh s**t, Person X will find out
that they’re earning less than Y,’ then
things have gone wrong. You should have
a rationale for any compensation differences
that you can confidently explain. This
might involve seniority, performance, rare
skill-sets, location, cash/equity trade-offs,
or other relevant factors.
Dominic Jacquesson, Index Ventures
Your approach to compensation should be aligned
with and driven by your overall company values
and employer brand. This is called your “compensation philosophy.” The elements that go into
it should include:
Cash compensation—What percentile are
you aiming for versus market benchmarks?
| Does this vary by function and/or
level? For example, “We aim to pay
75th percentile for technical roles, and
50th for other positions.”
Equity compensation—What percentile are
you aiming for versus market benchmarks?
| Does this vary by function and/
or level?
It rarely makes sense to be in the top
quartile against both cash and equity
components. Most companies for most
roles will have a weighting towards one or
the other (Also be aware that benchmark
data can be misleading on this front).
Benchmark peer group—Who is this? It
should reflect your closest competitors for
talent, maybe other local startups at a
similar stage and scale, or potentially larger
companies for certain specialist roles.
Equity—Is it something offered to
everyone, or is it reserved for senior hires?
Do you offer additional equity grants to
high performers? How do you treat leavers
(i. e. good/bad leaver definitions, extended
exercise)? Do you offer equity refreshers to
everyone or only to leaders and HiPo’s?
What model of equity refresher do you
want to adopt?
Secondary sales of equity by existing or
former employees—Do you want to
prevent this outright or are you more open
to allowing it?
Cash/equity trade-offs—Do you allow or
even encourage new hires (or existing
employees) to sacrifice some cash salary in
return for more equity, following a
predefined formula?
How do you view bonuses versus base
salaries? Executives only or more broadly?
Commissions for sales?
| Individual, team, or company-wide
bonus system?
| Structured-bonus versus spot-bonus
pool?
Level-based compensation (i. e. everyone at
a given level and function are paid the
same), or broad and overlapping
compensation ranges between levels with
greater emphasis on individual
performance?
Linkage to performance management
processes—explicit, implicit, or unrelated?
Financial benefits—the basics only (focus
on equity) through to more corporate-style
benefits, including contributory pensions,
life insurance, family healthcare, etc
Other benefits—What is your approach to
parental leave, fertility support, sickness
pay, etc? Do these reinforce your values
and objectives around diversity and
inclusion?
Geographic differences—within countries,
and between countries. Equal pay for equal
roles, adjusted to the local market or
blended? What about mobility, if
employees choose (or are asked) to
relocate? Cash only, or are geographic
differences also applied to equity? What
about benefits—set locally, or aiming for
harmonization across countries?
Specific internal or compliance-driven
rules—e.g. max ratios between top and
bottom earners, floor levels on lowest paid,
pay transparency and pay equity
You definitely don’t need answers to all of these
questions from the outset. But you should intentionally, progressively and flexibly develop and
adjust answers as your company grows.
When you adjust your compensation
philosophy, thoughtful change management
and communication are key to successful
adoption. Compensation by nature is sticky
(it’s hard to change from a legal, cultural
and administrative lens) so try to avoid
yo-yoing year to year.
Isaiah Baril-Dore, Index Ventures
A recurring issue I see is founders who
fail (or forget) to upgrade the comp of their
early employees, who joined when cash
was tight. With scale and accelerated
hiring, you either lose out on great new
talent because you’re unwilling to pay what
is now required, or you offer new hires
better pay than existing and equivalent
team members. Both are bad outcomes. You
need to proactively benchmark and upgrade
the pay of your existing team to enable
the continued hiring of A-grade talent.
Dominic Jacquesson, Index Ventures
From 50 headcount, and potentially earlier, you
should access a free (give-to-get) or low-cost
benchmarking resource, most notably Pave.
As you scale between 251 and 500 headcount,
you can consider triangulating data from multiple
benchmark providers including Radford, Willis
Towers Watson or Mercer. These providers are
more oriented to corporate customers, and include
complex leveling frameworks. They are therefore
more expensive to access (budget for $10,000 or
more) and challenging to adopt. At this point,
you might want to work with an external compensation consultant and/or consider hiring an
internal Director of Total Rewards. You should
also consider introducing pay review software
(such as Pave) to manage the process and workflow more transparently and efficiently.
Our top compensation KPI is to have zero
‘regretted leavers’, where compensation
is the primary reason for moving on. Our
second KPI is to minimize rejected offers
where compensation is the primary reason
for turning us down.
Ross Seychell, Chief People Officer (former), Personio
By a headcount of 500, you should have established a Remco separate from your Board of
Directors. The Remco is particularly involved
with executive compensation (including your
own as the CEO), but will also review and approve overall pay bands, benefits policies, etc. In
VC-backed companies, monitoring equity burn
rate is another key consideration. That is, do you
have sufficient, unallocated equity to meet your
talent needs, and are your equity grant levels
appropriate and balanced?
Index Ventures has developed detailed guidance and free-to-access tools around ESOPs and
employee equity allocations: see our Rewarding Talent handbook and OptionPlan web app.
Internal promotions versus external hires
Nurture homegrown talent (HiPo’s)
When your company is small, your team will
almost certainly lack the skills to navigate the
next stages of scaling. It’s extremely challenging
to sustain high-growth if your team is having
to learn everything on the job. Smarts alone are
not enough, and you need to bring in people
with specific kinds of experience. So in the early
days, it’s a mistake to promote too much from
the inside.
However, it’s important to recognize who in
your team has the potential to really grow and
develop. These individuals are referred to as
HiPo’s—high potential talent. These internal candidates are your most promising pipeline for future
leaders, and if you don’t cultivate them today, they
won’t be ready to take responsibility tomorrow.
From around the 50 headcount mark, you
should leverage your performance review process
to identify and nurture HiPo’s from across the
company. HiPo’s should represent no more than
10–15% of your employees. So in a team of 50,
you might have five to seven such individuals.
By the time your headcount reaches 500, you
might have 50.
You want to recognize and celebrate the contributions of HiPo’s to keep them motivated and
to retain them. Move them into progressively
bigger roles with more responsibilities, and
involve them more widely in the organization
(e.g. use them as bar-raisers during interviews).
They should also be offered mentoring, coaching
and training. Bringing in experienced and inspiring external leaders whom HiPo’s can learn from
is the best way to do this, and accelerates them
becoming leaders themselves.
As you scale, your management team should
be increasingly filled through internal promotions drawn from your HiPo’s. For any role, you
should always look for internal candidates first.
This even extends to your executive team, which
should ideally include at least one internally
promoted individual. Although it’s very unlikely
to be more than three, it’s definitely beneficial
to have executives and managers who have developed their careers within your company. They’re
fantastic culture-carriers, with a deep understanding of your business and customers, and
trusted personal relationships across the organization. They can also inspire your other top
talent, demonstrating that there’s no ceiling to
opportunities.
An environment where real career
progression is possible helps to drive
success at a high-growth company.
It puts a premium on institutional
knowledge and culture fit.
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
Nonetheless, be honest about whether any given
role needs a specific skill set or expertise that
you currently lack, or if it needs someone from
the outside to reinvent your playbook. You’re also
more likely to need to acquire skills externally
when building newer and smaller specialist functions (for example, Finance or Legal).
It’s a tricky balance to strike, but by the time
you scale beyond 500 people, the majority of
appointments to senior IC and manager-level roles
in core functions should be nurtured from within.
How honest are you in rewarding
per formance execution versus loyalty?
It can be hard to tease these apart,
but you can’t objectively consider
internal promotions unless you’re really
disciplined about deprioritizing loyalty.
Danny Rimer, Index Ventures
Your best promotions will be your best
of the best. This will also send a positive
message culturally, as these individuals
are respected role models.
Carlos Gonzalez-Cadenas, Index Ventures
These numbers are only guidelines. The faster
you’re growing your headcount, the less you
can rely on internal promotion. When you’re
doubling your team every year, with six months
to onboard plus 12 months on average to prove
potential, you simply won’t have a sufficient number of proven internal candidates to drive promotions faster.
If you have an internal candidate who’s
really committed to learning and adapting
their behavior to step into a leadership
role, you should bet on them. Management
skills can be taught, so long as the individual
enjoys it.
Jason Citron, CEO & Co-Founder, Discord
Conversely, if you’re not doubling every year, you
might be able to exceed these guidelines, as you’ll
have more time to develop and nurture talent
internally. But keep an eye on making promotions without a strong commercial rationale. This
is particularly dangerous if headcount growth
is slowing down following several years of
high growth.
You can only offer progression and
promotions when and where there’s a real
business need. Otherwise you embed
a culture of entitlement, with individuals
focused on getting to the next level rather
than on serving customers.
Dominic Jacquesson, Index Ventures
Never reorganize a team primarily to
accommodate a promotion someone has
been awarded. Organizational design
decisions should not revolve around an
individual.
Compensation typically represents over 50% of
total costs at software companies. When you add
indirect costs related to headcount such as offices
and facilities, this can rise up to 70%. Decisions
around hiring are therefore the single most important element in managing cash flow and runway.
Conversely, one of the biggest reasons that
companies fail to hit their objectives is falling
behind hiring and onboarding plans.
Workforce planning is therefore a critical
internal process. It needs to align directly with
strategic objectives as defined by your OKRs and
financial targets. This people-driven approach
is ideally led by a strategic (executive-level) People Leader, although your CFO or Finance Leader
can also steer the process. They should regularly
review and consolidate hiring requests across all
functions (at least annually, but more likely with
mid-year or even quarterly reviews). This plan
should be sanity-checked in terms of:
What competencies you need to build
Keeping productivity and expectations of
individual contribution high—
benchmarking team size ratios and output
metrics over time, and against comparable
companies
Reality-checking hiring timelines
Reality-checking that there is sufficient
capacity to absorb the new hires, in terms
of management and onboarding
Level of compensation required for each
planned hire
Backfilling in response to unplanned but
inevitable attrition in the existing team,
which will detract from your ability to hire
and onboard incremental hires
Opportunities for internal promotions and
for lateral moves between functions (i. e.
internal mobility)
You need to plan six months in advance,
given hiring times, notice periods,
onboarding, etc. In Europe, give it more
like nine months. And for executives,
nine to 12 months.
Nadia Singer, Chief People Officer, Figma
A common error is to set revenue goals
based on an over-optimistic frontloading
of sales hires to the start of the year.
The reality—and the better approach for
effective onboarding and ramping—is
that hiring will be spread out more evenly.
Dominic Jacquesson, Index Ventures
Your People team can then work with the Finance
team to cost the plan, ensuring that it aligns with
overall cash flow constraints and is consistent
with benchmarked ratios for team composition
(e.g. do we look top-heavy in our Customer Success (CS) team relative to our peers?) and for KPIs
(e.g. is our revenue-per-person dropping relative
to prior year?). This ensures some top-down
validation, and typically results in a series of
adjustments in consultation with individual
functional leaders. This leads to a tight and
aligned workforce plan across the organization
as a whole, which can be discussed with the
founder/CEO for approval.
An important distinction in workforce planning is between Technical, GTM, and G&A
hiring. Technical hiring can be thought of as
equivalent to R&D capital expenditure (capex),
though in tech startups, you build people factories rather than physical ones. Decisions to build
factories are much easier when the cost of capital
is low, as your return on investment can have a
longer time horizon. In today’s higher interest
rate environment, decisions around technical
hiring therefore face a higher ROI bar than they
did between 2008 and 2021. It can be tough to
accurately forecast the ROI from new technical
teams building new products. We therefore
expect a slower pace of technical hiring to persist
for several years, until access to cheaper capital
returns. As a result, founders need to focus on
building “more with less” when it comes to technical teams.
By contrast, GTM hiring decisions can be
supported with clearer short-term operational
metrics around salespeople hitting quotas, or
marketers achieving ROI targets. If these metrics
are being met, companies can confidently push
ahead with scaling these teams. If these GTM
metrics are not being achieved, then GTM hiring
should remain slow, and the focus should return
to R&D (i. e. technical team hiring and effectiveness), to improve product-market-fit.
G&A and Operations workforce planning is
more straightforward, as you can establish ratios
relative to overall team size or other key activity
drivers (for example, transaction volumes).
High-growth companies often end up
with Finance providing a top-down
headcount plan based on financial goals.
These are too often based on rudimentary
metrics, flaky team ratio benchmarks,
and an incomplete understanding of hiring
and onboarding constraints. You need
to shift to a more bottom-up approach as
quickly as possible, empowering your
functional leaders but also making them
more accountable.
Dominic Jacquesson, Index Ventures
TeamPlan—Explore our entire library
of 210 highly successful startups for
more detailed insights into their workforce planning up to 500 headcount.
Internal communications
Invest in your internal comms
Internal comms becomes a “thing” once your
headcount hits 50 or 75, requiring deliberation
and production effort. This usually falls under
the People team, although it can also be the
responsibility of the office manager, your EA or
Chief of Staff, and at later stages of scaling, someone from the marketing team. It can also involve
a combination of these.
Almost all early stage startups hold a daily
or weekly stand-up, which evolves into a weekly
or fortnightly all-hands meeting. With more people, often distributed across locations and timezones, these become trickier to manage. At some
point they’ll go virtual or hybrid, and will need
to be recorded for those unable to attend.
As you scale, the content of all-hands shifts
towards:
Values, vision, and mission—an
opportunity to reiterate messaging on each
of these and to bring them to life with live
examples, celebrating teams or individuals
who have lived the values or milestones hit
towards your mission
Progress updates on the company’s goals
and challenges—these may include OKRs,
North Star metrics, summaries following
board meetings, etc
Public announcements—product updates,
new joiners, internal promotions, company
events, and project initiatives
People function updates—new policies,
initiatives, benefits, engagement survey
results, etc
Spotlight—featuring rotating teams or
individuals in the company. Providing
insight into what they do, and how their
work impacts on the company as a whole
As your leadership bench broadens, you should
also expand who speaks at these meetings, which
also serves to keep them fresh and engaging.
However, as CEO you should still own them—
they are central to your role as Chief Inspiration
Officer.
All-hands are the most valuable—and
also the most expensive—moments in
your company’s life.
Danny Rimer, Index Ventures
Offsites are another key element of internal
comms that require far greater thoughtfulness
and planning as you scale. You might host quarterly, whole-company offsites when you’re 20
people or less, but they’ll shift to annual or biannual after you hit 100. The overall purpose and
content is similar to all-hands, but with the
benefit of in-person engagement, informal and
relaxed bonding (“breaking bread” together), the
opportunity to go deeper into topics, and to
involve third-party contributors (e.g. customers,
investors or inspirational speakers). Time at
offsites should be split between whole-company
content and activities, and function-specific
breakout sessions.
The pandemic years have only reinforced
the clear truth that there’s no substitute
for intentional in-person time and events
to build teams and create deep trust, even
while we leverage virtual channels.
Ross Seychell, Chief People Officer (former), Personio
As functional teams grow and acquire their own
executive leadership, they can also benefit from
function-specific events that mirror all-hands and
offsites. For example, your company might hold
“Sales Kickoff ” events annually or quarterly,
where you get into commercial goal-setting, product training, sales tactics and best practices.
Asynchronous communication becomes increasingly important with scale too. You’ll need
to put more thought into how you structure
Slack, Notion, Asana and other digital tools to
make information easily accessible, particularly
for new joiners. This becomes a critical element
in effective onboarding.
Remote—Founder-led internal
communications
I take the lead personally when it comes
to internal comms. Being so distributed,
we don’t do all-hands really.
We use two key Slack channels: “Announcements” is very busy, and is used
for each team to give updates, usually via
Looms. “Important” is used shamelessly
by me for posting my biweekly CEO
updates.
During in-between weeks, I post an
AMA, making sure to answer every
question. Colleagues can also post allcompany stuff there, but these have to
be approved by me or Marcelo, my cofounder. For example, yesterday we announced our timeline for performance
reviews. As founders, we are still the
heartbeat of the company, and we set
cultural expectations.
Job van der Voort, Co-Founder & CEO
Learning and development (L&D)
Until you hit about 50 headcount, you’re unlikely
to have the need or capacity to institute any formal L&D activities. The focus is on one-to-one
onboarding and training provided by you and
your co-founders, extending to include other
early hiring managers. However, you might
do some ad hoc training on specific topics to
save time, if several individuals need particular
knowledge.
We hit a crunch point at about 40
headcount, when I could no longer
personally drive our GTM activity. There
were 10 other individuals who needed
the know-how that I’d developed, so I ran
a series of workshops on our GTM
framework early each Wednesday morning.
We documented the output in real-time,
as I didn’t have time to carefully prepare.
This was huge for us, unlocking a step
change in GTM effectiveness.
Charmaine Chow, CEO & Founder, GetHarley
Train your People Managers
By 50 headcount, you will have introduced several non-founder People Managers into the company. Some of these might be first-time People
Managers who have been promoted internally.
Others will be experienced external hires, but
who are less familiar with your culture. In both
cases, we recommend prioritizing manager training on topics such as giving feedback, effective
interviewing, diversity and inclusion, and managing conflict. As you scale, cohorts of newly
appointed managers can go through a periodic
program of these courses.
They’re most effective when conducted by
professional external trainers, but with customization to reflect your company’s preferred
approaches. The cohort approach also fosters
trust between different functional areas, and
should ideally be delivered in-person to maximize
learning and the chance for people to build relationships with their colleagues.
Between 126–250 total headcount, these
“bite-size” elements can be formalized into
a more structured manager development program. This should include additional training
by your People team on key HR processes such
as performance management, compensation and
internal comms.
Empower managers to train their teams
Alongside management training, you should set
aside an L&D budget, delegated to People Managers, which can be used to offer specific training
for their team members. This budget might be
set at one to two percent of payroll, and covers
technical skills training, formal continuing
professional development (CPD), or one-to-one
external coaching for HiPo’s.
People analytics
Use data to support your people decisions
Once your team grows beyond about 125, it
becomes impossible for you (or any single individual in the company) to track each and every
employee’s level of engagement or development
profile. The consolation prize is that it does
become possible to generate meaningful insights
through data analysis.
People analytics requires appropriate HR
tools to be in place, with oversight to ensure that
data is complete, accurate and up-to-date:
Recruiting—an applicant tracking system
(ATS) such as Lever, Workable or
Greenhouse
Human resources information system
(HRIS)—such as Bamboo, Personio or
HiBob. Don’t consider Workday until
you’re approaching 1,000 headcount.
Equity—cap table management
software such as Carta or Ledgy. Don’t
consider Shareworks until you’re
approaching 1,000 headcount.
We’ll focus here on two people-related KPIs, which
we consider the most important ones to track.
Attrition—Why are people leaving?
If too many people choose to leave the company,
you’ll be unable to meet your business objectives
or financial goals. Your team will get absorbed
in covering for departed colleagues, and managers and recruiters will be sucked into backfilling
for these positions. It doesn’t take long before
your best talent gets frustrated and moves on,
you develop a toxic employer brand, and the
company enters into a dangerzone.
As a result, attrition is the most important
people metric you can track. You should tag every
leaver on two categories, creating a 2 × 2 grid with
different implications:
As a rule of thumb, voluntary attrition of 12%
is good. Above 15% is a yellow flag, and above
18% is a red flag. Below 10% could indicate weak
performance management (if non-voluntary
attrition is also low).
However, benchmarks like these can’t be taken
at face value. Much will depend upon the team
mix in the company, as rates of attrition can vary
dramatically by function:
If you build a large team in a secondary hub, it’s
worth tracking how attrition compares to HQ.
(It’s typically somewhat higher, as employees can
feel less connected.) Once you’re over 250 headcount, you can also split out attrition of recent
joiners versus more tenured employees. Higher
attrition for recent joiners is to be expected, but
you want to diagnose whether this reflects weaknesses in hiring quality or in onboarding. We
recommend adding a +/− 3 months tenure filter
to attrition metrics, so you can monitor these
factors and take appropriate action.
Attrition should be tracked on a rolling
monthly basis, at both a quarterly and annual
level of granularity. Quarterly attrition is multiplied by four to get to an annualized equivalent.
This will be more prone to noise, but acts as
a better early warning system than relying solely
on 12-month lagging attrition measures.
It’s also important to conduct exit interviews
with leavers. These should be run either by the
hiring manager’s manager, or by a member of the
People team. They need to be handled extremely
sensitively, protecting confidentiality and listening to the individual while being careful not to
agree or admit to any information that might be
legally compromising. But if handled well, they
can yield valuable insights into underlying issues
that need to be addressed, particularly if consistent patterns emerge:
Hiring—mismatched expectations on role,
failure to assess values-alignment
Compensation—below-market salaries,
equity or benefits
Onboarding—weaknesses in setting people
up for success, or in making them feel
welcomed
Management—poor managers who need
training, or toxic managers who need to go
Attrition metrics become a key focus when
you exceed a headcount of 150, together
with reasons for leaving. This data informs
how to improve your hiring and People
processes.
Sian Keane, Chief People Officer, Farfetch
How engaged are your employees?
Engagement metrics help you understand the
overall health of your company, and provide signals to understand and predict employee attrition
and retention. They require the use of a thirdparty tool such as CultureAmp to conduct regular
employee surveys. This ensures confidentiality
and anonymity of responses, which is more likely
to yield authentic answers.
The core metric to track, and which can be
benchmarked externally, is employee net pro moter score (eNPS). This is a variant on the
familiar customer NPS (Net Promoter Score)
metric, and asks:
On a scale of 1 to 10, how likely would you be
to recommend Company X as a great place to work?
eNPS is a fundamental measure of engagement, which can be tracked over time and between different functions, locations and levels
of your organization once you have sufficient
scale. eNPS is also an accurate leading indicator
of attrition. Taken together with comments and
engagement scoring by theme, it can help identify
the people issues you need to prioritize.
As with customer NPS, detractors (1–6) are subtracted from advocates (scoring 9–10), to give an
overall percentage:
Excellent >50%
75th Percentile 41%
Median 23%
25th Percentile 7%
Cause For Concern <0%
Source: CultureAmp—based on 5 point eNPS
scale rather than 11 point.
As with attrition, it’s as important to track
changes over time as it is to compare against
external benchmarks.
Alongside the eNPS metric, engagement surveys typically include 10–15 other questions,
exploring attitudes to more specific aspects of
working at a company such as compensation,
alignment with vision, living the values, confidence in leadership and opportunities for career
development.
Engagement surveys are usually run every
six months, or sometimes every three months.
Pulse surveys, with a single question that might
be helpful for specific insights, can be more frequent. However, you want participation rates of
75% or more, otherwise it indicates survey
fatigue or something more worrying about overall trust and morale.
Flock and awe
Starling murmurations can contain over a million birds, yet the undulating, shifting shapes they create appear intricately choreographed. This coordination doesn’t arise from a single leader, but rather from swarm dynamics— how each bird synchronizes with its seven nearest neighbors. In this way, small perturbations propagate rapidly through the flock, creating graceful waves and undulating patterns.
What’s the purpose of such behavior? Experts think it may reduce aerodynamic drag, and often presents itself when a falcon appears at the edge of the flock, making the starlings flee in defense.
Murmurations display a rare quality known as “scale-free correlation”—whereby a tiny change in one part of the group affects the behavior of all the others, regardless of how big the group is. This means each bird can “sense” things happening far across the murmuration, and react as one.
Similar forms of self-organization can be found in the flashing of fireflies, the rhythmic chirping of cicadas and the spontaneous clapping of sports fans in unison. Nature’s tendencies towards synchronicity can align even the most chaotic and unpredictable of elements.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Building your leadership team
Evolve your time as CEO from doing to managing
As you scale beyond tens of people into the hundreds, your role as founder needs to undergo
a dramatic transformation. You’ll no longer be
involved in every hire, or even know everyone’s
name. You’ll inevitably feel a weight of responsibility for the livelihoods of so many others.
You’ll have multiple investors, and will probably
have less than majority ownership or control of
the company. You’ll feel yourself pulled away
from frontline activities and the raison d’être
behind your business, and sucked more deeply
into running the company.
These changes are both inevitable and in the best
interests of the company. But adapting to them
can be challenging, and you need to adjust the
way you spend your time accordingly. One of
the most crucial things you need to consider is
how to create CEO leverage—bringing people
on board and creating processes that can channel
and amplify your actions, freeing you up to focus
on what only you can do.
You need to become the conductor rather
than the musician.
Martin Mignot, Index Ventures
Several of the founders we interviewed for this
book had things to say about this transition in
their role:
In my first startup, I still found myself
coding on the side when we were 80 or 100
people, which maybe wasn’t the best use
of my time. As a developer, it was tough for
me to rewire my brain so that I didn’t see
a day without coding as a wasted day.
But leading is about getting leverage
through others.
Jason Citron, CEO & Co-Founder, Discord
In the early days, I just had to put in the
sheer hours needed. I can now create
windows when I can be more deliberate,
and my focus is on celebrating our success,
while ensuring we retain humility and
grit. But I still can’t take my foot off the
gas—there’s just a different shape now
to how I achieve.
Kate Ryder, CEO & Founder, Maven
You need to fight against the inertia of,
‘I’ll keep doing what I’m doing now.’
You need to regularly realign your time
against the real priorities.
Matt Schulman, CEO & Founder, Pave
I am now surrounded by a lot of doers,
but ideas often originate with me. With
hundreds of people in the company,
I focus my internal time on upleveling
my executive team, while maximizing
the external time I have with customers
plus media.
Anonymous Founder
You might hope that you’ll spend less
time on people, but you won’t. It will just
morph into other types of people stuff.
Divinia Knowles, The COO Coach
Now that we’re at a larger scale, my role
has developed into founder plus executive.
As a founder, I can bring passion, product
instinct, domain expertise and intimate
knowledge of the company; As an executive,
you need to really focus on leadership
and operational excellence. Being able
to combine both is a real privilege.
Abakar Saidov, CEO & Co-Founder, Beamery
A key part of my role now is to bring
clarity and simplicity. I’m the only person
in the org who can say, ‘We’re not going to
do X, and that’s ok.’ Otherwise everyone
wants to perform and achieve, and that can
overcomplicate and reduce effectiveness.
Rodolphe Ardant, CEO & Co-Founder, Spendesk
But there’s a balance to be struck here. While you
need to step away from the frontline, you also
need to consider where you, and only you, can
make the most impact, and feel the most fulfilled.
If you have a “superpower” it brings you joy to
use, then carve out time and formal responsibility
for exercising it. For many founders, this revolves
around product, and they love to remain hands-on
with product review sessions. The key thing is
that you do this in a way that always provides
learning and development progress to other
members of the Product team. The same principle
applies if your superpower is in sales, operations,
or anything else.
Inspiration and vision are very important.
But my value also lies in translating these
ideas into products. If you disconnect
completely from building, it’s too easy for
folks to misunderstand what they should
be building, and you can end up with
hallucinations! So I see my role as more
like an editor, working with raw material.
At any time, certain areas of the business
need more editorial input than others.
For areas that are ticking, I’m offering
inspiration. But for areas that are misfiring
or new, I lean in.
Jason Citron, CEO & Co-Founder, Discord
Hanno [Personio’s CEO] is good at
choosing what he wants to do, and
at pulling back when he’s too deeply
involved in something that he shouldn’t
be. It’s impressive ‚and also very rare.
Maria Angelidou-Smith, CPTO, Personio
Core executives
At the start, hire just a few executives
In the early days, it rarely makes sense to hire
executive-level talent across more than a couple
of functional areas. You won’t be able to afford
it, and you’ll also struggle to access and land
high-caliber candidates. You’re also unlikely to
know the precise profile and experience that
would be most helpful for your company. In general, we advise you not to hire more than three
executives by the time you reach 50 people.
Nonetheless, it can be beneficial to have seasoned
professionals to guide your early thinking. The
concept of “fractional execs” has therefore gained
ground in recent years—that is, former operators
who spread their time across a number of startups during the period before a full-time executive
is hired into the role. There is a growing talent
pool on the fractional side, particularly for People, Marketing and Finance execs.
The best founders know what they don’t
know. Working with fractional executives
can help them to accelerate their learning
curve, so they know more clearly who
they’ll need in a full-time capacity later on.
The risks and costs are lower than diving
straight into a full-time hire. For example,
which marketing channels and
competencies should you double-down on?
Doing this before you hire permanently
can bring clarity and focus to your role.
Sandra Schwarzer, Index Ventures
There are still risks with fractional executives.
Are they an outsider or an insider? Are they doing
actual work or only advising? It’s important to
have clear and aligned expectations around these
questions. It may be that a more traditional advisor role is better suited. But if there’s heavy lifting
to be done, you want an “insider” mentality.
We favor constructing these relationships as
part-time employees rather than as contractors,
with a minimum of three days per week. While
this can be less favorable from a tax perspective,
the “psychological contract” is stronger. Another
option is a “burst exec”, who is contracted (three
to five days per week) for a few months to deliver
a defined project or objective. For example, a
People Leader who helps to deliver the initial
vision, mission and values documentation plus
internal rollout. Or a Finance Leader who helps
you run your next fundraise. The worst type of
arrangement in our experience is a one day per
week freelancer paid per diem, who never really
gets under the skin of who you are or what you
need to focus on.
You might find it helpful to engage one or
two fractional functionally-oriented executives
during the first period of scaling, but construct
these relationships as either “burst contracts” or
as part-time employees.
Craft your inner circle as you grow
Even with co-founders to share the load, you will
need to increase the number of experienced and
specialist functional leaders as you scale—people
you can comfortably delegate to, and who know
what “great” looks like without having to learn
it through trial and error.
These executives will be people who can operate at either a VP or CXO level, who can assume
responsibility with a high degree of autonomy
to run an entire functional area of the business.
They will always (with a 95% likelihood) be
better qualified than you or any other co-founder
to run their function at scale.
It all comes down to the quality of your
executive team. Building this team is
your number one priority. It just makes
everything else easier.
Daniel Ek, CEO & Founder, Spotify
Building a leadership team also brings its own
challenges, such as managing internal comms now
that there’s a new layer between you and the
broader team. Most of your time will now be
spent with a small number of direct reports, so
you’re no longer directly role modeling the behaviors you want to see in the organization as a whole
in areas such as goal setting, feedback (positive
and negative), quality bar, and prioritization.
The central challenge when selecting and
managing leaders is ensuring that things
are done the right way, even when you’re
not looking.
Martin Mignot, Index Ventures
Find “executive-stage fit”
Very few functional leaders can be star performers at all stages of growth. Companies often
progress through multiple generations of leadership in core roles on their journey from startup
to IPO-readiness. This can be challenging to
manage as a founder, since it can involve letting
go of executives as well as finding new ones—
topics we’ll address later in the chapter.
We can distinguish three leader personas that
map against stages of a company’s life: Builders,
Scalers, and Optimizers. Each of these personas
also brings a distinct blend of leadership thinking: strategic, tactical, and operational.
1st Generation—Builders excel at reasoning
from first-principles to quickly spin up a function
from nothing. As multi-tasking player-coaches,
they thrive in ambiguity.
Title / Level = “Head of” or Director
Core skill set = Tactical + Operational
2nd Generation—Scalers are skilled at templating ways of doing things at scale. They’re
seasoned managers, and demonstrate strong
potential, if not first-hand experience, of being
effective managers of managers.
Title/Level = VP or CXO
Core skill set = Strategic + Tactical
3rd Generation—Optimizers have worked at
large corporations. They know how to lead big,
multi-disciplinary, matrixed organizations that
connect across multiple geographies and business
units. They’re experienced “leaders of leaders”.
While they can add value post-IPO, they’re rarely
helpful in a pre-IPO company. In fact, their
process-heavy mindset can be destructive in
high-growth.
Title/Level = CXO
Core skill set = Strategic + Operational
As a functional team gets bigger, you
move from generalists to specialists, and
then to segmented sub-teams. It takes
a more experienced leader to execute
effectively across all these pieces.
Abakar Saidov, CEO & Co-Founder, Beamery
The point at which these types of leaders come
into their own varies by function. Headcount is
one key factor. Since engineering and sales teams
tend to be the largest, the need to switch from
“doing to managing” and then to “managing managers” tends to happen here first. This is reflected
in our analysis below. But other factors also contribute. For example, as you prepare for an IPO,
you need a CFO and General Counsel who have
the credibility and gravitas to reassure institutional investors.
If you hire the wrong type of leader for your
stage, expect things to go wrong, even for individuals with exceptional track records and pedigrees. Scalers will struggle to hire and inspire
the caliber of people needed for them to step-up
to be Optimizers. And Optimizers will struggle
to get into the weeds and lead by example, which
is necessary as a Builder.
While the functional teams that experience
most growth are the most likely to need transitions in leadership, the tenure of different functional executives illustrates the different dynamics
at play. The longest tenured executives are in
Finance, Engineering and Legal, while the shortest-tenured are in People/HR, followed by Sales.
This aligns with our experience—Finance and
Engineering Leaders have more objective and
tangible skills and qualifications. By contrast,
leadership of the People function is more subjective and intangible, and depends upon a close
match between the values and behavior of the
People Leader and the CEO. Sales leadership has
very measurable objectives, but performance
shortcomings show up quickly, and the area can
be prone to a mercenary mentality.
Can people move between the Builder, Scaler and
Optimizer leadership styles? Sometimes you’ll
find leaders who excel at one of the earlier stages,
and who go on to specialize as serial operators
at that specific phase in the startup lifecycle. You
can also find leaders with less experience who
can continue to thrive in leading a function, even
in hyper-growth. Conversely, you’ll sometimes
find a leader with huge amounts of experience
and maturity who is able and motivated to step
back from Scaler to Builder, or (more rarely),
from Optimizer to Scaler. But it’s vanishingly
rare for a successful double step-back from an
Optimizer to a Builder.
I’ve had more positive surprises from
people hired for more immediate needs
who are able to scale into the future
than the opposite. Hiring big company
Optimizers rarely works for pre-IPO
businesses.
Martin Mignot, Index Ventures
Calibrate what excellence means for each
executive role
You should be regularly discussing the performance and evolution of your leadership team with
your Board, your advisors and your coach (if you
have one). This will give you a sharper focus on
emerging gaps, and allow you to plan in advance
for hiring, or switching out, executives.
Where you suspect gaps are emerging in
a leader’s ability to perform, you should begin
a process of external calibration. Leverage your
investors, network and search partners so that
you can talk to top outside executives in that area.
These don’t need to be interviews with active
candidates, but they should be conversations that
you prepare for, to reframe your expectations of
what “great” looks like for your stage of growth.
We’ve used board members and our
VC’s Talent teams for introductions to
both active and calibration candidates.
Assaf Rappaport, CEO & Co-Founder, Wiz
Executive hiring calls for a different mindset
from you as a founder. Candidates will be deeply
knowledgeable about their area and are likely
to have longer career histories than yourself.
But don’t be bowled over by an amazing resume,
and trust your intelligence. If a candidate can’t
explain something clearly to you, it’s more likely
to be a problem with them than with you.
You’re constantly upskilling across the
board, and it can be hard to balance
trusting your gut with the rigor that’s
required to find your second gear.
Alex Zaccaria, CEO & Co-Founder, Linktree
I made some poor executive hires early on.
But I learned from that and got better.
I just had to. I came to know more clearly
what I was looking for, and was willing to
wait for months and months without
caving in to the pressure to compromise.
Andrew Robb, COO (former), Farfetch
Build towards a full-stack leadership team
The following executives are critical leadership
roles common to any IPO-ready successful tech
company, regardless of its focus or how it operates.
Additional executive roles may be critical for your
specific sector or business model—for example,
Chief Risk Officer or Chief Investment Officer in
fintech, or Chief Supply Chain Officer in D2C.
The precise composition of your executive team,
including the hiring pace, sequence and the mix
of C-level and VP-level executives, should reflect
your:
Stage of growth
Strategy and competitive differentiation
Strengths as CEO and the strengths of existing executives
Example 1—If you put design at the heart of
your competitive differentiation (e.g. Airbnb
or Squarespace), then having a Chief Creative
Officer makes sense.
Example 2—If you have an exceptional early
executive who really understands your broader
strategy, you might make them COO, with several
functions led by VPs below them.
It’s a meta-skill for any organization
to periodically reorg in order to align
its people with an evolving strategy.
Soleio, Investor × Designer, Figma Advisor and former Dropbox and Meta
You should steadily build your executive bench
as you grow, but expect more rapid executive
hiring between 125 and 500 headcount. This
reflects growing operational intensity in the
business. It’s often a particularly high-pressure
period for you as CEO, because you’re personally
managing emerging leadership gaps while also
making time to hire into them.
TeamPlan—Explore our entire library
of 210 highly-successful startups for
more detailed insights into when and
how they built their leadership teams.
Hiring executives
Hire no more than two executives a year
Don’t hire a whole slate of executives at the same
time. Finding and hiring exceptional executives
is tough. Hiring several in a year, at the same time
as maintaining your quality-bar, onboarding them
successfully, and expecting business needs to stay
roughly the same, are compounding risks. We
suggest an annual limit of two new (CEO direct
report) executives, and in exceptional cases,
three. This will force you to think carefully about
your priorities as you build your exec team.
Each year, you should bring on one exceptional (C-suite) executive. Someone you’d
have been unable to land in previous years.
Dom Vidal, Index Ventures (former)
I tried hiring four executives at the same
time last year, but it was unsustainable.
One is ideal, and the absolute max is two.
Never do more.
Matt Schulman, CEO & Founder, Pave
Reframe your perspective on interviewing—Jason Citron, CEO & Co-Founder, Discord
Spending the time to recruit executives
and senior people is critical as you grow.
Bringing in individuals who’ve “seen the
movie before” creates the leverage you
need. But I was held back because I just
found the endless hiring processes and
interviews boring. It was like eating broccoli. It wasn’t until I reframed my
approach to ask, “What can I learn from
this person?” I now treat interviews as
advice sessions. I ask people to help me
work through relevant current issues. It’s
a great way to assess them and is also stimulating for me—it’s like adding garlic and
chili flakes to help the broccoli go down!
Hire executives aligned with your needs in
two years' time
You need to reframe what capabilities you need
from an executive hire against what your company will look like in 18 months to three years’
time, not against your needs today. The faster
your growth, the more important, and challenging, this is to envision. However, it’s essential so
that your ramped executive can operate at their
sweet spot of experience, but also look forward
to new challenges beyond. This also gives you
the time as a team to hit the milestones necessary
for the executive to be successful—for example,
to get your product ready for rollout by a new
enterprise-focused Chief Revenue Officer (CRO),
or to put in place the necessary accounting foundations that a strategic CFO can build upon.
Hire leaders for your next chapter of
growth, rather than on a timeline. If you’re
preparing to roll out an enterprise
offering, hire a CRO or VP Sales capable
of doing that.
Nina Achadjian, Index Ventures
I optimize for the job as I envisage it
in three years’ time. Most people run in
cycles, where Y1 is onboarding, Y2 is
performing, and Y3 is getting itchy about
what comes next.
Andrew Robb, COO (former), Farfetch
There are times you just need to hire
someone to get you through the next two
years, even though you suspect they’ll then
plateau. You can think of this as a ‘tour of
duty’ approach, and reassess what you need
when their tour is up. In general, though,
you should try to hire someone you can
imagine being in the seat in three years’
time, particularly in roles that you expect
to look very different then versus now.
Sandra Schwarzer, Index Ventures
Look for “step-up” execs
To widen the pool, consider a candidate looking
for a step up. You’ll want to look for someone
who has thrived in a second-in-command role,
running a function at a similar or later stage, and
who’s had a great mentor to learn what excellence
looks like. Their current job title or the number
of people they’ve managed isn’t nearly as important as having skills equivalent to a proven leader
(e.g. communicating, influencing, inspiring,
developing, handling complexity). However, be
more cautious about step-up candidates for execution-intensive roles running big teams such as
Sales or Engineering. In these cases, you want
someone who already knows what to do.
Don’t only look at executive experience.
Also look for the number two who wants
to become number one. For example,
a Finance Leader who’s lived it all including
an IPO, but didn’t lead it themselves.
These people are hungry and can grow.
Assaf Rappaport, CEO & Co-Founder, Wiz
Think hard about how far you can broaden your
search to include candidates working in different
sectors or business models. For some roles, you
might be looking for very specific sector insight
and experience, such as enterprise security sales.
But for others, like CFO or VP People, you can
flex more widely, which in turn improves your
candidate diversity.
Location also has a big impact on your access
to talent. The Bay Area still has by far the deepest
pools of executive tech talent across all roles. This
will shrink significantly if you are in a nexttier location such as New York, LA, Boston or
London, and dramatically for most other places.
Think through whether relocation would be necessary for the right candidate, or how much
in-person travel time would be acceptable. Otherwise, manage down your expectations on hiring proven executives, and focus on step-up hires.
Consider the impact on your incumbents
If you need to hire on top of an existing leader, be sensitive. Figure out if it’s better to try to hold
onto the incumbent, or to encourage them to
move on. If you want to keep them, present it as
an opportunity, and make sure the incoming exec
is truly a step-change, someone they can respect
and learn from. Make the transition a success for
your incumbent leader, opening their path to be
a step-up candidate in a future role.
If you want the incumbent leader to stay
on with you, it’s really important to involve
them in the interview process, though
only later, once you’re reasonably confident
that you’ll make an offer to the candidate.
The incumbent shouldn’t have a right
to veto, but they might flag potential
issues. The interaction should ideally be in
the context of a case study or lunch, rather
than a formal interview or competency
assessment. You should do a rich debrief
with the incumbent to draw out potential
onboard ing opportunities or challenges for
both the candidate and the existing leader.
Sandra Schwarzer, Index Ventures
Look inside and out for executives
We discussed why internal promotion is a good
idea in the last chapter, and how it needs to be
balanced against the benefits of drawing in fresh
perspectives and candidates with richer operating experience. These challenges bite the most
at the executive level, which is reflected in the
range of opinions offered below. In high-growth,
you’ll need to look externally for the vast majority of executive-level appointments. On the other
hand, the proportion of executives promoted
from within will increase with scale. Our analysis
indicates that 18% of executive appointments
made between 51–125 total headcount are the
result of internal promotions, rising to 25%
between 126–500, and reaching 32% by 501–
1,000. We also found that internal promotions
to VP level are twice as likely (20% of total) as
those to CXO (9%).
Why you should hire externally
There’s a tendency, especially for first-time
founders, to be too loyal to their existing
team leads and too trusting in their ability
to scale. Instead, there needs to be an
honest reckoning: Are the people leading
the company today really the right people
to take you to the next stage? If a skill set
or expertise you need is missing, you need
to find it externally.
Sian Keane, Chief People Officer, Farfetch
You go through so much together with
your early leaders. You want them to
continue to succeed, and it’s hard to take
your loyalty out of the equation. You can
end up putting their needs ahead of the
company’s.
Anonymous Founder
If your year-over-year growth goal is 35%,
you can probably promote internally, if your
existing team is working like clockwork.
But 80% or 100%? That’s just not possible
without people falling over. You need to
supplement your leadership with external
talent to cope with that pace of change.”
Marcia Kilgore, Founder, Beauty Pie
“External talent can raise the bar, and
expands the skill set and perspective of
your team.
David Lee, Chief Creative Officer, Squarespace
The toughest decisions involve internal
candidates with great potential, but where
you just don’t have the time to wait for
them to get there. It doesn’t happen often,
but when it does, it hurts.
Andrew Robb, COO (former), Farfetch
Our first CX agent was amazing and
ambitious, but not highly experienced. We
progressed her too far, too fast, and
without sufficient mentoring. Eventually,
with a team of 150 under her, the pressure
became too much. We made a mistake,
which I’ve tried to learn from.
Anonymous Founder
Why you should promote internally
The state-of-the-art isn’t what’s going
on in the last generation of post-IPO tech
companies. If you’re super successful,
it’s a new playbook, likely written at
your company!
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
It’s human nature to look for superstars
outside. We undervalue the people we
know, and overvalue the people we don’t.
Kipp Bodnar, CMO, Hubspot
Internal promotion is particularly
important from a diversity and inclusion
perspective—identify and nurture your
own talent pipeline.
Lindsay Grenawalt, Chief People Officer, Cockroach Labs
It’s controversial to say, but some
functions have such a mediocre executive
talent pool—in marketing and people in
particular—that it’s often not worth
bringing in a so-called expert from outside.
Anonymous
Each external executive hire you make
involves a risk. It can go horribly wrong,
even with a rigorous search process.
Sian Keane, Chief People Officer, Farfetch
Stability and equilibrium are often
undervalued in leadership, versus bringing
in new leaders externally.
Gabriel Hubert, Co-Founder, Dust and Product Lead (former), Alan
Also be aware that some investors can have a tendency to look to a big hitter from the outside
to solve problems. But bear in mind that they
won’t know your own team members and their
strengths as well as you do.
Scaling yourself in a scaling company—
tips from Farfetch
Sian Keane joined Farfetch in 2013
as Head of HR when the company had
60 employees. She was promoted as the
business scaled, becoming Chief People
Officer in 2018 and through IPO. She
offers three lessons for professional
development:
1. Network—Build a solid group of external professionals who knows what challenges are likely to come in the next phase
of growth. It’s critical to know what’s
coming down the track in order to plan
and be ready for them.
2. Think longer term—Major processes
or projects can take a year to design and
implement, and another year to embed.
So you need to project forward two to
three years, to design for what the organization will have grown into at that
point, and therefore what will be needed.
You need to turn this type of thinking
into a habit.
3. Invest in your personal development
—Set aside a generous amount of time for
coaching, reading and courses. Actively
seek out feedback, and be open to changing as a result of what you hear. Cultivate
humility and self-awareness.
Having a growth mindset is key to scaling
as an executive in a high-growth company.
Embrace imposter syndrome, with a
thirst to learn and stretch yourself. Push
constantly to be better. But demand brutal
honesty from the CEO to tell you if
they think you’re falling behind. You’re
a shareholder too.
Nina Achadjian, Index Ventures
Run rigorous executive search processes
If you need to prioritize an executive hire, and
there’s no amazing candidate either internally or
uncovered through your network, then you
should work with an external search partner.
Given the air of mystery that can surround
headhunters and executive search, it’s worth
going into more detail for exactly how to do this,
using our 13-step process below.
1. Be judicious about who you pick
Founders often don’t pay enough attention to
this critical first step. Get recommendations for
search specialists from your network and your
investors. Get pitches from two or three, and be
sure to take references from recent clients. Make
sure you ask plenty of questions, such as:
Have you done similar searches to this one
before? When?
Who ran these searches? Are those
individuals available to work on my search?
How well do you understand this type of
role? Can you describe specific candidate
archetypes and which might be right (or
not) for us?
What success have you had in securing
diverse hires for your clients? How have
you achieved this?
Which companies are off-limits due to
client clashes?
How many searches will your lead partner
be conducting in parallel?
Are you conducting parallel searches which
might create tension or conflict due to an
overlap of potential candidates?
Who will make the first call to candidates?
Who will conduct the first interview?
Can you provide sample profiles based on
our first (pre-selection) call? (This is
to check how well they have understood
your brief.)
Can you show us you understand the
compensation range for this role, split
between proven versus step-up candidates?
Can you provide constructive challenges to
our objectives? For example, in relation to
our access to top candidates, who can we
realistically target given our stage and
profile? Are our timeframes for completing
this search realistic?
Fixed-fee is the standard approach, split into
three staged tranches (kickoff, mid-way, and getting an accepted offer from your chosen candidate). Some top firms have an appetite for taking
equity in lieu of cash for a portion of their fee,
although very few will push this.
2. Be clear about your priorities
Your search partner should take the lead to ensure
that you:
Know the likely overall timeline for the
search, and when you can expect to be
meeting the first pre-screened candidates.
Map out the full hiring process in advance:
Which interviewers, in what sequence, and
with what power (influencer versus
veto-power)?
Write a job description, which can be
shared with interested and vetted
candidates.
Build a scorecard for the role, setting out
the four to six key competencies you’re
looking for, potentially with a weighting
between them.
Establish “candidate archetypes” that may
be a good fit and worth targeting. For
example, you might define three archetypes
as: proven candidates in your sector,
proven candidates in adjacent sectors, and
step-up candidates in your sector.
Set diversity goals for the search. Your
search partner should be able to let you
know the key diversity parameters for the
specific role, allowing you to realistically
target a specified percentage of diverse
candidates for initial conversations, and for
your shortlist.
Share the above materials with your
interviewers, and ensure alignment.
Get the recruiter to pitch the role back to you,
before they start outreach to candidates. This is
to make sure they’ve got the story clear, and can
effectively showcase your company, the role and
the opportunity.
3. Stay abreast of the search process
Schedule weekly update calls with your search partner to discuss specific
candidates, the overall candidate pipeline,
and any feedback they’re hearing back
from the talent pool overall. Do not
delegate these calls—as CEO you need to
be driving the process.
Conduct initial meetings with a slate of
candidates that cover your target candidate
archetypes to help you sharpen your
preferences and narrow the search
parameters.
Highlight top (and top diverse) candidates,
where initial outreach could be directly
from yourself to improve the likelihood of
a response.
4. Start interviewing within two months
There’s a wide time range for running a search
from kickoff to an accepted offer. It can run from
as little as six weeks to as long as seven to eight
months for highly complex searches (e.g. a tricky
role in a tough geography with specific diversity
requirements). However, you should be meeting
multiple viable candidates within two months,
and have established a clear understanding of
what “great” looks like.
5. Use your interview time efficiently
Getting your leadership team in place is a key
priority. Great founders will make time for candidate calls without slowing down the overall
search process. On the other hand, you shouldn’t
need to speak to 20 candidates. Your search partner should ensure that each interview you conduct teaches you something new, even if you
reject the specific candidate.
6. Engage passive candidates
The majority of candidates you’re likely to meet
during a search will be passive. Although the
search firm will have warmed them up, you’ll
need to spend five to 10 minutes connecting with
them on a personal level before you can gauge
how much effort it will take to sell the opportunity to them and get them fully invested in the
process. Only then will you have earned the right
to quiz and assess them at length.
7. Have an open dialogue with your
search partner
When issues arise, the key is to have an open and
ongoing dialogue with your search partner. They
should know if you’re unhappy rather than being
surprised if you express disappointment after
several weeks. Likewise they should be managing your expectations about the search process
and target candidates, ensuring you’re all aligned
and that their assertions are supported with
data. For example, if they say that you are overly
focused on aspirational versus viable candidates,
can they prove unresponsiveness to outreach
or compensation expectations that are beyond
your budget?
Here are some of the main reasons why executive searches go wrong:
A mismatch between the search partner
and the client on the exact role or profile
you’re looking for—This suggests
poor stakeholder management by the
search partner.
Clarity of feedback—Are you giving clear
feedback after each interview you conduct
to help the search partner tighten their
parameters? Or are they failing to adjust
their approach based on your feedback?
Lack of success connecting with target
candidates—For example, is your search
partner over-committed and using juniors
to call candidates who are unable to convey
your story effectively?
Lack of internal alignment—Do your
interviewers have a shared understanding
of what you’re looking for?
Time-lags between interviews—Are you
moving candidates through the process fast
enough or are you losing them to
competing searches or to a sense that
they’re not a priority?
Reputation in the market—Have you
pre-burnt yourself in the market through
negative news or opinions shared by
former employees?
Hot talent market—We’re past the
craziness of 2020-21, but top candidates
remain in very high demand. A hot talent
market can still make a search twice as
hard and long, with candidates fatigued
through constant approaches by recruiters.
Rigidity about location—If you’re not in a
top-tier location and insisting on
permanent relocation, you may simply be
unable to find candidates willing to engage
in your process.
8. Assess candidates’ technical skills
with an outside expert
As we discussed in Chapter 4,
it’s good to apply the same questions to all candidates so you
can easily compare their responses. In addition to what we’ve
covered previously, use the scorecard you’ve created with your
recruiter as the basis for the questions.
For many executive roles, you’ll lack individuals internally who can really assess a candidate’s
technical skills. In this case, involve an outside
expert to conduct a purely technical assessment.
Your investors should be able to introduce relevant experts for most functions.
Dylan [the founder of Figma] is exceptionally good at seeking outside advice from
experts to learn about new topics. He
recognizes the limits of his own knowledge.
Amanda Kleha, Chief Customer Officer, Figma
You need a very bought-in candidate before you
can use a complex case study requiring hours of
preparation. Otherwise, you’re giving candidates
an excuse to pull out of the process entirely. This
means that the case study is usually the last step
in the process before you extend an offer. Also
gauge the candidate’s situation—for example,
a CFO at a sensitive point in their budgeting or
fundraising cycle isn’t going to appreciate the
extra burden.
9. Make sure candidates’ values align
In an executive hire, values-fit is crucial. In addition to the
suggestions we offered in Chapter 4,
you’ll need to invest extra time with candidates
you’re assessing for your executive team, so make
the most of it. Once they’re deep into the process,
you want to observe them carefully in-person,
both in and out of the office. How do they interact
with other people? What does this say about their
values? This is also an opportunity to gauge your
personal chemistry, which is critical with any
direct report that you hire. You have to be able
to relate to the individual, have a good rapport,
and find your interactions with them enlightening and energizing. But you also have to be aware
of unconscious bias, and the tendency to hire
people who look, sound and think like you, or
what you understand “competence” to mean.
With candidates from very large organizations, try to anti-sell them in the
interview. Really push at their motivation.
It’s a risk, but candidates who haven’t
actually worked in a startup can be drawn
to the romance rather than the reality,
and end up leaving.
Andrew Robb, COO (former), Farfetch
One of the simplest tests is taking
someone for coffee or lunch, and seeing
how they treat the barista or server. It
sounds straightforward, but it’s amazing
how many people can regurgitate values
from a job spec in a discussion, but clearly
not live them in practice.
Charlotte Howard, Index Ventures
As soon as possible after each interview, complete
a scorecard for the candidate. Highlight points
of interest or concern against each competency
and areas for follow-up, if the candidate made the
cut to progress to the next stage. Also think about
which of your internal interviewers will be best
placed to explore each of the outstanding areas.
Any instinct you have from interviewing
is probably right, and 10× worse than
you think it is. Take time to lean into the
feeling and unpack it. If you perceive
a lack of fit, don’t move forward.
Max Klijnstra, Co-Founder and Chief Growth Officer, Otrium
10. Get feedback from interviewers
Ultimately you are the hiring manager, and you
can’t delegate the decision. But you want to get
objective and frank feedback from your other
internal interviewers. Use your scorecard to focus
this feedback on what really matters.
Make sure that you don’t bias other interviewers by providing too strong an opinion about
how you feel. Collect the feedback “blind” as soon
as possible after they have met the candidate.
If you’re deciding as a group on whether
a candidate should receive an offer, the
CEO should always speak last, to avoid
introducing bias.
Sandra Schwarzer, Index Ventures
11. Take at least four references
Eliciting representative references to guide your
decision-making is particularly significant when
you’re hiring executives. (See our earlier remarks
in Chapter 4
for some background about how to handle references and backchannel checks).
You should aim for at least four references for any
executive hire, and ensure you collect broad feedback (previous managers, peers, and subordinates) to give you confidence about your decision,
and also to identify insights to help with effective
and personalized onboarding.
I do loads of referencing on executive
candidates, sometimes up to a dozen.
There’s no such thing as too much.
Amit Bendov, CEO & Co-Founder, Gong
12. Make your offers personal
As the CEO, you should always extend your offer
verbally one-on-one to an executive candidate.
Make it as personal and authentic as possible,
highlighting why you’re looking forward to
working together and the scale of the opportunity this role affords. Follow up with a written
offer letter that restates why you’re excited by
them, and why you think they should be energized by this opportunity.
Index Ventures’ Rewarding Talent offers
further guidance around equity compensation for executive hires.
Obtain board (or Remco) approval before you
table any executive offer, including upper limits
for how far you’re willing to step up during negotiations. If the candidate is going to see a drop
in their cash compensation, you might choose to
table your highest and best offer upfront. Alternatively, you might give yourself some wiggle
room by starting lower.
Compensation negotiations with executives
should never go for more than two rounds,
otherwise they corrode good faith and
mutual respect.
Dominic Jacquesson, Index Ventures
You need to be prepared for a candidate to reject
your best offer. This can be tough after you’ve
invested so much time in building conviction and
internal alignment, but offer acceptances for
executive roles are 75–80%. You need to be ready
to walk away and continue your search. But you
should first explore in detail with the candidate
why they’re saying “no”, in case there are elements
that can be worked through. As one example, is
it a question of start date versus a significant
vesting point in the candidate’s current role?
13. Spend the first year onboarding
Several of the entrepreneurs we spoke to confessed to hiring excellent executives who failed
to make their expected impact, primarily because
of insufficient or poor onboarding. These executives never learned how to navigate the organization effectively or to understand the context
behind historical decisions, and therefore failed
to build trusted relationships with the people
that really mattered. They usually ended up leaving the organization and the whole executive
hiring process had to restart, this time with the
added challenge of having to explain to wary new
candidates why the previous incumbent didn’t
stick around.
Poor onboarding is often the cause of
executive hires rapidly bouncing out. Give
up any machismo ideas about ‘sink or
swim’ or throwing people in at the deep
end. You want them to have a positive
impact as soon as possible, so invest
upfront and set them up for success.
Sandra Schwarzer, Index Ventures
For executives, onboarding is not a 90 day process—that’s just too short. Their whole first year
can be considered part of onboarding learning
the culture, building critical relationships, understanding systems and so forth. Be deliberate
about creating a plan. You need to spend enough
time with the executive both inside and outside
work to establish trust and openness.
Onboarding will involve a range of other
people too, both internally (e.g. peers) and externally (e.g. customers, vendors, investors). You
should jointly define and prioritize whom they
should spend time with, provide pre-briefing
context, and spend time debriefing. Focus on
early warning signs come up during this
period, such as misunderstandings or ambiguities
that could impede effectiveness, and unpack why
they arose. For example, role overlaps or differences in communication styles or personalities.
In particular, watch how they respond to feedback, particularly to criticism. Remember that
while people can change their style or approach,
there’s zero chance of this happening unless
someone has explained why that style isn’t appropriate in your company, and how they should
behave instead.
I recommend daily 15 minute one-to-ones
with direct reports during onboarding.
Keep this going until it becomes obviously
over-the-top. Inadequate onboarding can
be fatal for a new executive. You need
to give immediate feedback to set them up
successfully. I also go above and beyond
in stressing to my direct reports the need
to be raw in their feedback to me. You’ve
got to establish honesty and openness in all
your communications.
Matt Schulman, CEO & Founder, Pave
You can add further richness and evidence into
feedback you offer to executives by personally
conducting 360s with their direct reports at the
six and 12 month points. As CEO, people might
find it hard to open up to you with negative comments, fearing that you could disclose what they
share in a way that could come back to bite them.
If you have cause for concern, you need to ask
direct reports who you know to be high performers about the specific concern, and stay attuned
to subtle signals when they respond, so that you
can lean into this for more detail.
The first 90 days is also a unique opportunity
to leverage a new executive’s fresh pair of eyes
on the business. Make the most of this time for
“reverse onboarding” to hear what the new hire
has to say in order to identify strengths and weaknesses in your own company and team.
Fire under-performing executives
decisively but graciously
Even with a thorough assessment and onboarding
process, you can’t guarantee that executive hires
will work out. For a start, there’s a learning curve
to figuring these processes out, so expect to make
at least one or two executive mis-hires as you
build out your team, and don’t beat yourself up
for having made a mistake. As discussed earlier,
only a minority of executives can adapt their
approach across multiple stages of company
growth, which means that the time will likely
come when you part ways with them.
In the early days, I was too slow to pull
the trigger on under-performance. One of
my first hires took me 12 months to let
them go. The next was six months, then
three, and then two. I’m getting better
at identifying issues and acting on them.
Anonymous Founder
This can be emotionally tough. You know how
challenging and disruptive it will be to hire and
onboard an alternative executive. But you need
to stay alert to signals, particularly during their
first six months, that things aren’t working out
positively. A consistent failure to hit mutually
agreed objectives is a clear signal, as is a failure
to course-correct on behavioral issues that you’ve
flagged to them. Repeated negative feedback
from 360 reviews conducted with the executive’s
direct reports is another. If these indicators
mount up, you should share your concerns with
two or three trusted confidants to get their perspectives: board members, established senior
executives, co-founders or relevant advisors.
Be very wary if an incoming executive
starts to lose, or to fire, individuals below
them who you had thought were
high-performers.
Mark Fiorentino, Index Ventures
Where you get clear signs that things are going
wrong, and where direct feedback and guidance
has failed to bring things back on track, you need
to be decisive in removing them. Otherwise
things will inevitably get worse over time. You
will suffer poor motivation and potentially lose
valuable team members, making it less likely that
you’ll meet your business objectives. Failing to
act could also undermine your team’s confidence
in you as a leader, since you’re the only person
who can put things right.
I had an excellent early ops hire, who
was smart and strategic. I promoted him
to be a manager, and then to VP—this
involved managing managers, which he
hadn’t done before. When a VP Sales
hire didn’t work out, I asked him to step
in as I was over-stretched. The wheels
started to come off at that point. It took me
a while to establish that the issue was more
than one of over-stretch or burnout. He
just wasn’t able to develop his management
skills in step with the scaling in his teams.
When he started to lose good people, I was
forced to act. It was emotionally tough,
but we just couldn’t afford to slow down
our pace for him to catch up.
Anonymous Founder
At this point, if you haven’t already, you’ll need
to disclose your decision to your People Leader,
so that you can jointly orchestrate a termination
process that doesn’t expose the company to
risk.³ When it comes to the actual meeting with
the executive, you need to take care to follow
all guidelines, particularly outside of the US,
where employee protections tend to be stricter.
³
It is also recommended to
have the exit package and
documentation reviewed
by an employment
attorney.
Know what you’ll have to cover in the meeting,
including:
The timeframe for departure
The status of any final/severance pay due
and benefits (particularly health cover)
What you expect from them, if anything,
in terms of handover
The status of any accrued bonus or exercise
rights over vested stock options
These points should also be written up and
printed for the individual to take with them to
review more calmly afterward.
The best advice I was given before
holding my first termination meeting was
to rehearse these lines to use to kick off
the meeting: “I’m afraid I don’t have good
news to share with you today. We have
decided to let you go from the company.”
Make sure you can say this while
maintaining eye contact, and conveying a
neutral but human tone. Pause afterward
to hear the reaction. Expect that this may
take an uncomfortably long time, as the
person processes the news. Be
compassionate to the fact that you are
telling them that you have lost faith in
them. I’ve followed this advice with each
termination I’ve had to conduct since.
Anonymous Founder
If you have been clear in previous feedback to
the individual regarding your mounting concerns,
the news of their termination should not come
as a surprise. For the majority of people in this
case, their reaction will primarily be one of sadness. They might ask how you came to this conclusion, and you need to be prepared with what
you will say, as a succinct but direct summary.
Depending on personality, their relationship
and their own assessment of what’s led to this
point, some people can assume a sense of cynical
acceptance, which you need to have the composure and maturity to let pass. Only a small
minority of individuals respond aggressively,
and you should be able to gauge in advance
whether this is a possibility. If they do, you need
to bring the meeting to a conclusion quickly.
Maintain calm, saying, “I’m sorry that you feel
this way, but I considered this decision very carefully, and it is final.”
Regardless of how an individual responds
during the termination meeting itself, in the
period following it and leading up to their final
day, most people do become more negative and
cynical. They may also become outspoken in
their criticisms of you and of the company. In
these cases, if you had expected the individual
to continue working during their notice period,
you should consider switching them to paid administrative leave.
You also need to restrict or remove access to
any company information, systems and premises
following the meeting. Even if the individual
handles the termination news with good grace,
you should apply certain restrictions during their
notice period. At the least, you should closely
monitor their access and file download activity
to protect sensitive data and knowledge.
Co-founder Relationships
Should co-founders stay or go?
Co-founder harmony is critical to the early success of any startup. However, while a large majority of founding CEOs retain this position in
successful companies through to IPO or exit, only
a minority of co-founders retain an executive
role through to IPO. In fact, many end up leaving the company prior to exit.
The principal reason for co-founders stepping
back or out is that they lack the skill set or desire
to build and lead a large team. In these cases,
there might be an alternative and mutually-beneficial role for them within the company, such as
being an individual contributor or leading a subteam or initiative. However, many co-founders
choose to step away entirely. They might prefer
a return to an earlier-stage environment, or they
might wish to start a new company, or pursue
entirely different career or personal goals.
These transitions can be hard for you and
other co-founders to navigate. Hopefully you’ll
both end up on the same page, making the transition a bittersweet but positive experience.
You might benefit from the input of a mutually
trusted advisor or board member in preparation
for such a conversation. But ultimately, as CEO,
you have to find a solution that is in the best
interests of the company.
The same advice applies to yourself, if you
feel joyless or unable to cope at the thought
of leading the company through the next set
of goals and challenges. This isn’t a character
flaw or failure. Rather, it’s a mature and brave
acceptance. While investors undoubtedly prefer
founder-CEOs, they also know that this isn’t
always in the best interests of either the company
or the founder.
We were looking to close a seasoned
executive. I knew she’d only accept
a C-level title, reporting directly to me.
This forced a difficult conversation
and rapid transition with my co-founder.
Ultimately he realized what was best for
the company and agreed to work under
her. It has been transformational for both
the company and for my co-founder.
Anonymous Founder
We realized over time that whereas I got
joy from the outcomes—regardless of
what tasks this required me to actually do—
my co-founder’s joy had come from crafting and coding the product, rather than the
stuff that they now had to do at scale.
Anonymous Founder
CEO Leverage
Limit your direct reports
There’s no “magic number” in terms of CEO
direct reports. Multiple factors can influence the
best solution: stage of growth, business model,
founder DNA, and the capabilities of the specific
leaders in the company. Reporting lines can
also be fundamentally reconfigured if a COO is
appointed who can take over direct responsibility
for a large chunk of the organization.
In the earlier stages of the company’s life,
CEOs often have a large number of direct re ports—say 10 or 12—as there’s simply a lack of
alternative options. This is particularly true for
solo founders and represents one of the toughest
challenges of taking that path. It’s vital to build
CEO leverage by establishing appropriate support, as well as by hiring leaders to whom you
can delegate.
With scale, the CEO role involves more intensive external-facing responsibilities. You need to
spend more time with investors, media, key
customers and partners. Your number of direct
reports needs to drop accordingly. Note that
direct reports in this context don’t include individuals whose role is explicitly designed to
provide CEO leverage, such as an EA or Chief
of Staff.
By 500 headcount, we advise that a CEO
should not have more than eight direct reports,
and it could be as few as three.
The following functional leaders are direct
reports to the CEO by the 500 headcount stage:
COO/President
Finance—CFO or VP Finance
Technical—Chief Product and Technology
Officer (CPTO) or a separate CTO/VP
Engineering and VP Product
GTM—Sales (CRO or VP Sales) and
Marketing (CMO or VP Marketing)
People—Chief People Officer or VP People
Legal—General Counsel
Without careful attention (and a degree of luck),
getting to this point might involve a particularly
intensive “crunch” period between 126 and
250 headcount, when operational complexity is
ramping up, but before you’ve been able to build
out an effective bench of executives.
This situation isn’t healthy for multiple
reasons:
It over-extends the CEO, drawing them
away from critical engagement with
product, the board and external
communications.
The CEO will be unable to provide
sufficient bandwidth to each functional
area, either slowing things down or
reducing the quality of decisions.
A CEO can’t be expected to be an expert in
all functional areas, particularly as
complexity increases, which further
reduces the quality of decisions.
If the situation persists it can lead to
CEO burnout.
It can make changes to reporting lines
tougher when a new executive is hired.
Individuals may feel that it’s a demotion to
no longer be directly reporting to the CEO
You should also consider lightening your load as
CEO by temporarily giving additional responsibilities to trusted existing senior executives, even
if those jobs are outside of their core competencies. If they have smarts, internal credibility and
your trust, they should be able to rise to the challenge for a period of time.
More senior leaders bring a stronger focus
on their own priorities and ways of working.
The CFO is focused on keeping within
budget. The GC and HR executive have
a focus on risk. The CRO is focused on
growth. This can lead to tensions. My job
as CEO isn’t to play parent but to state
clearly what I want our risk appetite to be
and to communicate this clearly. I use live
instances to demonstrate this. Then I need
to step back and let my executives work
it out between themselves.
Anonymous Founder
Consider a Chief Operating Officer
COOs play a special role in a leadership team, so
it’s worth unpacking what they do, and whether
it makes sense for you to hire one. It all starts
with the founder. Are you at your best when
you’re more hands-off from day-to-day operations, and can focus on vision, strategy and external audiences? Or are you better suited to running
the business, setting objectives and holding people to account? If the former sounds like you,
then a COO could unlock huge leverage.
There are a number of models for a successful
COO. But regardless of what the role looks like,
COOs are typically accepted as being a deputy
to the CEO, empowered to make proxy decisions
regarding almost any aspect of the business.
It’s important to distinguish this framing of
COO—as Chief Operating Officer—from the
more narrowly defined Chief Operations Officer,
which is about specific responsibility across
Operations teams (such as supply chain activities
in a D2C E-commerce business).
COOs are more common in Marketplace and B2C
App business models compared to SaaS. A CRO
in a SaaS business may take on elements of the
COO role, when they oversee the entire GTM/
Revenue team.
The COO offers the CEO a partnership—
someone else who works ON the business
rather than IN the business.
Divinia Knowles, The COO Coach
The classic framing is that the COO is
internally facing while the CEO is
externally facing.
Hannah Seal, Index Ventures
Effective COOs are servant-leaders. They
may be quite introverted, but with enough
personality and confidence to build great
relationships across all stakeholders. The
best setup is when they are complementary
to a more extroverted CEO.
Divinia Knowles, The COO Coach
COOs generally hold more authority than any
other executive in the company besides the CEO.
This may be reflected in one of three distinct
setups:
1. The COO has a large portion of the organization directly reporting to them. This setup
makes sense if the CEO is finding it challenging
to effectively manage their direct reports alongside all their other priorities. Before the COO is
appointed, the CEO may have more than eight
functional lead reports. With a COO (which in
this form might also carry the President job title),
the CEO’s reports could drop to as few as three—
e.g. COO, CFO, plus maybe a CPTO or Chief
People Officer (CPeO). Alternative configurations are also possible: for example, the COO
might take on the Tech team, but not GTM
responsibility. Or in a Marketplace, the COO
might take responsibility for both demandand
supply-side teams.
This configuration requires a very careful
and explicit delineation of roles between CEO
and COO, and of reporting lines, particularly
because top executive hires are likely to insist on
reporting to the CEO. If your COO is supposed
to be “running the show” this can create a conflict. You will also need to adjust your respective
roles over time as the business evolves. The COO
will need to have demonstrably richer prior operating experience than anyone else, as this lies at
the root of their authority.
Well-known examples of COOs with broad
responsibilities across a company:
Facebook/Meta
Sheryl Sandberg ←→ Mark Zuckerberg
Google/Alphabet
Eric Schmidt ←→ Sergey Brin
Box
Dan Levin ←→ Aaron Levie
King
Stephane Kurgan ←→ Riccardo Zacconi
2. The COO has less direct responsibility over
portions of the organization. In this formulation,
the role is more about building connective tissue
and scaffolding for the organization. The COO
drives the operating cadence and principles,
OKRs and execution. This type of COO may own
just one full functional team, plus a smaller
“cross-organization” team (e.g. BizOps, corporate
development, or analytics), although they often
end up with additional interim or project-based
responsibilities. For example, integrating teams,
systems and products following an acquisition;
to stand in if another executive leaves unexpectedly; or if there’s a business area that requires a
dramatic overhaul. This flavor of COO tends to
work best when the individual was previously
in a more focused executive role, and is promoted
to be COO—the most common shift being from
CFO to COO. As a new hire, it can be tough for
this kind of COO to build a deep understanding
of the business, and they therefore struggle to
earn the respect of the leadership team in a timeframe that’s realistic for the model to work.
Jonas was the very first employee at
Personio in 2016, joining as Customer
Success Lead, but limited prior experience.
He’s been a superstar, and was promoted
to VPCS, more recently becoming COO.
He has retained responsibility for CS
and CX, and has also taken on analytics
and operating cadence.
Martin Mignot, Index Ventures
3. The COO is hired early and has broad responsibilities across the company. They are likely to
have solid prior operating experience, but typically much less than in the first configuration.
As the company scales, their direct responsibilities narrow as specialized functional executives
are hired. The COO might be left directly owning
only a single function, but they still retain the
more holistic responsibilities of the COO role.
They accumulate a deep understanding of the
business over time. The degree of trust they’ve
built with the CEO and others is the source of
their authority, rather than their formal span of
control as reflected in the organizational chart.
I joined Farfetch at seed stage, doing
everything that wasn’t related to fashion:
growth marketing, tech product,
operations, G&A and international
expansion. Jose [founder & CEO] focused
more externally: on supply, business
development and investors. As we scaled to
Series C and D and brought on other
executives reporting directly to Jose, my
role narrowed, although I had to jump back
into running teams during transitions.
Both preand post-IPO, I ended up
commercially focused on the core marketplace. But I also owned M&A and had
earned a sort of soft power internally to
shape strategy.
Andrew Robb, COO (former), Farfetch
Consider a Chief of Staff
If you think that you have the ingredients to hold
onto the full-stack CEO role without needing a
COO, you risk becoming the major organizational bottleneck because you’re overseeing so
many direct reports and areas of the business.
You need to create leverage by delegating more
of your to-do list.
In this situation, it’s becoming increasingly popular to hire a Chief of Staff (CoS). The main distinction between a CoS and a COO is in terms
of experience and remit. The CoS rarely has any
team of their own. They triage who you see and
when, join you for most meetings or one-to-ones,
and provide briefings on significant external
meetings. Their overall role is to ensure that you
can focus on priority areas and that your team
follows through on them. For example:
ExCo weeklies and offsites—building the
agenda, capturing and pursuing next steps
Creating materials for board meetings
or offsites
Fundraising—pulling together
presentations and preparing investor
briefing notes
Operating cadence—orchestrating OKR
processes
We distinguish three levels of CoS, which align
broadly with the stage of business:
Early-stage (Seed)—Gives you an extra pair
of hands to competently conduct research
and analysis, which accelerates decision making. Typically two to three years
of prior experience.
Middle-stage (Series A–D)—Can execute
on certain areas on your behalf, but mostly
as coordinators. 4–8 years prior experience
Later-stage (Series D+)—Can execute
with your authority (West Wing style).
Deep experience, often including as
a professional (e.g. legal or finance
background). These tend to be career
CoS’ers.
The most common background for any CoS is
either consulting, investment banking, law or VC.
These are super smart, super focused and highly
strategic individuals—hyper-organized generalists with exceptional intellect and drive. You
should be punching above your weight to convince them to join at a particular stage. The quid
pro quo is that they are desperate to get into the
world of startups and work with a founder, but
lack any obvious route in, so they are also willing
to take a significant pay cut.
I have had a Chief of Staff (Guillaume) for
five years now, since we were 100 people.
He has given me huge leverage in execution:
presentations, fundraising decks and
tracking follow-up actions. As the company
has matured I’ve been able to give chunks
of this work to other leaders and I’m now
thinking about reshaping the CoS role.
Rodolphe Ardant, CEO & Co-Founder, Spendesk
Typically CoS roles are “tour of duty” jobs lasting
18–30 months, after which individuals either
take on another senior role in the company (e.g.
General Manager of a business unit) or leave to
pursue other opportunities. In exceptional cases
where they have built credibility and respect, a
CoS may also step up to a COO role.
Every founder should consider a CoS.
It’s a brilliant way of bringing exceptional
talent into your company.
Charlotte Howard, Index Ventures
Hire an EA
We recommend that all CEOs hire an EA by the
time you hit 50 headcount. You can work with
an EA at one of three levels, described below.
Stepping-up between levels involves finding the
right person, building trust and understanding,
and also significantly adapting and delegating
your own workflows, which requires an intentional shift in your mindset:
Level one
Calendar scheduling
Travel planning
Flagging key dates or meetings which
require preparation
Helping on office management
Level two
Access to email—clear out junk and
ghost-write responses as drafts for review
Tracking and feedback around how you’re
spending your time versus your priorities
Anticipating what you might need or
might have overlooked
Level three
Autopilot on email—permission to choose
when to send stuff on your behalf
Identifying how the team operates—who’s
upset and who should you spend time with
Responsibility for office cultural events
I hired an EA when Discord was 20
people and it was a big improvement.
She funneled all meeting requests
against my priorities, knowing when
to schedule things.
Jason Citron, CEO & Co-Founder, Discord
I’ve now worked with my EA, Tina Long,
for four years and Kalli White, my Chief
of Staff, for seven years (though she had
other roles within the organization in the
earlier days). Thank God for them! Tina
has also really supported me now that I’m
a mother, helping me to organize school
and childcare around work commitments.
I have an A+ office of the CEO.
Kate Ryder, CEO & Founder, Maven
Curate your calendar
Set up color-coded blocks of time for thinking
versus meetings (maybe split between internal
and external), and for personal/family time. Audit
this regularly and align with your priorities.
I timebox my calendar a lot, with blocks
daily/weekly for workouts, email catch up,
and thinking time. Mornings are for deep
work. Meetings are between 10–5. Family
time is 5–7, and 7–9 is US time [Abakar
is based in London]. Twice a year, I also
clear my calendar for a half day and ask
myself, ‘If I was a professional CEO coming
into the company right now, how and
where would I be spending my time?’
I then restructure my calendar priorities
accordingly.
Abakar Saidov, CEO & Co-Founder, Beamery
Jason Citron, Co-Founder & CEO of Discord, offers advice on prioritization
I’m a big fan of the Eisenhower Matrix.
As a founder, whether you’re small or big,
you need to free up time for the “important but not urgent” quadrant. Early on,
you’re always being reactive, because
there is just so much to get done simply
to survive. But you need to get ahead of
the game to avoid fires occurring in the
first place. As you scale, there’ll be hundreds of people who really want to talk
to you. It’s easy to become reactive to
their priorities, which isn’t necessarily
what’s best for the business overall.
The judo move is to realize that other
people’s sense of urgency can make things
feel more urgent to you than they actually
are. I think Reid Hoffman said it best,
“You’ve got to let fires burn.”
I have introduced two techniques to
drive my agenda:
A two hour block each morning
when I’m at my highest energy to focus
on my top goal. This way, I keep
moving the most important ball down
the field.
Regular block of “office hours” time
for whoever internally needs to speak
to me
Get a business coach
The majority of high-growth founders we work
with have a business coach—someone to provide
a safe environment in which to explore specific
challenges, and to help them navigate their path
to a solution. There are many different approaches
to coaching, and a lot comes down to personal
chemistry. However, it’s important to distinguish
between a mentor and a coach. Mentors can provide the benefit of their technical knowledge,
skills and experience, but generally on an ad hoc
basis, and with less sharing about the emotional
journey. Coaches offer active and regular guidance on your journey towards self-improvement,
with full openness about the struggles that you
may be going through. Some of the best coaches
can also provide some active mentoring, but this
is restricted to areas of specific prior operating
experience.
Tap your network for recommendations and
speak to several coaches before picking one. We
recommend that your coach also spends time
with your direct reports, and potentially with
board members, so that they have a more rounded
context, rather than relying purely on what you
tell them.
In addition or as an alternative to a coach,
find confidants and advisors outside the company
with whom you can share your anxieties and
problems. These could be family members or
other founders.
I’ve had different coaches with each stage,
and they have been critical for me.
Anonymous Founder
Beware of having a single role model
whom you try to emulate. Diversity matters,
so lean variously on coaches, mentors,
peer founders, advisors, and board members
as well as friends and family. Learn to
align the right people for counsel on
a given issue.
Hanno Renner, Co-Founder & CEO, Personio
I’ve developed a small but strong circle of
entrepreneur friends in New York now.
They ‘get it’. I used to have monthly dinners
with two very good friends, Zach Sims
from Codecademy and Liz Wessel from
WayUp, over five years. We would talk
about the good, the bad, and the ugly.
Kate Ryder, CEO & Founder, Maven
Look after yourself
It’s essential to take care of your physical and
mental wellbeing. The stress and time-pressures
of being a founder who is Scaling Through Chaos
can be punishing. Remain mindful of your need
for balanced nutrition, physical exercise and time
to decompress. Consider using specialists or
therapists too. The days of needing to present
yourself as some kind of superhuman who is
always “killing it” are thankfully mostly behind
us. Show care for yourself, and show your care
for others by demonstrating that you care for
yourself.
I don’t live close, but I run to the
office which allows me to get in some
daily exercise.
Matt Schulman, CEO & Founder, Pave
It’s a marathon not a sprint. Sleep well
and work out. Late nights won’t help.
Job van der Voort, CEO & Co-Founder, Remote
Your sense of wellbeing is also dependent on being
able to look at your overall behavior and to feel
that you’re acting in accordance with your personal values. This means not only optimizing for
your own success and that of your company, but
also fulfilling your obligations and duties towards
others in terms of care, time and attention. If you
find yourself structurally unable to behave ethically, consider what needs to give or change so
that you can be at peace with yourself.
If you have a partner and/or children, be mindful
of what you might be asking them to sacrifice
for the success of your business. Project yourself
some decades into the future, and ensure that
you won’t regret the choices you’re making now.
Optimize your travel
Business trips are often essential, but can absorb
a lot of time and are also physically draining. You
want to make them as efficient as possible. Plan
them in advance so that you can coordinate
scheduling with all parties that you’d like to
spend time with (e.g. customers, prospects, partners, team members, candidates, investors, media,
etc). Blocking times in advance also allows your
EA to plan your route efficiently.
For long haul trips, it’s also time to lose your
early-stage attachment to flying coach. The business cost of you feeling more jetlagged is going
to outweigh any savings, let alone the physical
toll if you’re doing a lot of travel.
Increase your compensation
Assuming that the company is on a strong financial as well as business footing, then you shouldn’t
feel awkward about requesting your Board to
increase your cash compensation. The business
will benefit if you’re able to enjoy a good quality
of life. While founder CEO compensation is significantly discounted versus professional CEOs
due to the equity disparity, the difference in
benchmarks has narrowed somewhat over the
last seven years, and are readily available from
sources such as Pave. We also believe that founder
compensation should take account of personal
circumstances—in particular, if you have children
or other dependents.
If there’s an appropriate opportunity when
you’re fundraising at later stages (from Series C
onwards) to sell a small portion of your founder
shares in a secondary sale, this could be another
way of creating liquidity to improve your quality
of life, particularly if you’re looking to buy a home.
Golden age
The nautilus is a mollusk that lives in the outermost part of its opalescent shell, made up of multiple chambers that spiral out from one another as the creature grows. Each new chamber is formed by dividing the shell at a constant ratio, approximately 1.618. This is known as the golden ratio or phi, and is visible everywhere from petals to pinecones, self-assembling proteins to the ratio of certain planetary orbits.
Phi emerges from the series called the Fibonacci sequence. It was known in Ancient India but later rediscovered and popularized by the Italian Leonardo of Pisa, called Fibonacci, who imagined the growth of a population of rabbits. The sequence starts at 1 and advances by adding the current number to the one preceding it (1, 1, 2, 3, 5, 8, 13, etc). The ratio of each number to the one prior gravitates ever-closer to the golden ratio.
Fibonacci sequences regularly crop up in mathematics and are used whenever computers need to search efficiently, build complex networks of information, or find patterns in large, unstructured pools of data.
Similar patterns of proportionality tend to emerge in high-performing teams—in the ratios between more and less experienced professionals, between visionaries and do-ers, and between leaders and individual contributors. Shaping your company with “golden means” in mind might help you achieve a harmonious, if necessarily temporary, balance amid the chaos.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Dealing with complexity
Channeling chaos
As your product and customer segments become
more complex, and your company develops more
distinct roles and levels of responsibility, you’ll
inevitably need to introduce more formal business processes, procedures and systems. But you
don’t want to lose the pioneering, action-oriented
spirit that brought you this far—your “startup
vibe”. How do you strike a balance?
The key is to listen objectively to the myriad
signals that tell you whether you’re getting it
right. This includes the interactions you have
with different colleagues, employee incidents,
consistent signals from pulse surveys, and exit-interview feedback from regretted leavers.
A typical journey in high-growth is that
things first get too chaotic. You’re hiring crazy
fast, without a clear delineation of roles and too
little time for people to onboard effectively or
to build up internal trust. This translates into
bad outcomes including:
Decisions aren’t taken because consensus
isn’t reached
Promising hires quit out of frustration
soon after joining
Trusted team members suffer burnout
Costs escalate
In response you try to centralize to establish
order, forcing decisions to run through you or a
few trusted others. You impose controls on costs,
and review “local” decisions being taken—for
example, around squad priorities or marketing
campaigns. This ultimately leads to new damaging symptoms:
Decision-making is slow, because you
become the bottleneck.
New hires and trusted team members get
frustrated by the lack of autonomy.
You and other key executives suffer burnout.
Growth goals are missed.
Following this phase, you’ll find yourself swinging
somewhat between these two positions. You’ll
also face curveballs outside of your control (for
example, macroeconomic or geopolitical crises)
that push you towards centralization. As you grow,
the balance might also look and feel different in
different parts of the organization, according to
the stresses they are under and the quality of leadership they have. Making change happen just
becomes harder, as systems and internal comms
become more difficult to navigate, and as the consequences of mistakes become more expensive.
In high-growth, if processes aren’t
buckling, then you’re too process-heavy.
You should feel like things are almost
at the point of chaos. The best swords are
forged when the steel is almost melting.
Being in the deep end of the pool is great
for forcing solutions.
Harsh Sinha, CTO, Wise
There are various cultural changes that
you need to introduce with scale. In
hyper-growth mode, we want to be even
more thoughtful about people’s time.
If you’re asking someone for their
contributions (in a meeting, async, via
Slack), we want to be judicious about
offering context, a pre-read or just the
ability to opt out.
Nadia Singer, Chief People Officer, Figma
There is no magic solution to managing this balance between chaos and order. It’s an inevitable
consequence of high-growth, so the most important advice is not to interpret the apparent disorder around you as a sign of failure.
Half of my team will tell me we’re too
disorganized. The other half that we’re
too process-heavy. I guess this means we’re
not too far from the right balance!
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
Processes work and support effective
decision-making 95% of the time. The art
is to identify the 5% of instances when
you need to take a risk, bending or
breaking your rules, in order to achieve
outsized business success.
Sian Keane, Chief People Officer, Farfetch
However, you can take steps to reduce how
far the pendulum swings each time between
the extremes of “loose localization” and “tight
centralization”:
Reflect on your own personality and
preferences. Do you require more structure
and preparation in order to feel comfort able, or do you thrive in ambiguity?
Know more clearly where you are at any
given moment. Clearly diagnose if you’re
running things too loose or too tight,
and whether this differs between areas of
the company.
Address talent weaknesses as a cause of
chaos. Follow our advice from earlier
chapters around hiring, onboarding and
performance management.
Introduce continuous improvements, and
make course-corrections as opposed to big
knee-jerk changes. This was a theme of
Chapter 5
around People processes starting simple, and getting more
sophisticated as your team scales.
Treat change management as a competency
that you need to cultivate.
It’s really hard to introduce and embed
new ways of working later on from scratch.
It’s much better to introduce simple
processes early, and then to adapt and
optimize them later. For example, so
many founders ask me about introducing
OKRs when they’re at 150 headcount,
and I don’t know what to suggest, as we
had them from the outset.
Hanno Renner, Co-Founder & CEO, Personio
Managing change is about aligning
people. The more people you have, the
more alignment is required and the harder
change gets. We don’t have a dedicated
change management team, but we do have
an intentional culture around change.
The best people don’t just want to know
what they need to do, but how the change
will help customers and the company.
So you need their buy-in. This involves
a combination of broad but relevant
consultation, followed by testing, and
rollout via all-hands and through the
managerial chain. It also requires closing
the loop, which is where many people
and projects otherwise go wrong.
Jason Citron, CEO & Co-Founder, Discord
Remote—Separating fast from slow
It’s a natural tendency of large organizations to get process-heavy. People want
to justify themselves and to insert themselves into projects. But for anyone working on something that needs to move fast,
you’ve got to push processes out of their
way. In Sales or Engineering, for example,
we don’t do any sprints, sprint-planning
or estimation. We throw things into a
queue and we rank them. We don’t monitor throughput, we just ask, “Are we
building good stuff, and are we doing
it fast enough?”
But there’s a whole other side to our
business—a high-volume of compliancerelated tasks. We have standard operating
procedures for specific teams, and we
need to uphold client service level agreements. Error rates need to be driven to
zero. So for these tasks and teams, we
have rigid processes and sign-offs which
flow through a project management tool.
Finally, the earlier you grow up when
it comes to finance, the better. Take budgeting and capital planning. You don’t
need a long sign-off process, but you need
to do it thoroughly and it needs to involve
all your executives.
Job van der Voort, Co-Founder & CEO, Remote
Get smart when it comes to planning
Introduce OKRs
OKRs are the most widely used operating framework in startups and growth-stage companies.
OKRs help align and focus people on objectives
and measurable results rather than just tasks and
activities. Your OKRs or operating framework
provides the link between strategy and shorter
term objectives, ensuring alignment across teams
and functions. The basic idea is a quarterly cycle
of setting and reviewing goals.
We introduced loose OKRs before we
hit 20 people. They evolved over time
with a strategic planning framework.
The nuances are really important, and
we worked with a former Googler to
get it right.
Andrew Robb, COO (former), Farfetch
Be aware that frameworks such as OKRs also
impose a cost in terms of reduced agility and
speed. So we advise running your company without anything very formal for as long as possible.
OKRs are valuable when implemented flexibly,
but only make sense as a more structured framework once the benefits of improved coordination
across teams and functions outweigh the loss in
agility. To start with, you could simply introduce
three quarterly company-level OKRs, which
are communicated clearly to your whole team,
including regular follow-up on how your performance is tracking against them.
Factors (other than headcount) that accelerate the need to introduce a more structured operating framework:
Multiple locations and time zones—even
more so if you’re a fully-distributed team
Multiple products versus a single product
Specific business models:
| Marketplace—constant need to
coordinate between supply and demand
| D2C—complex supply chain and
logistics dependencies
| Enterprise SaaS—long sales cycles
with complex implementations
The contrasting case is a purely digital B2C app
(for example, in mobile gaming), where data
feedback loops from marketing and product are
daily, allowing (and requiring) changes to be
rolled out more rapidly. OKRs are clearly less
helpful here.
OKRs can be set at four different levels, with
different corresponding ownership:
Company
Business unit, or functional group—
for example: Technical, GTM,
G&A, Operations
Function
Squad or subfunction
Annual or biannual company-level OKRs are the
starting point, and can be introduced by you as
a founder from very early. From there, companies
take either a top-down or bottom-up approach
to extending the OKR framework to include
deeper organizational levels as they grow.
It’s better with OKRs to be too simple than
too complicated. Introduce more control and
detail gradually as the process embeds.
Top-Down
Company OKRs are cascaded down the organization, reflecting the levels above. Smaller companies might only go to level two or three. Larger
ones, where the OKR approach is embedded, may
then cascade down to level four. This naturally
generates alignment, but it requires more coordination, and can feel disempowering to individuals and teams.
Getting teams to engage with OKRs is the
greatest challenge of any implementation.
Quantive
We’ve introduced a negative OKR
alongside each cycle. For example, ‘Stick
with our ICP and don’t go outside of it.’ We also take
time to communicate the evolution of our
objectives over time, to make them more
meaningful and to mark our progress,
like our evolution from being a challenger
to becoming a tool of choice.
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
Bottom-Up
Company OKRs are translated by individual
managers and teams into goals that are appropriate and relevant for their scope of responsibility. These team-level OKRs must still be
written down and tracked (i. e. in a spreadsheet
or using OKR software). This gives more autonomy to managers and teams, and is more agile
and self-organizing, without compromising on
accountability. However, it does mean less consistency, and makes it trickier to handle dependencies across teams.
Each team sets itself a maximum of three
objectives and three key results for each
company-level objective.
KRs are stretch goals. They are not
designed to be consistently achieved
in full.
Teams share their OKRs to identify
overlaps or inconsistencies.
Teams evaluate KRs (score them) at the
end of each quarter against a target
set by the company (typically between
60–70% success).
Teams and managers decide whether
employees should continue on incomplete
KRs (i. e. if they are still priorities for
the business).
Our framing at Farfetch is that OKRs
define the ‘what’ of our goals, while
our values and behaviors indicate the
‘how’ of achieving them.
Sian Keane, Chief People Officer, Farfetch
Our OKR process is twice-yearly, as we
find that quarterly is too much. It’s overseen
by our Operations Lead, who is empowered
to apply OKRs on behalf of teams that
don’t provide feedback in time.
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
Every year we got our leaders to independently write down what success would
look like in one year and three years.
There’s usually a lot of alignment on the
answers. But we then ask what might block
us from getting there and why might we
fail to succeed, and we find a lot of different
answers. We use this process to identify
priorities, grouping them into core themes.
These became our shared OKRs for
success.
Abakar Saidov, CEO & Co-Founder, Beamery
It can be easy to get started setting up OKRs on
a whiteboard. However, capturing and tracking
OKRs at scale quickly becomes complicated. You
have multi-level cascading goals, inter-team
dependencies, as well as privacy and visibility
concerns. You also need an accountable individual to orchestrate and drive the OKR quarterly
rhythm and discipline—usually a COO or CoS.
Specific OKR software (for example, Quantive)
is unnecessary when you have 20 headcount,
helpful by 250, and critical as you approach 1,000
headcount.
OKRs require firm commitment from you as
the CEO, otherwise engagement across your
teams and managers will erode rapidly.
I insist on a weekly ‘traffic light’
monitoring update, involving a one
sentence progress report from each
team against quarterly KRs. It’s tough,
but I think essential.
Matt Schulman, CEO & Founder, Pave
Set budgets collaboratively
Financial budgeting ensures that resource allocation is aligned against your company’s objectives. Financial accounts and budgets therefore
lie at the heart of every company’s planning
processes. They also underpin governance (aligning the board) and cash flow modeling (ensuring
that you don’t run out of money).
As you scale, you’ll need an increasingly sophisticated approach to annual budgeting and
forecasting. It will become more granular—for
example, incorporating seasonal adjustments by
quarter and by month—and more KPI-driven,
facilitating sensitivity analyses and what-if scenarios. It will also become a more collaborative
and iterative process between Finance and your
functional leaders.
We brought in a Finance Director when
we were about 125 headcount. She has now
implemented full financial reporting,
which is amazing to see. We can now plan
strategically across multiple what-if
scenarios driven from underlying KPI
assumptions, and the relevant sales
efficiency and hiring targets needed to
achieve them.
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
In most tech companies, people constitute the
majority of costs, and successful hiring and retention of people is the single biggest constraint
on hitting targets. Therefore budgeting and forecasting processes are closely tied to workforce planning, and need validation from your
People and Recruiting leads, as we explored in
Chapter 5.
For SaaS companies, “The Cadence” (developed by David Sacks) is a great framework for
translating top-level objectives into a detailed
operating rhythm for the company as a whole,
which can be adapted for other business models.
Document decision-making responsibilities
As a founder-CEO, your presence remains almost
the only constant through multiple phases of
company growth, even while you go through your
own profound personal growth journey. While
yours is the single most influential voice in terms
of decision-making, complexity will require you
to delegate many decisions. Conversely, your
executives should be more capable than you of
making the right call on decisions that sit within
their remit. In this situation, how do you classify
which decisions should still flow back to you,
and how should you best navigate the messy middle to get to this point?
Issues of governance and board composition
are outside of the scope of this book, so we will
focus instead on the dynamics and evolution of
decision-making within your immediate team.
Every organization needs to codify what
decisions can be taken by whom. Some of these
are enforced through legal and financial mechanisms: Who is a company director, who has signing approval for financial transactions, and what
level of sign-off authority do named individuals
have for entering into contracts? These parameters need to be adjusted as your team and budgets
grow, to keep things agile while controlling risk.
There’s a set of business decisions, however,
which continue to require your sign-off as CEO
right through to when you are at IPO-scale,
so that you retain control over decisions that
strongly shape culture:
Hiring staff—approval of all hiring
requests (with the possible exception of
back-fills)
Senior staff hires—meeting and approval
of any final-stage candidates ahead of
making offers (although the definition of
“senior” will evolve as you scale)
Compensation changes—group-wide
parameters, plus any individual exceptions
outside of agreed parameters
Performance calibration sessions
Promotions—approval of all internal
promotions
Once you have a People Leader, this set of decisions can form part of a regular committee which
includes both of you, plus possibly your Finance
Leader.
There are of course equivalent non-people
related decisions where, as CEO, you should also
retain final review and approval, such as press
releases, pricing changes or product launch
timetables.
Outside of this set of closely defined decisions, however, you want to empower your team
to make all other decisions without you being
the bottleneck. Once again, this depends upon
having experienced and trusted executives leading functional areas, who can be given autonomy
within their area of responsibility.
The RACI framework can be very helpful
with defining roles and responsibilities for particular processes or decisions, particularly before
you have fully fledged executives in place:
Responsible: One or more individuals
charged with running the process or
researching the decision options
Accountable: One and only one individual
with overall accountability for the process
or decision. Where the buck stops. This
should be delegated as far down as
possible, and can be the same as the
responsible individual.
Consulted: The set of individuals whose
views should be canvassed when defining
the process or when evaluating the
decision. These can be further split
between those with veto-power or not.
Informed: The set of individuals who need
to know the result of the decision. This
includes everyone above, plus potentially
others (potentially the entire organization).
RACI can be applied to any level of decision-making. The objectives when using RACI are:
Delegate as far as possible
Consult all relevant stakeholders
Inform widely but without generating
noise
Ensure that every process or decision has
one, and only one, accountable individual
Ensure that every process or decision has
at least one individual who is responsible
It’s critical to document these principles about
decision-making and responsibilities so that they
are accessible and visible to everyone in the company. Responsibility for documentation should sit
with the COO, CoS, or other individual with a
business operations remit that you nominate. RACI
responsibilities should also ideally be reflected and
updated in individuals’ job descriptions.
We have a detailed annual calendar for
processes: boards, offsites, QBRs, compensation, promotions, hiring planning, budget setting.
This allows us to plan time for both
bottom-up and top-down input, but forces
decision points which drive things
forward. I prefer if folks complain about
too much versus too little of this.
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
Setup an executive committee and a
management team
While you’re growing your company and senior
team, you’ll have a mix of leaders across different
functional and business areas, some but not all
of them being true executives. These will (almost
always) be your direct reports, and between them
represent every team within the company. You
can call this your “senior leadership team” (SLT),
or something similar.
You should schedule regular (usually weekly,
and at least biweekly) meetings with your SLT
to share progress and to flag problems in the
company. With a growing team, your SLT is likely
to reach a point where it becomes unwieldy,
potentially with more than 10 or even 12 attendees. As you build your executive bench, your SLT
will eventually need to be replaced by an executive committee (ExCo), comprising anywhere
between three and eight executives. The ExCo
is typically established sometime between 251–
500 total headcount. Your ExCo should also have
deeper monthly or quarterly sessions, half a day
to one day long, to discuss plans and priorities
over the next three to six months. These deep
sessions are important to maintain alignment in
your growing company and to counteract the risk
of silos developing between different areas.
If you let your ExCo group get past
eight people, it won’t be effective for
making decisions, and will become
merely a forum for communicating
decisions made elsewhere.
Hannah Seal, Index Ventures
The arrival of new and more senior executives
means that individuals might drop out of the
ExCo. This usually happens alongside the person
in question getting a new boss other than yourself—for example, a VP Sales being replaced by a
CRO. This change should never come as a surprise
to the individual affected, and should be handled
sensitively, as we discussed in
Chapter 6.
At this point, you’ll have a wider cadre of
senior managers—mostly individuals who
directly report to members of the ExCo. This
group of managers should be formalized as your
senior management team (SMT). In a company
of 250, this might consist of 25 individuals, growing to 40 by the 500 mark. It should include all,
or almost all, of your senior managers and directors. Communication with this group is more
“broadcast” in nature. Meeting every three
months, the focus should be on informing everyone about mission, values, strategic priorities and
quarterly goals. It’s a key channel through which
you as the founder can ensure cultural alignment
at scale: a chance to regularly and directly explain
what constitutes a high bar for hiring and performance; how company values translate into
management behavior; and to motivate and
inspire your next-generation of internal leaders.
Conversely, the role of SMT members is to rolemodel, cascade and inform the rest of the company, in order for information and expectations
to scale as the company grows, and they should
be developed, assessed and mentored with this
role in mind.
Strategic decision-making
The most strategic decisions are forged
outside of formal ExCo sessions, in groups
involving the CEO plus one or two others.
However, we find that there are two distinct formulations to this model, favored
by different founders:
1. CEOs who rely consistently upon
one, or at most two, other executives who
form a core nexus for any strategic decision. This is usually informally understood, rather than being reflected in org
charts. The executive who most commonly
takes on one of these spots is your COO or
CFO (i. e. individuals that work on the
business versus in the business). But it usually includes one other highly-trusted
C-suite exec such as your CRO, CPTO or
CPeO. The individuals are likely to shift
a few times over the years: first, as seasoned executives substitute the co-founders who usually take these roles early on,
but also later as your leadership and priorities evolve. The CEO has built a close
dynamic of trust and chemistry with these
individuals, and looks to consult with
them before taking any major decision
that affects the company as a whole.
2. CEOs who bring in the one or two
other execs most relevant to any specific
decision, be it the CRO and CMO around
revenue, CFO for fundraising, or CPO
and CTO for product strategy. In these
cases, the CEO hears perspectives from
the relevant “internal experts” and then
takes the final decision in real-time.
The choice really comes down to your
own comfort around trust and judgment.
Some people have a very small circle of
trust, relying on just a few individuals to
shape decisions and to build conviction.
Others prefer to go broader, drawing on
the advice of the most knowledgeable individuals for any particular issue. As a general rule, the second approach is more
effective than the first. But this can involve
a lot of personal rewiring (facilitated
through coaching). It is also co-dependent
upon building a leadership bench that you
feel able to trust and rely upon.
Prepare to enter the (managerial) matrix
Tidy box-and-wire employee charts with tightly
defined functional roles and responsibilities
break down once you introduce extra organizational dimensions into a business. The most
common ones being:
When you hit these inflection points in complexity, you face a familiar corporate dilemma: How
to structure your business? Should you align
around functions, reducing the operational remit
of general managers (GMs) overseeing a product,
business unit or geography? Or vice versa? Who
should report to whom? Some specific challenges
that we see in companies include:
Should the EMEACS team report to the
GMEMEA or to your global VP CS?
Should SMB have a separate dedicated
technical team, given its distinct product led growth motion?
Does your newly launched product deserve
its own GM with a dedicated technical
squad and GTM team?
Should GMs (with P&L responsibility)
report to you as CEO, supplanting
functional executives? If not you,
then who?
When you optimize for one set of problems,
such as insufficient localization, you inevitably
increase another set of tensions, such as a lack of
consistency around branding or opportunities for
career development. Left unchecked, the new set
of problems will become more apparent over time.
The truth is that there is no perfect organizational design (OD). This isn’t a math problem
with a single solution. All you can aim for is the
best pragmatic approach at a given point in time.
You therefore need to embrace the fact that organizational restructures are a feature, not a bug.
They will happen very regularly, affecting various parts of the company at different points.
However, we have found that broader reorganizations affecting the whole organization don’t
tend to happen below 1,000 headcount.
There is a massive organization design
inflection point when tech companies have
to flip from a functional to a business
unit-based model. It just becomes impossible
to coordinate activities across such big
teams. This seems to happen fairly
consistently between 1,500–2,000 headcount. So it’s unlikely that you’ll have
to face it when you’re pre-IPO.
Andrew Robb, COO (former), Farfetch
There’s a considerable cost each time you undertake an organizational restructure: internal comms,
re-aligning roles and workflows, bedding in new
reporting structures, and dealing with bruised egos
or flight-risks. On the other hand, they also help
to stop silos forming in the organization and can
foster more innovative thinking.
At scale, you need a different organization
every 18 months. You just need to evolve
your team(s) in that time scale. If you can,
there’s no limit. Failure to evolve teams
for the next chapter is the biggest reason
for failure.
Kipp Bodnar, CMO, Hubspot
The answers to these org structure questions
always involve some form of matrix management.
The exact approach is highly context-dependent,
but here are a few principles to bear in mind:
Choices are not binary, nor do they have to
be consistent. The optimal matrix solution
you adopt for one geography or product
can differ from the one you use in another,
and depends on:
| Size and maturity of different
geographies or products
| Skills, capacity and preferences of the
individuals and leaders concerned
| Are the relevant dedicated sub-teams
at, or below, “critical mass” to be
self-standing? Is there a timeline
to reach critical mass in the next
twelve months?
| Distinctiveness of each geography
or product—how radical is the
localization required or roadmap
planned?
Team players will make a virtue of
dotted-line reporting structures, rather
than using them as an excuse for failure.
Clearly and transparently document roles
and responsibilities, including mechanisms
for resolving differences of opinion. The
worst outcome is that you, as CEO, end up
as the arbiter (i. e. bottleneck plus
therapist) whenever there’s a disagreement.
Communication and trust are key to
success. Ensure that you have in place the
internal tooling, training and culture
(to pick up the phone or jump on a plane
to build the relationships) to make it work.
Align your leaders’ incentives to foster
collaboration rather than internal
competition.
Org design is not a theoretical exercise,
but a set of pragmatic choices that above
all needs to reflect your actual leaders.
So when you hire a new leader with new
capabilities, reorg around them.
Yunah Lee, Chief Operating and Finance Officer, GOAT Group
International expansion
The core challenge in international expansion is
whether you have more autonomous GMs (country, city, or regional P&L leaders), or a more narrowly focused (typically revenue) leader, with
other local functional roles reporting into global
functional leadership. This situation can be more
or less complicated, depending on your specific
business model.
In cross-border marketplaces you need to
address both supply and demand in each
geography. You can’t have a single GM
overseeing both aspects, and in many
sectors, such as fashion or travel, individual
geographies will be asymmetrically
weighted towards either buyers or sellers.
Andrew Robb, COO (former), Farfetch
Expansion into Europe, or into the US from elsewhere in the world, is still the dominant initial
pathway to international growth for VC-backed
tech startups, so we will use EMEA leadership
in a SaaS company as an example.
A comparison of EMEA leadership
models
GMEMEA—Responsible for P&L and for
hiring and managing across Sales, Sales
Development Representatives (SDRs),
Sales Engineering, Customer Success, CX
and Marketing, plus recruiting resources
to make it happen. Each of these individuals has a primary reporting line to the
GM, and secondary reporting lines to
their corresponding functional leadership. Local hires into G&A functions such
as Finance, HR and Legal however retain
primary reporting lines to G&A leadership (see the Business Partnering section
below).
VP Sales EMEA—Responsible for net
new sales revenue, and for hiring and managing account executives (AEs) and SDRs
only, although they almost always have
some level of “holistic” ownership for
market expansion. They collaborate with
global functional leaders for agreement
on local hiring (or alternative resourcing
solutions). These local hires have a primary reporting line to the global functional leadership, with a dotted-line
reporting relationship to the VP Sales
EMEA, being the most senior local leader.
The correct solution for a given company at any
given point in time depends on a whole range of
factors. We refer you to our other Index Press
handbooks for deeper discussions and advice on
international expansion:
How do you carve up and allocate responsibility
for what your company is selling? You can think
about this question in terms of three different
strategies:
Single core customer group with a range
of products on offer—for example, Workday
Single core platform with products
targeting distinct customers—for example,
LinkedIn
Radically different customers and
products—for example, Amazon
If (2) or (3) apply to you, then organizing around
business units with separate GMs and product
teams makes more sense than in (1), where organizing by geographies and/or customer segments
will make more sense.
Building a great product into a multi-product
offering following strategy (1) is already a huge
undertaking. As a result, we very rarely find
strategies (2) or (3) being pursued until significantly later in a company’s life, well after a public
listing.
You have a much better chance of
succeeding at multi-product if you start
from day one with a platform-first
approach, such as Wiz or Personio. If your
thinking is limited to solving your initial
wedge problem, this will be reflected
in your product architecture and in your
cultural DNA. While there are exceptions,
it is much harder to have a ‘second act’
in these situations.
Martin Mignot, Index Ventures
Following this first strategy of going multi-product, you will still have dedicated product teams,
but with commercial goals to hit in order to
unlock further R&D funding. You will need to
optimize your GTM motion for customer experience. This might require further investment in
dedicated teams when you launch a new product.
For example, your sales teams may not have the
knowledge or confidence to effectively sell the
new product. You may need to carve out a small
number of individuals from these teams for
immersive training, so they can provide cover
and support to your early sales efforts. This
approach can be instituted as you roll out more
products by creating a richer sales enablement
function. A similar approach may be necessary
in CS and CX (for example, support expertise in
the new product is first established in a small
group of second-line CX agents, before it can be
distilled and built back into onboarding and
training for the broader CX team).
With multi-product, you start off with
dedicated people, with dedicated focus. But
you have to re-merge them back into the
wider company as quickly as possible. This
happens across your GTM organization:
Marketing, Sales, Success and CX. The
more complex your solution gets, the more
investment you’ll need in enablement.
Dilution of focus is a very expensive thing.
If you do it, you’ve got to really equip
folks for it.
Kipp Bodnar, CMO, Hubspot
We centralized G&A functions asap
after our acquisition of Flight Club, which
worked really well for efficiency and
consistency. Likewise later with fulfillment.
However, we chose to keep separate
design teams, as the two brands had
distinct voices.
Yunah Lee, Chief Operating and Finance Officer, GOAT Group
S**t Happens
We all personally experienced extreme disruption
between 2020 to 2023. The Covid-19 pandemic,
followed by the supply chain crunch and high
inflation, demonstrated the challenges of dealing
with unexpected real-time crises.
The path from starting a company to an IPO
is typically over 10 years, so the odds are that
you’re going to experience both the top and bottom of a full economic cycle. During this time
you’ll inevitably face major crises, potentially
existential ones, that you can’t predict. Examples
that we’ve lived through with our portfolio companies include:
Environmental disasters, such as Hurricane
Sandy in 2012
Acts of terror, notably 9/11 and more
recently the Hamas attacks on Israel
Wars, including the ongoing Ukraine
conflict
Banking crises such as SVB’s collapse in
2023 and Lehman Brothers in 2008
Cyberattacks of increasing sophistication
and frequency
Personal tragedy or illness affecting
founders or key employees
You can’t fully prepare for any one, let alone every
one, of these. What you do need is general resilience, alongside a sensible approach to risk. As
you scale you have more to lose, and your company also presents a larger surface area of vulnerability to malicious actors or to misfortune. You
will therefore need to steadily step-up your risk
controls: financial, legal, infrastructure, security,
key personnel and succession planning, disaster
recovery, and crisis comms, among others.
Thankfully there’s a growing awareness of the
emotional pressures on founders, and an openness to discussing these to avoid getting overwhelmed. While this book is about helping you
to succeed, appreciate that things might not work
out as planned. When executing on a hugely
ambitious vision, you’re taking a big risk, as are
the investors, employees and customers who
follow you. They are all grown-ups, capable of
gauging the pros and cons of joining you on your
journey. Your duty is to give it your best shot,
and to always pursue your goals with integrity
and responsibility. Beyond this, if things don’t
go according to plan, it’s important not to beat
yourself up about it or to feel guilt about the
potential impact on others. Learn lessons, but
don’t internalize a sense of failure.
We’d had two previous startups that
worked out. Our third didn’t. We had to
fire our whole team, sell off our laptops
and desks on eBay, and we lost millions of
VC dollars. It felt so, so painful. But
you know what? We got through it, and
it wasn’t as bad as we’d felt it would be.
Our investors were supportive, we helped
the whole team get new jobs, and we’re
now building our fourth company together,
with Index backing us. It’s important
that founders know that it’s ok to fail. But
you can’t just walk away—you have to
do it right!
Tom Leathes, CEO & Co-Founder, Motorway
Architect of the imagination
The work of the Dutch artist MC Escher captivates us because it hovers on a shoreline of credibility. His art makes the impossible seem possible, turning fantastical ideas into spellbinding woodcuts, lithographs and drawings. Intricate and meticulously executed, Escher’s images depict phantasmagoria such as staircases that stretch forever upward, birds transforming stepwise into fish, and figures of men and women formed from looping strips of paper.
Escher was inspired by the mathematical logic of symmetry, tessellation and topology, found in abstract geometry and advanced algebra. Combining the technical and the aesthetic, Escher was at once rigorous and whimsical, guided by structures that nonetheless created space where weirdness could run riot. His elaborate inner visions are an inspiration to founders about how constraints and creativity don’t need to cut across one another, but can work hand-in-hand.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Scaling your technical team
Build in squads
Create and empower squads
As you add functionality and richness to your
product, you inevitably need more “Builders” to
keep developing new stuff. You also need Builders
to maintain and scale your existing stuff. This
means your technical team is likely to grow rapidly, particularly in pure software businesses.
However, you can’t just keep adding engineers,
product designers, data scientists, and others
without creating a clear organizing framework.
Squads (also known simply as “teams”) have
become the near universally accepted route to
scaling technical functions, an approach that
dates back to a classic blog post published in 2012
by Spotify. The basic idea is to avoid prioritization
by committee, and instead to create a North Star
metric that each squad is empowered to deliver.
Some guidelines about squads to maximize
their agility and productivity:
Each squad should have a blend of skills
across Engineering, Product, Design, and
potentially Analytics. Resources from
other functions (including non-technical)
might also be appropriate. Engineers are
generally dedicated to a single squad at any
one time. Other members may work across
multiple squads depending on your overall
capacity constraints and the need for their
skill set.
Squads don’t have hierarchical leaders. The
two key leads are the: | Product Manager (PM), whose role is
to align the team members around
shared priorities and objectives, but
without any formal authority to direct.
The PM's effectiveness depends upon
their influencing skills, integrating and
balancing everyone’s perspectives. | Tech Lead Manager (otherwise
referred to simply as the Tech Lead, or
TL), who oversees engineering aspects
of the squad’s work, such as
architectural or design decisions.
You need balance in your squads. If
Product goes unchallenged, you can get
endless new features, because Product
people have a tendency to find problems
where they didn’t see them before. If
Engineering dominates, technical debt
can be over-prioritized. If Design,
you can get experiences which aren’t
financially viable.
Gabriel Hubert, Co-Founder, Dust and Product Lead (former), Alan
Teams work best when internal trust is
high, but where there’s a healthy tension
and respect between the distinctive
mindsets and priorities that each member
brings.
There should be a maximum of eight to 10
members. Beyond that, you should look to
split them again into more focused squads.
This reflects Jeff Bezos’s canonical “two
pizzas rule”: Every internal team should be
small enough that it can be fed by two
pizzas. This allows them to move fast.
Each squad should be aligned with a
product part or business function that can
be clearly defined.
The squad is given ownership and
responsibility for how to achieve this goal,
and teams should be as decoupled as
possible, to minimize their need to
coordinate or seek permission from anyone
outside the squad itself.
Recognize that squads are not static
Squads might have persistent goals, while others
might be assembled to work on a specific project
or time-bound objective. A persistent squad
might handle ongoing development and support
of a specific product. Another might implement
a new cloud service, or build the features needed
to launch in a new geography. If a squad with a
specific project achieves its goal and is disbanded,
a persistent squad will need to inherit and maintain the codebase or service. This can create
tension, and some technical thought-leaders push
back on the idea of temporary, project-based
squads. No clear consensus has emerged, which
is true of several elements of technical team organization beyond the basic squad approach.
My philosophy is that if you build it,
you run it.
Carlos Gonzalez-Cadenas, Index Ventures
The individual members of a squad will also
change over time, although you need to strike a
balance between change and continuity. The
depth of knowledge in their area, as well as the
mutual trust that builds up in a stable squad, are
part of what makes them more effective. Staffing
changes may be the result of:
Shifts in squad priorities. For example, if it
progresses from “innovating”—adding new
features or tooling at a high velocity—to
more of a steady state—“maintain mode”.
Offering career development opportunities
for squad members
Squad members leaving the company
The effort you put into a product is
totally driven by where it is in the lifecycle.
A one-size-fits-all approach doesn’t
make sense. A nascent product could
involve a squad with as little as one
product manager and one engineer, while
a mature product could have a 1:10 split.
Thomas Soulez, Chief Product Officer, Silae
At the start, technical squads will all be oriented
to external customer problems, with metrics that
link to commercial priorities and engagement. For
example, in a marketplace you might focus one
squad on users, another on suppliers, and a third
on marketplace operations such as payments. As
you scale further, though, you need squads which
are more internally focused. For example, on
infrastructure requirements or internal tooling
to support other functions in the company.
In the early stages, our teams were all
product-focused. This naturally extended
to core infrastructure teams as we scaled.
We resisted for as long as possible adding
the third, middle layer: platform teams.
The risk is that these teams are too distant
from customers—things that sound like
good ideas, but aren’t tethered to validated
needs. So we only introduced platform
teams once we went multi-product. That
was four years ago [2019—as Datadog
approached 1,000 headcount], when we
needed our products to sit on top of a more
consistent underlying foundation.
Alexis Lê-Quôc, CTO & Co-Founder, Datadog
Expect your technical team to shrink in
relative terms
As overall company headcount grows, your technical team will shrink relative to other areas of
the business. However, this varies dramatically
between business models, as does the balance
between Engineering, Product, Design and Data
Science. Software companies (B2C App and
SaaS) retain the largest technical teams at scale
in relative terms, falling slightly from 40% of
employees at 50 total headcount, to 35% by 1,000
headcount. Marketplaces fall from 26% to 23%
over the same period, while D2C companies have
the smallest technical teams, falling from 24%
to 20% of total headcount.
Other differences in technical teams are
apparent between business models. For example,
the ratio between product management and engineering is highest in pure software, at 6:1 in earlier stages and rising to 8:1 in later stages. In
Marketplaces and D2C businesses, this ratio
hovers nearer to 5:1. This reflects the fact that
product managers in pure software are mostly
delivering results through collaboration with
engineers, without having to consider suppliers,
inventory and other external factors.
As a second example, data science teams are
significantly larger in pure software relative to
Marketplaces or D2C, which instead rely more
on business information (BI) analysts to support
decision-making.
Each of these differences corresponds to how
central tech is to delivering overall customer
value, and to the intensity of integration required
between software and operations.
Be mindful of how these factors related to
your business model will shape your optimal
technical team mix as it grows.
Balance levels of experience
You want to aim for a balance between more and
less experienced employees. Significant differences in seniority mix between more and less
experienced founding teams persist as you scale
your technical team, with less experienced founding teams continuing to make fewer senior hires.
If this is you, you need to focus on counteracting
this tendency, to ensure that less experienced
team members can be supported and trained by
more senior colleagues.
Highly successful companies retain a similar
balance (to the bars above) of experience levels
across their technical team even as they scale
through to IPO-readiness. Active graduate recruiting and career progression can help here,
allowing you to grow your own technical talent
pipeline and be less dependent upon brutally
competitive external hiring.
Take a long-term view on ROI
Technical teams are the modern equivalent of
factories in the industrial era. Your decision to
invest in building a new squad is more like a capital expenditure, because you won’t know for
years whether the investment was worthwhile.
You therefore have to take a long-term view
on ROI. This contrasts with investing in GTM
teams, where ROI can be assessed quickly, and
decisions can be reversed if necessary—for example, if salespeople aren’t hitting their quotas.
When interest rates are low, capex
becomes more attractive. In software
companies, this makes it more attractive
to invest heavily in your technical team.
In today’s higher interest rate environment,
you need to think more carefully about it,
because the hurdle for delivering positive
ROI has gone up.
Mike Volpi, Index Ventures
If you’re on top of everything, you’ve got
too many people. Scarcity creates friction
which forces prioritization. Friction is
where you get great software. Conversely,
you’ve got too few people if you’re leaving
low-risk money on the table due to
capacity constraints. For example, if you’re
unable to launch your sixth new country
even though you’ve got a successful
playbook for five already.
Simon Lambert, CTO, Birdie
When you’re small and racing towards
PMF, things are clear and super tactical.
You have aligned goals, with six or seven
things to do or ship at any one time.
At scale you need different DNA: clarity
around metrics and resourcing, and
concrete success criteria. These underpin
your priorities and investment decisions.
Michael Manapat, CPTO (former), Notion
The long-term horizon of technical team investments can drive an unhealthy obsession with
measuring technical team productivity or output. We recommend an alternative approach—measuring the impact being delivered relative to the investment.
Technical team productivity
I’ve never been a fan of directly trying to
measure the productivity of technical
teams. There have been so many rabbit
holes and ridiculous attempts to quantify
it. For example, “story points” shipped.
As soon as you measure something like
this, you end up with the wrong outcomes.
The process of building product is just
too nuanced.
Instead I recommend reframing the
question as, “Should we have 0.5 × or 2 ×
the team size that we have today, or
are we about right?”
You can review this team size question
from two directions:
Top-down: Technical cost as a percentage
of revenue, and technical headcount as a
percentage of total headcount. Seek out
benchmarks for both of these at comparable tech companies. [You can also use
the TeamPlan companion web app to this
handbook.]
Bottom-up: Consider your product’s surface area. Break it into chunks, and give
each of these to a team or squad. Make
sure you can cover all of them, taking
account of complexity, operational load,
the number of services, etc. More backend-oriented teams tend to be operationally intensive; the focus here is on
maintenance and uptime, rather than
innovation. For example, at Skyscanner
our “flights processing service” was super
intensive, with a focus on constantly putting out fires. By contrast, our frontend
squads could move faster on introducing
new features. Also look at where your
surface area is increasing and will need
additional teams in the next year or two.
We often see a period during which
engineering bloat (declining productivity) becomes a problem for companies
beyond a certain scale—generally when
they exceed about 100 engineers. The root
cause has to do with bottlenecks. This is
largely solvable if you organize your
teams and service architecture correctly.
Focus on decentralization, breaking into
small teams with clear remits and the
autonomy to ship independently. Enable
these teams with the right DevOps tooling
and service-oriented architectures.
The key question has now shifted to,
“Who makes decisions on what individual teams do?” In my opinion, the
right balance here is that teams should
decide on 50–60% of their time allocation, with 40–50% being driven by company-wide objectives.
Overall the focus should be more on
measuring the impact of what is being
shipped, rather than measuring shipping
productivity itself. Does the impact justify the additional investment? Are you
delivering true value and differentiation,
or spinning your wheels by introducing
way too many minor tweaks that won’t
be that impactful? This is how a culture
of innovation truly dies.
Carlos Gonzalez-Cadenas, Index Ventures
Datadog’s approach to delivery velocity
Shipping velocity is easy to articulate
but hard to measure. We think about it
constantly. In simple terms, we aim to
be a growing body of products and initiatives which are heading generally
in the same direction, but which are
allowed to move at different speeds
because they are decoupled.
Our focus is on ensuring that the time
we take to bring a product to market is
as fast as it was in our early days. For
example, it took us two years to get from
the initial idea to deployment of Application Performance Monitoring (APM),
one of our core products. So similarly
complex products should not take longer
as we grow.
But the two years doesn’t guarantee
that we actually built the right thing. So
we aim to bring products to market as
quickly as possible, so that we can gauge
customer reaction before deciding whether
to push further, or to abandon them.
Alexis Lê-Quôc, CTO & Co-Founder, Datadog
The longer time horizons required for technical
teams are exacerbated by the time it actually takes
to hire engineers and to fully ramp them. You
need to have realistic expectations about how
much product development is actually achievable,
given this reality.
I’ve seen this happen repeatedly.
A technical team needs to be scaled from
20 to 60 in a year, but delivery plans
assume you already have the 60 in place
to start building. Plan in terms of the
team you have today!
Innovative technologists will leave your company
if you move too far into “maintenance mode”.
There’s also a danger at scale of creeping incrementalism rather than true innovation. Internal
politics can favor risk-minimization—“It’s safer
for me to deliver low-risk but tangible stuff, even
if the impact is low.” It’s true that incremental
improvements can generate significant benefits
at scale. But on the other hand, new products
capable of delivering step-changes in your
growth trajectory aren’t born this way.
Once you sense that maintenance mode is
creeping in, you need to intervene top-down by
identifying individuals, or potentially teams, to
focus on true innovation.
It’s not good enough for anyone to be
merely a maintainer. Everyone needs to be
customer-focused and entrepreneurial,
so that you foster a culture of continuous
innovation even in your core product.
Call it, ‘Maintenance+++’.
Maria Angelidou-Smith, CPTO, Personio
You need both personas in your technical
team: innovators and maintainers. But
you have cycles as different teams shift
between the two states. My solution is
tactical intervention—moving the highly
innovative people around more. They
usually get bored if you don’t move and
give them the opportunity to do what they
do best, so they’re generally happier
with this approach.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
Once your technical team grows beyond 100
people, we also recommend periodically reviewing it in terms of an 80–20 innovation split: Invest
80% of effort into your core business, and 20%
into new (adjacent) developments. This differs
from the more widely known 70-20-10 model
of innovation which is better-suited to lower
growth corporations in search of transformation.
In a high-growth startup, you’ve already discovered your transformational innovation and don’t
want to be distracted in pursuit of radical
alternatives.
The challenge with any planned split
between maintenance and product
building is having visibility into the type
of work being performed. Ideally, the
tools for managing the day-to-day work of
teams provide real-time insights as well.
About a year ago when our technical team
hit about 200, we shifted to ‘portfolio’
thinking about our engineering organization
and time. It hadn’t been much of an issue
before, but we now aim for a split of 60%
spent on current product priorities, 20%
on longer term investments and 20% on
technical excellence, such as repaying
technical debt and UI polishing.
Michael Manapat, CPTO (former), Notion
Recognize the limits of the squad model
at scale
Fostering innovation can be seen as part of a
broader challenge with the overall squad model.
Up to 15–20 squads, it appears to scale relatively
well, and the benefits in terms of agility and speed
are clear. However, beyond this point, when your
overall tech team reaches about 200, cracks rapidly
appear. Communication between teams becomes
an issue, as does efficiency and duplication of core
tasks. Interdependencies mean that things slow
down as decisions need to be escalated, or incidents become more frequent and severe.
The original Spotify model had additional
structural elements: tribes (for organizing groups
of squads), chapters (groups with common interests across squad specialists, such as testing
or security/privacy) and guilds (less formalized
interest groups across squads). However, these
have to some extent been discredited as not workable in practice, including at Spotify itself. There
is no clear alternative consensus on how best to
organize technical organizations at scale. However, certain elements of a more traditional management structure are required to supplement
the squad model even at earlier stages of growth,
and will be discussed below.
Many companies chase specific
philosophies with weird labels. I’m not a
fan. It’s just confusing and inefficient.
To me, when you’re small and trying to go
after multiple projects, it’s really hard for
designers or data engineers to be part of
squads. There’s simply not enough folks
to dedicate someone fully to each project,
plus it can be hard to mentor or develop
them depending on seniority of folks at the
company. You will need dedicated central
teams, with a culture to support, say,
a design studio, or informal interest groups.
So there is no one-rule-fits-all. Your team
model needs to evolve given the circumstances you are dealing with.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
Engineering
How to hire in the early days
Be wary of hiring folks straight from Big Tech
who lack startup experience. There’s a temptation
to go after “six years at Google” profiles. But
while these companies teach great engineering
practices, they tend to be about “how to do the
job right” versus “how to do the right job”. At
the early stage, you don’t particularly care about
code accessibility—it’s all about shipping. Your
early engineers will need to be their own product
managers. They need to get their hands dirty,
rather than being too process-focused.
This risk not only applies to hiring from post-IPO tech companies, but also to larger pre-IPO
companies. The only exceptions are where big
companies are housing segregated projects, such
as Google Brain. These can attract specialists
who are obsessed with their area, and who can
be startup-oriented in their approach.
Domain experience matters less nowadays.
For a start, there’s a broader set of tools such
as MongoDB, which reduces the need to have
your own database team. There will be even more
of this in the coming years thanks to AI, with
generalist engineers leveraging open AI APIs
and LLMs. So unless you’re specifically building a database or an LLM company, domain
specialties have less value. Likewise sector experience doesn’t matter much in engineering. It’s
much more about the overall caliber of the
individuals.
Shifting industries—for example
from SaaS productivity into health
tech—is far easier for engineers than
for other functions.
Zabie Elmgren, Index Ventures
I’m definitely seeing the impact of AI
on the strongest engineers already. Given
the progress, I expect that over the next
five years we can bank on a 40–50%
velocity boost across the org as a result.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
Your location makes a big difference to the availability of technical talent, particularly at junior
levels. In Silicon Valley or New York, there’s
a high density of ambitious early to mid-level IC
engineers who are interested in startups. Outside
of major hubs density drops dramatically. You’re
more likely to find senior profiles, who are also
generally more open to remote opportunities.
Similarly, more experienced founders are more
likely to have the confidence to build a distributed
or remote team early on, and therefore will be
more able to leverage this senior talent.
Bring in engineering specialists as
you scale
At the start, your engineers will mostly be generalists who can all write code and turn their
hand to pretty much anything.
You always need people who are not
necessarily experts in any one area, but they
understand the tech enough to get 80% of
the way there on anything they get their
hands on. They’re hard to come by, but find
them and empower them, particularly
earlier on.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
Over time, functional specialties get more granular. This is partly a reflection of technical talent
pools. True full-stack engineers are a rare breed
who are particularly drawn to working at early
stages due to the breadth of the role and the
impact they can have. But the majority of engineers lack the interest or skills to be considered
truly full-stack. Instead, they tend to focus on
more narrow aspects of engineering—most frequently backend, but otherwise frontend or
mobile.
If a mobile-native app is core to your
offering, then hire iOS and Android
developers. If you’re SaaS with important
security considerations, then hire
security specialists. It all depends on your
product, and how you can gain competitive
advantage.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
As your product matures and your company
grows, you also need more specialist attention
on “horizontal” considerations such as infrastructure. For example, as a startup, security needs
are there, but they’re simple (e.g. SOC2 compliance). At scale though, you become a target for
hackers, and the consequences of a security
breach become existential, so you’ll need a specialist security sub-team. This shift towards
specialists will be mirrored elsewhere in your
engineering organization, where generalist developers are supplemented with security engineers,
data engineers, DevOps engineers, and so on.
Once you hit 100 engineers, you’re
probably into the rapid scaling phase, and
will face a whole series of options and
decisions about your technical stack. It’s
critical by this point that you have some
internal experts with deep specializations—for example, in data architecting or frontend foundations. Without them, you end up with solutions that need to be reworked (debt to pay back) which can halt your progress significantly as you scale.
Maria Angelidou-Smith, CPTO, Personio
By 250 total company headcount, you will also
need to formalize roles and systems in:
IT—desktop support
Business applications—advice across the
company on vendor selection, and to
support implementation and integration
Data engineering and data science—creating a centralized data infrastructure and tooling, for users across the business
The traditional corporate model separates IT and
business applications into a separate technical
group, potentially overseen by a Chief Information Officer (CIO)—separate from the CTO—who
focuses on customer-facing solutions. However,
modern companies typically keep all of these
activities within a single engineering group and
leadership structure, recognizing the high degree
of overlap between these areas. For example,
business applications such as CRM are increasingly integrated into core product and customer
workflows.
I’d previously seen the importance of
reliable and timely metrics as you scale.
We made sure to invest in data science and
data engineering support before it became
a problem for us.
While certain specialists become essential,
over-specialization leads to fluffy positions,
where people outsource or delegate the stuff they
don’t like. For example, basic unit testing should
remain a core responsibility of your developers.
You may need some testing specialists at scale,
but if so, their focus might only be on QA/testing
tooling, or on particularly tough testing elements.
While it’s straightforward to push out new
releases for SaaS software, for example, mobile
apps are trickier, so testing needs to be more
comprehensive and systematic upfront.
QA is a classic. If you have a separate QA
team, you’re signaling to your developers
that quality is no longer their responsibility.
It creates ‘moral hazard’.
Carlos Gonzalez-Cadenas, Index Ventures
The number of tests you can conduct is
limited only by your imagination. So
our guidance is: make sure the stuff you
build works for the intended use cases.
Release, and then observe for unexpected
instances or breakage points which need
to be fixed post-live.
Alexis Lê-Quôc, CTO & Co-Founder, Datadog
When I started at Snap, we were a small
engineering team and had the mindset
that engineers should be wholly responsible
for deploying and maintaining their own
code. There were no separate test teams, no
separate DevOps teams. We scaled this
‘no SRE’ model
almost until my departure, at which point
we had thousands of engineers, and it
worked very well.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
As your organization scales, engineers
need to shoulder additional responsibilities
when it comes to developing productionlevel code. This includes broader testing
requirements, improving alerting and
observability, and optimizing performance.
Implementing more rigorous testing standards can raise deployment quality and
lower the incidence of issues.
With large numbers of engineers working in
non-hierarchical and cross-functional teams,
distinct management challenges arise. There are
two approaches to handling people management
issues in engineering teams:
Tech Leads (TLs) focus on engineering
quality and shipping velocity within a
single squad. Formal people management is
handled by Engineering Managers (EMs)
who each operate across two to four squads
to ensure that execution is aligned and
coherent, beyond the squad’s own
immediate delivery goals.
Tech Lead Managers (TLMs) with
combined responsibility for technical and
people management within a single squad
In the first approach, the main disadvantage is
the ambiguity of management responsibility,
since TLs are overseeing the work of engineers
in their squad on a day-to-day basis. The central
challenge of the second approach is securing
enough TLs who are foremost excellent engineers,
but also strong at people management. Therefore,
at scale most companies switch to the first
approach, or to a hybrid model where some squads
have TLMs, while others simply have a TL.
The TLM model is cleaner. It avoids
having too many cooks in the kitchen.
With separate EMs and TLs, individual
engineers can end up with two bosses.
But the downside is that tech leads often
aren’t the best people managers! There’s
no perfect solution or common industry
conclusion. Companies tend to follow
one route or the other, or they flip flop,
or they might hybridize.
Carlos Gonzalez-Cadenas, Index Ventures
Even though there are different approaches to
the precise role of EMs, they should not be writing code, although they may be reviewing code.
For example, they may have responsibility to:
Ensure that commitments to automated
testing are adhered to
Ensure that engineers are getting the
learning opportunities to progress, such as
paired-coding to nurture graduates
In even larger engineering teams, Engineering
Directors (EDs) may also be appointed, who
define and align these requirements across larger
groups of 50–70 engineers (i. e. up to 10 squads,
and potentially covering broader cross-squad
topics such as testing).
It’s really tough as a CTO to keep on top
of EM and ED effectiveness. They’re
conceptually the right roles to introduce to
set you up for long-term success. But when
your focus is on immediate delivery goals,
the EM/ED role can become an easy place
to hide, delivering limited value.
Simon Lambert, CTO, Birdie
EDs are also a conduit for the CTO or VP Engineering to monitor progress. An ED should be
able to explain in detail what’s going well or not
across their teams—for example, where an intervention may be required, or what lessons were
learnt. If an ED can’t answer these questions
without asking someone else, this suggests that
the model isn’t working.
We require our EMs and EDs to be
deeply technical and fairly involved in the
day-to-day of whatever their teams are
working on. We concluded a while ago
that it’s not sufficient for them to be great
people managers. They also need to be
capable of insightful written and verbal
commentary. We expect them to proactively
spot and fix challenges, and to explore
opportunities.
Alexis Lê-Quôc, CTO & Co-Founder, Datadog
KPIs for EMs & EDs are primarily people-focused, such as:
Employee satisfaction
Talent retention and development
Team productivity (impact)
Project success
Technical debt reduction
Be thoughtful about engineering
leadership
Although half of successful startups have a
co-founding CTO, only a small proportion of
these are familiar with the demands of managing
a large engineering team. In the early days,
you want someone who can hack code rapidly
and efficiently, taking you to an MVP and then
towards PMF, iterating and hunting for shortcuts. But with multiple squads and specialist
sub-functions in your engineering organization,
you need an effective and enthusiastic People
leader with a strong focus on delivery. This
involves a very different skill set and draws on
very different sources of motivation.
At the very least, co-founding CTOs should
be supported to successfully adapt to these new
needs by an experienced technical coach or mentor. But where they lack the desire or personality,
a shift in technical leadership to a professional
CTO or VP Engineering is an established solution. Sometimes this is a smooth transition, but
it can also be fraught and painful to manage. It’s
important that as co-founders and major shareholders, you are both upfront and clear about
prioritizing the company’s needs. Managing the
shift represents an important early test of maturity in managing leadership transitions.
Datadog—A co-founding CTO leading
an engineering team of 2,000
Now I focus almost entirely on the technical side, but in the earlier days it was
everything and anything. I see my role as
doing what needs to be done, from picking
the right health insurance plan through
to formulating strategy. I would ask
myself what things we needed to be doing
that we weren’t, but which could kill us.
Conversely, what were we doing now that
we shouldn’t be. I would observe how this
was playing out across the company and
dive in. I had stints running CX and HR
along the way.
I focused on where I could have a singular impact, which is rare these days! But
I also looked out for bottlenecks, where
individuals were over-stretched and falling behind on important stuff. For example, in the early days when SaaS was only
slowly being accepted by enterprises, I’d
fill out security questionnaires, because
other engineers were focused on coding,
and I could complete them pretty fast. I
did five, then 10, then 20, and then 50. I
then said, “Ok, can we now figure out how
to do this more systematically without
relying on me?”
Alexis Lê-Quôc, CTO & Co-Founder, Datadog
A common solution to leading large engineering
teams is to hire a VP Engineering who takes on
team management and delivery. In this case, you
need to assess the best management structure
with your co-founding CTO. If they are the right
individual to retain overall engineering leadership from a technical perspective, the incoming
VP Engineering may report directly to them.
Alternatively, the co-founding CTO may step
back from overall engineering responsibility,
with a more focused role, which may include:
Overall vision and roadmap for technology
in the company
Innovation, research and new product
development—retaining a small team of
their own
Architectural decisions
Technical liaison with key customers and
partners and interfacing closely with
commercial teams
Bar-raising and talent branding initiatives
around technical hiring
Open source strategy—community
collaboration and participation
In this setup, it’s healthier for the VP Engineering
to report directly to the CEO rather than to the
co-founding CTO (even if the co-founding CTO
retains their title). Top candidates will also insist
on this structure.
It was a multi-year journey, with a lot of
emotional turns, to shift my co-founder’s
role from CTO to a more narrow focus on
research and innovation, relinquishing
team and broader responsibility to a new
VP Engineering.
Anonymous Founder
In some cases, the co-founding CTO would prefer
to step away from the company entirely, in which
case you may choose to directly hire a professional CTO.
The vast majority of excellent engineering
leaders with proven experience of managing
teams at scale are to be found in the major tech
companies. Given the status associated with
working for these firms, as well as the generous
compensation structures, three-quarters of the
potential candidates won’t even acknowledge an
opportunity from an early (or even growth) stage
startup. And most of these individuals wouldn’t
be right for you either. You’re looking for the
minority of leaders who still enjoy operating in
the weeds and staying heavily involved with
their teams.
As an incoming engineering leader at
a growing startup, you’ve got to recognize
that the role isn’t just about scaling, but
also about cleaning up the mess. You’ve
also got to recognize that creating a mess
was what earned the right to get to
this point.
Simon Lambert, CTO, Birdie
To some extent it’s a game of numbers and luck,
but you can improve your odds by leaning on
warm intros from your investors and network.
While I was at Snap, I had dinner with
two Index team members in relation
to angel investing opportunities, when
one of them pitched me on Linktree.
At first I just said no, but he persisted,
and I ended up speaking to Danny Rimer
[Index’s partner on Linktree], after
which I started to get very interested.
Farnaz Azmoodeh, CTO, Linktree and VP Engineering (former), Snap
Wise—Hiring a professional CTO
I joined Wise in 2015 when there were 300
employees, with 40 in Engineering. I’m
still the CTO today, with 750 in Engineering alone.
I relocated to London from the Bay
Area, after 11 years at eBay and PayPal.
The problem being solved by Wise was
what appealed to me. I had direct experience of the pain of moving money
across borders, having moved to study in
the US from India. I knew that it was a
complete ripoff. I had also witnessed the
explosion of international payments at
PayPal and eBay.
Kristo [Wise’s co-founder] convinced
me to fly out on Thanksgiving Day to
Estonia to meet the team. I was super busy
with Black Friday preparations before the
launch freeze at eBay, but I went,
half-thinking that I must be crazy. But
after spending three days there, I realized
that this was something special. Young
and driven people, aggressively learning.
24-year olds were launching new countries. Several of them reached out to me
for insight before I even accepted. I was
personally up for the challenge, as was my
wife. We didn’t have kids yet so it felt like
now or never. This all gave me the confidence to say yes.
Harsh Sinha, CTO, Wise
Create an engineering metrics dashboard
Once you establish multiple squads and lose direct
visibility into what’s going on, it’s important,
culturally as well as operationally, to set up a
metrics dashboard in Engineering. Over time it
will inform your leadership decision-making, and
should cover four key areas, although the starting
point might just be two or three metrics—for
example, bugs created plus hiring versus plan:
Velocity—sprint-level features shipped,
experiment velocity (experiments shipped
plus percentage of experiments that rolled
out generally), aggregate code output,
developer experience (cycle time from
creation of change to deployment)
Cost—payroll cost, non-payroll people
cost, cloud spend (with splits by service),
tooling spend
The rationale for opening additional engineering
centers (ECs) is in order to tap into new talent
pools. This may be a function of the depth of the
engineering talent pool in the city where you
start, together with your success in creating an
appealing and distinctive engineering talent
brand. If you start in a smaller city, you’re limited
both by the sheer number of suitable local candidates and by the appeal of the city as somewhere people want to relocate.
When I started, we had 40 engineers,
with most of the team in Tallinn [Estonia],
alongside a small team of seven in Ukraine.
We now have 750 across seven product
engineering locations and London is larger
than Tallinn. We simply tapped out the
talent pool in Estonia.
Harsh Sinha, CTO, Wise
You could also open secondary engineering hubs
in lower-cost locations, with teams focusing on
less complex aspects of your engineering stack.
This allows your core team to focus on higher-value activity.
However, when you’re at pre-IPO scale, it’s
more important to optimize for productivity
versus cost, so be wary of opening up additional
ECs that will pose travel or time zone challenges.
US growth-stage companies should look to secondary hubs within the US, or otherwise in Latin
America. Conversely, Western European companies might look first to Eastern Europe.
Notion’s engineering center in India
We inherited an engineering team in
Hyderabad through an acquisition.
They’re doing great and varied work for
us (including AI initiatives). Each quarter,
the mission and charter for the office gets
clearer, meaning less real-time coordination is required. I’m grateful to the team
there for their heroic work staying in sync
with us given the time zone challenges.
We now need to establish PMs on the
ground so they can be more self-owned,
rather than relying on a New York-based
product lead.
It’s also been a learning journey to
adapt to the hiring dynamics which are
so different compared to the Bay Area,
including interview style and offer
process.
Michael Manapat, CPTO (former)
Give engineers special attention
Engineering teams are special in high-growth
startups in at least three different ways:
They are “beta testers” for approaches to
management. In software companies,
engineering teams scale the fastest, so the
need for People processes appears here
first. This is accentuated because as you
scale, you will increasingly be hiring from
large tech companies, with sophisticated
processes around career progression and
job leveling. That forces you to follow suit
to some extent. But engineering teams also
represent a tough beta testing environment
for HR processes, and for more traditional
people professionals who rely on empathy
and emotional attunement. By nature,
engineers may ask more probing questions
and expect strong rationales to support
decisions that affect them.
Their compensation should be higher.
Compensation for engineers is significantly
higher than for other functions, as a simple
reflection of supply and demand. This fact
has to be accepted and translated into
pay-grids with wide disparities relative to
other functions, particularly at more junior
levels. This applies to both cash and equity
components of compensation.
They need specialist processes: Certain
processes are also bespoke to Engineering.
For example, incident management
requires deep post-mortems, since
downtime becomes so painful and
expensive with scale. Incidents in other
teams, such as Operations, rarely have such
broad and deep implications, so can be
handled with a lighter touch. As another
example, retaining the best engineers at
scale requires an IC track to career
progression with no ceiling, separate from
people management pathways (a
manifestation of the “10 × engineer”
philosophy).
In the early days, the engineers we hired
didn’t care about job titles or levels.
Stock options and their day-to-day work
was what mattered. We also actively
avoided hiring people for whom job title
mattered. But when we needed to start
hiring actively against the tech giants,
we were forced to adopt their rules to
some extent to remain competitive.
The engineering mindset has a tendency
to cover every eventuality, which leads
to career frameworks being overly
complicated, instead of rough guidelines.
People can end up chasing promotions
too often. We’ve pushed back and returned
to a simpler and tighter model.
Alexis Lê-Quôc, CTO & Co-Founder, Datadog
You need buy-in from Engineering for
People processes if they are to have
internal credibility, and therefore drive
high performance. This means involving
Engineering in their design and
customization. The best candidates will
also have strong views, asking detailed
questions about how you stack-rank, what
gets incentivized and rewarded, what
‘hard’ skills are expected per level, etc.
Maria Angelidou-Smith, CPTO, Personio
Product
At the start, you are the product manager
The story of scaling product teams is one of
accepting the progressive shift and delegation
of responsibility from the founder(s). But this
needs to happen gradually.
It rarely makes sense to hire anyone in a dedicated product role in the early phases of a startup,
i. e. as part of the first 10 hires you make. As
founder(s), you are the product manager. The
product vision, strategy, and roadmap is still going
to be very much in your head, so you need to retain
full responsibility and stay super close to it.
Your early engineers should also act like
“product engineers”—they need to stay close to
relevant user and customer feedback to inform
what they are building.
Having said this, we do sometimes see successful
early product hires, particularly associated with
one of two situations:
When the problem space encompasses
specialist knowledge that the founders do
not feel confident in—for example, tax
compliance or IP law. Bringing this
understanding in-house can accelerate your
path to finding PMF, and also gives early
customers more confidence in your
capabilities.
In D2C models, where the founder may be
more focused on and familiar with the
physical product rather than digital, in
which case it can make sense to hire a
separate “digital product manager”.
Seeing a seed stage company hiring
a product manager is a bit of a warning
sign to me. In most cases, the founder
should be the PM at this stage and not rely
on someone else. Design hires are often
more impactful early on.
Zabie Elmgren, Index Ventures
Only make your first product hire once
you’ve hit initial product-market-fit.
Gabriel Hubert, Co-Founder, Dust and Product Lead (former), Alan
Understand why you need product
managers
Some founders are drawn to the Stripe approach
to product management: Stripe had zero PMs
until total headcount was over 250, with engineers instead taking full responsibility for
designing and implementing new features as
“product engineers”. While there’s something to
be said for this philosophy, it has significant
limitations for most companies for two key
reasons:
Founder bandwidth—Once you’ve hit
initial PMF and raised significant (Series
A) funding, you’ll be drawn increasingly
into hiring and selling. You’ll become a
bottleneck to product development if you
don’t find someone who can manage
day-to-day interactions and
decision-making with your engineering
team. Shipping velocity will suffer.
Engineer bandwidth—With increasing
numbers of users and use-cases, staying on
top of customer feedback and evaluating
priorities or tradeoffs becomes harder. If
your users are developers themselves
(as with Stripe), engineers might find this
somewhat easier. But if your users are
consumers, and even more so if they are
non-developer B2B professionals (lawyers,
doctors, marketers, etc), your engineers
will struggle to get deeply inside the
customer persona and quality will suffer.
Product managers help to bridge these gaps
between your product vision, customer/market
needs and optimal technical solutions. As you
grow, this bridging role will get tougher:
Use-cases expand
Product surface area widens
Internal customer touchpoints become
more numerous—Marketing, Sales,
Customer Success, CX, etc
You’ll therefore need more product managers,
aligned with technical squads, to manage this
increased complexity.
Notion—Product managers or product
engineers?
We waited a long time to hire product
managers, and it’s still a small team—less
than 15 out of 550 in total headcount.
We didn’t have any PMs until two years
ago, at around 50 or 60 engineers. I’m
not sure this was actually ideal. Both
Notion and my former employer Stripe
are very engineering-driven to start, and
both companies have a very product-minded engineering core, which I think
is a great thing.
That said, there is a difference between
engineers who think about product, and
product managers who are out there
talking to users and bringing in user feed-
back constantly, coordinating closely with
go-to-market teams, and thinking deeply
about product strategy. I think that was
missing at Notion early on. So I’m glad we
have PMs now and that we’re growing the
product management team.
Michael Manapat, Chief Product and Technology Officer (former)
Credit: Lenny’s Newsletter (interview
with Michael Manapat in May 2023)
First hire a technical product manager
Generally, we recommend that your first PM has
a technical orientation, so that they can actively
problem-solve with your engineering team. A
mid-level IC (five to seven years experience) can
work well. This could also be an internal appointment rather than an external hire—for example,
a customer-centric early engineer or data analyst.
You’re optimizing here for speed of experimentation and execution.
As founder you still need to be deeply involved in bringing your vision to life and setting
product priorities and roadmap. This includes
doing (at least) weekly product reviews with
technical teams, maintaining a quality-bar for
what gets shipped and ensuring a focus on the
commercial outcomes that you want.
Your first PM critically needs to be
someone who can quickly build trust with
the co-founder responsible for product
and manage arbitrage. If you have a very
technical founder, then first hire a PM with
enough technical chops to construct and
explain their decision-making in terms the
founder will be aligned with. But the PM
must also be able to challenge the founder.
Gabriel Hubert, Co-Founder, Dust and Product Lead (former), Alan
Given how close you have to stay to product, it’s
almost always an error to hire a senior product
leader this early. At most, hire a Head of Product
with five to eight years of experience who can help
to hire and coach a further two or three PMs.
I hired a VP Product when we were 40ish
people and delegated the roadmap to them
It didn’t work out. We diverged between
vision and reality, and between company
versus product strategy. After hiring two
PMs and two designers, the team fell
into an overly comfortable, big company
culture, with too much process. I had
to dive back in and tear off the Band-Aid,
which was tough.
Anonymous Founder
Steadily delegate product leadership to
others
The pace at which founders hand over the reins
for product decisions depends on your interest
and capabilities. Being a technical founder can
delay the shift, as you can more accurately consider the trade-offs involved in product decisions,
such as new feature releases versus paying down
technical debt. If you have specific experience in
product management, you’re more likely to be
drawn to it and to continue adding value. But for
the majority of founders, directly overseeing
product becomes more challenging with scale.
An increasing proportion of feature requests and
priorities will originate from your GTM team—feedback gathered from prospects, customers, user analytics or market research. You will also have a growing team of PMs who need day-to-day supervision and professional development. While your overall vision and strategy remain the North Star, you’ll need to bring in progressively more senior product leadership, and gradually delegate overall control.
Phase One—The first PM(s) manage the interface with Engineering, and ensure on-time delivery per sprint.
Phase Two—The Head (or Director) of Product oversees a small (less than six person) product
team, consolidating customer/prospect feedback,
market data and competitive analysis for you to
jointly review. You still steer the product roadmap and priorities.
Phase Three—An executive-level product
leader takes primary ownership of the product
roadmap, and jointly agrees product strategy
with you.
Phase Four—A CPTO with deep (15+ years)
experience at-scale brings product and engineering leadership together, freeing you wholly
from being a bottleneck. This is unlikely before
your technical team reaches at least 250 headcount, and if you are a technically-oriented CEOfounder, may not be desirable.
There are two step-changes in startups:
when the founders are no longer building
product personally, and then when they’re
no longer directly responsible for product.
Gabriel Hubert, Co-Founder, Dust and Product Lead (former), Alan
It inevitably ends in failure when a CEO
has a super fine grained blueprint of what
needs to be done. This applies to any
area of the business, but it’s most likely to
happen in product. With no opportunity
to deviate and iterate based on progressive
results on the ground, you also never
know whether the failure is due to poor
strategy or poor execution.
Maria Angelidou-Smith, CPTO, Personio
VP Product—by comparison with a Product
Director:
More comfortable with making decisions
in conditions of ambiguity
Great communicators and/or great
relationship-builders
More capable of interacting with sales and
marketing teams
Builds high levels of trust and respect with
rest of the leadership team
May have deep specific insight into your
market or category
Chief Product Officer—by comparison with a
VP Product:
Increasingly tied to product marketing
competencies
Chooses where you play, incorporating
signals from GTM team and customers
Able to rally the entire company in
readiness for shipping new releases,
including CX and operations teams
Deeply immersed in company financials, to
align product decisions with company
strategy and constraints
Builds relationship of respect and trust
with founder across a broad landscape—from architecture, customer segmentation and pricing-for-value through to product suite, product names and internationalization priorities
Two contrarian views:
Datadog—Hiring a Chief Product Officer
pre-revenue
Two years into our life, we had running
software but we lacked a product and
weren’t making substantial progress commercially. So we asked ourselves if a product person could help—and this turned
out to be true! Amit joined us in 2012
before we raised our Series A.
We had a good sense of what we
wanted our product to do and what it
should look like. But we had far less sense
of the commercial packaging and pricing.
Amit naturally gravitated towards these
aspects: What problems are we solving
and how much value does this translate
into? As engineers by trade, Oliver and
myself weren’t very adept with these
questions. So we formed a triumvirate,
with fuzzy boundaries and complementary strengths. This was uniquely circumstantial to who we each were, and I don’t
think you could put it into a formula. But
you need to recognize when you have gaps
in your approach that could benefit from
outside thinking. We were lucky in Amit
that we found someone senior and experienced, but who still took a first-principles approach rather than slavishly
following shortcuts they’d learnt elsewhere. This was really important to the
relationship working so well, as it still is,
11 years on.
Alexis Lê-Quôc, CTO & Co-Founder, Datadog
Remote—Founder acting as CPO at
1,000+ Headcount
Before starting Remote, I had been VP
Product at GitLab. In my mind, the company IS the product. So I find it tough to
work with product leaders. I expect so
much, and care so much about the details,
that they can’t replace me. In fact, I’m now
directly leading the product team again.
Yesterday I reviewed a new feature we
released, even giving feedback on the
color contrast on a screen. So yes, I’m
involved from top to bottom. But I’ve figured that I now have to stand back from
the “how” of implementation, while staying very involved in the “what” and the
“why”. I give loads of feedback, from
MVP right through to PR.
Both month-to-month, and quarterto-quarter.
I’ve hired loads of product managers,
and in my opinion there are huge differences in quality which are unrelated to
compensation.
I’m also very aware of the danger
of becoming risk-averse as we grow, and
falling victim to the “innovator’s
dilemma”. Looking ahead, I want us to
continue to take risks, be bold and move
quickly. I don’t believe in seeking validation beyond direct customer feedback.
Avoid additional deep studies and surveys, which only stall you. The only true
proof comes from asking, “Will you use
and pay for this?”
At the same time, building via customer feedback alone can lead you into
local maxima, versus pursuing a longterm vision which can drive long-term
relevance and growth. Founders always
need to look beyond what customers are
asking for.
Job van der Voort, Co-Founder and CEO
Find product managers who inspire your
engineers
The relationship between Engineering and Product is prone to conflict, leading to damaging delays
and a loss of trust. What you need is a sweet spot
of tension.
There are three major sources of conflict:
Product projecting an attitude of, “We’ll
set the direction and you’ll follow.” The
best engineers will rebel against this,
leading to breakdown.
Engineering holding strong opinions about
the product when they don’t understand
the full context or dynamics at play
Product lacking the technical proficiency
to be true partners in decision-making, so
they can’t offer credible counterarguments
to Engineering’s skepticism from which
creative compromises and solutions can
be forged
Fostering a culture of mutual respect starts with
a strong relationship between your engineering
and product leaders, who role model a recognition of the value brought by the other. They need
to demonstrate a joint commitment to seeking
out optimal solutions that balance ambition with
achievability, and immediate versus longer-term
success. If you spot a “blame” dynamic creeping
in, you need to intervene immediately to diagnose
the root cause, otherwise it will rapidly percolate
throughout your entire technical team. Ask yourself: Are you setting sufficiently clear accountabilities and priorities? Can the relationship be
put back on track through closer communication?
Or does one of them need to go, because they
lack the right capability or mindset?
Wise—The Engineering/Product
relationship
We fundamentally believe that great
companies have builders, who understand not just the “how”, but also the
“what” and “why”.
Every engineer we hire has an interview round called the “product round,”
where a PM and an engineer ask: “What
have you built, how did you measure
impact, and why did you build it that
way?”
The split between Engineering and
Product is largely a function of time
constraints. So there is a role, and need,
for both. But we really push against a
culture that says, “Engineering just does
delivery.” The PM is the glue, but not the
CEO, in a squad. Engineers can effectively fire the PM by just walking away.
PMs must inspire.
Harsh Sinha, CTO, Wise
Blend four types of product manager
We can distinguish between four kinds of product manager
Project manager—focused on delivery: for
example, internal coordination across
teams to ensure the effective rollout of new
products and features
Technical—former engineer who can
rapidly translate needs into technical
requirements and viability
Customer-centric—focused on determining
customer needs: asks the right questions,
with prior experience potentially in
product marketing or management
consulting
Market-centric—particularly in vertical or
complex B2B, it’s essential to have some
PMs who bring a deep understanding of
your target market and industry structure
Being a great PM is as much about
a mentality or mindset as it is about
competencies. Do you care deeply about
delivering something end to end?
Are you willing to do whatever it takes
to actually ship product?
Michael Manapat, CPTO (former), Notion
Product hires at Discord
My co-founder and I covered the PM role
ourselves mostly until we were about 150
headcount. Our first two PMs were internal hires. It felt too risky to hire externally for the PM role. The first was a data
scientist with great product sense. The
second was a technical writer for our
dev tools, who became our dev-facing
PM. We continued this model for a few
years—finding people in different roles
internally who just came up with terrific
ideas, and tapping them up. Our first
external product hire was in growth,
where our internal capabilities fell short
of what was needed from a senior lead.
Jason Citron, CEO & Co-Founder
You should aim to add PMs as your overall technical team scales, aiming for one product manager per technical team. The optimal PM profile
will reflect the specific team’s focus: If it’s focused
on growth, you want a PM with growth experience; If it’s an infrastructure team, you want a
technically-oriented PM.
You need different PMs at different
lifecycle stages of a product. The product discovery skill set is very different from
product-maintenance. Both are vital,
but the same individual is highly unlikely
to be good at both.
Thomas Soulez, Chief Product Officer, Silae
Product manager archetypes at Meta and
Personio
At Meta I was the functional “guild” lead
for product managers at Facebook, and
I oversaw the promotion committee.
I sponsored the introduction of career
paths for PMs. This new model with four
archetypes made it clear that PMs could
progress through to a VP-equivalent level
along any of these “superpower” pathways. This is extremely important, as in
the business you need both senior ICs and
experienced managers. The former is
often much more valuable in a product
and technology organization, especially
when it comes to advancing complex and
ambiguous initiatives. So the incentives
system needs to allow for a clear progression along the IC path.
Specialist—experts in a specific domain
(e.g. growth, ML, integrity) built up over
years. Achieve impact through solving
tough problems in their domain, building credibility and influence
Captain—can drive insanely complicated
projects, which involve bringing loads
of pieces together, beyond simply project
management (i. e. can take executive
decisions)
Entrepreneur—exceptional at conceiving, building momentum and delivering
from zero to one. These individuals
really need recognition and protection,
as they can find themselves crushed in
the corporate “machine” that over-optimizes for short-term gains.
Generalist—These are versatile folks
and typically the majority of the product
manager population.
Few individuals can be versatile across
the archetypes. For example, great Captains tend to be terrible Entrepreneurs,
and vice versa.
I’ve introduced a similar framework into
Personio too. For example, we now have
a Captain for our key markets, empowered end-to-end to identify gaps, set
goals, and prioritize team roadmaps.
We’ve also just hired someone who has
Specialist experience in product growth.
Maria Angelidou-Smith, CPTO, Personio
Design
Decide if design is core or secondary
Users today have much higher expectations (both
explicit and implicit) about ease of product use
and product delight. Founders are recognizing
this and adopting a stronger design-centric approach to both product and brand.
However, be realistic about whether you are
truly design-centric, or simply being design-savvy.
Not all startups need to be, or can be, design-centric. It largely depends on your founding team
DNA, the nature of your product and market, and
your source of competitive differentiation. Being
design-centric leads to a certain set of decisions
(such as building early in-house competency and
capacity). If not, it leads to another (such as more
agency usage, and a split between internal oversight of design and brand).
I advise founders to think of design more
as a verb rather than a noun. It’s a way
of operating rather than a function. So it’s
less, ‘When should I hire my first designer?’
and more about, ‘Who’s designing right
now?’ because someone inevitably will be.
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
Most B2B products will not be differentiated on just design. The UI needs to be
‘good enough,’ but more importantly it
should be modular, with a design system
so you can iterate faster on feedback. If
design is a differentiator, then it’s likely
more around UX.
Thomas Soulez, Chief Product Officer, Silae
If you have a clear vision as the founder for what
the product is going to look like, it’s more a case
of bringing this to life, and you can go far without
needing to hire a dedicated product designer. You
could also work with a freelancer. However, if
you’re still in the idea maze, and you don’t have
strong design expertise as a founding team, then
you should prioritize hiring a product designer
to accelerate your iterations and make progress.
Just under half (46%) of the startups we researched
had a designer by the time they reached headcount
of 10, rising to 88% by 50 headcount.
I get anxious if cycles are spent polishing
work prematurely because the founders
believe that’s where utility is concentrated.
Google didn’t need to be beautifully
designed on day one or even in year one.
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
Hire a designer that can code
Your first design hire must also be able to put on
a developer hat. Otherwise they won’t be flexible
enough, given the overlap of roles between Engineering and Design. You need to ensure that your
technical team is moving swiftly to give form to
early product concepts, so that you can rapidly
get user feedback, and determine whether it’s
serving their needs. The focus of your first
designer, or design tasks, is to give functional form
to prototypes. Tools such as Figma make this
much easier nowadays. Critically, designers can’t
be touchy about feedback, and should be willing
to create and refine continuously.
The first designer we hired [at a previous
company that Simon co-founded] shared
her ideas before they were ready. It was
brave, and it was a revelation. It unlocked
a dynamic and collaborative technical
environment to have visuals that everyone
could group around and discuss. Visuals are
just so much more powerful than words.
Simon Lambert, CTO, Birdie
It’s a red flag for a startup if a designer
is sensitive about sharing their work.
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
When hiring designers, prior in-house startup
experience is preferable, but too tight a filter. You
should also look at agencies and at larger in-house
teams, favoring candidates based on their bias
for action and comfort with ambiguity. A designer
coming from a late-stage company may not cope
with the ambiguity, so you really need to assess
this. Conversely, an agency designer, or even a
fresh design graduate, could be a promising route.
They’re by definition very raw, which could serve
you well, and for this reason they’re a common
hiring profile we see in startups.
I find hiring straight out of college can
be great for designers. You’re looking for
raw talent, with evidence of doing projects
on their own initiative or for free, and
just to gain the proficiency and experience.
Curious and self-directed learners thrive
in high-growth startups.
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
Note that if you’re a D2C E-commerce startup,
your first designer is more likely to skew to brand
design rather than product design by background,
since the early design tasks will be more focused
on marketing and packaging elements than on
software.
Pre-launch, I worked with a freelance
creative to develop our logo and our
packaging. Post-launch, one of my first
hires was an in-house, well-rounded senior
graphic designer. We had daily deadlines
for creating community emails, blogs, and
social posts, and we needed visuals and
videos to accompany them. If you’re selling
a visual product and need to generate
desire on a daily basis, it’s hard to outsource that to an agency.
Marcia Kilgore, Founder, Beauty Pie
As you scale, think about other branches
of design
By the time you reach 50 headcount, you’re likely
to have hired a second or third designer. One of
these might be a brand designer rather than
a product designer, focusing their efforts more
on marketing and brand collateral, and without
a technical background or ability to code. If
you’re a D2C business, this balance is more likely
to be inverted, with two brand designers and one
product designer.
Your product designers at this stage will
report into either a Head of Product, or to your
overall technical leader (CTO or CPO). Brand
designers are more likely to be oriented towards
your marketing team and lead, although it largely
depends on the specific managers that you have,
and the balance of work that the designer is doing.
Design effort at this stage will be a mix of
supporting new product development and features, together with revisiting design work on
product that you’ve already released (color palette, tone-of-voice on copy, logo representations),
to ensure consistency and to improve finesse.
Your UI doesn’t need to be polished to
demonstrate initial value. But once you
have solid signs of PMF and enter a formal
launch or growth stage, then you need
to add some cycles on UI polish. Otherwise
it’s like going to a new restaurant and
finding that you have been given mismatching cutlery and no napkin. It’s not the
primary reason to go to a restaurant, but
you will notice and it will erode credibility
and the overall experience.
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
Hire more design generalists
As you scale further, the majority of designers
that you hire should be generalists able to take
on a range of roles and projects. Your strong
preference should still be hiring designers who
can code, to give you more flexibility between
design and engineering aspects of building.
In the early stages, you are likely to
accumulate ‘design debt’. You’re shipping
product quickly, which isn’t entirely
consistent in terms of overall design. As
you scale, you want to smooth out these
rough edges and offer a more cohesive user
experience. This ‘design refactoring’
will put additional strain on your design
team as they’re simultaneously trying
to ship new features.
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
Keep designers engaged
The conventional ideal is to have one designer
dedicated to each of your product-oriented technical teams. However, this isn’t necessarily optimal. For a start, finding excellent product
designers is tough. Furthermore, designers by
nature are particularly hungry for variety, so
tying them too closely to a particular team or
problem runs the risk of losing them. This is one
reason why agency roles can be so appealing to
designers.
Here’s our advice for how to keep your
designers motivated:
Regularly rotate designers between teams
to keep them engaged and learning.
Develop a studio model for designers,
allocating resources to teams and projects
as required.
Separate product design from brand
design, with the latter grouped under the
marketing function.
Build better design libraries, training your
engineers to use them in order to reduce
the need to directly involve designers in
every task.
It’s hard to ensure one-to-one mappings
of PM and designer per team. PM's
are a dime a dozen compared to excellent
product designers. A studio model for
product design can work better. You also
build expertise and craft by pairing
senior designers with junior ones.
Gabriel Hubert, Co-Founder, Dust and Product Lead (former), Alan
Ideally, you’d have a rich UI framework
developed by your designers, including
style guides and components, which can
then be assembled by a UX-tilting product
manager to minimize demands on design
time. But this involves a lot of upfront
investment, which is a rare luxury in highgrowth startups.
Thomas Soulez, Chief Product Officer, Silae
Later, look for specialists
With scale, you’ll also likely hire some specialists
into your design team, with distinctive and
non-overlapping skill sets, such as copywriting
and illustration.
Illustrations were a key part of our design
approach at Dropbox early on. We had
a single individual on the design team who
created them all. We needed to explain
computing abstractions like files and cloud
storage and security to potential users.
Illustrations just worked way better than
words to convey key concepts. For example, showing a person’s computer on
fire but with their files safe inside Dropbox
explained in a single visual what the
product offered. A picture really is worth
a thousand words.
Soleio, Designer × Investor, Figma Advisor and former Dropbox and Meta
Eventually you’ll have multiple needs around
brand and graphic design, alongside product
design: designing your website, marketing
materials, recruiting events, sales collateral, TV
ads, etc. These projects rarely fit into the technical team model, and some of the best brand
and graphic designers are also specialists in
these fields, rather than coming from a coding
background.
Additional sub-disciplines of design activity
will emerge as you scale, for example:
Growth and conversion-focused design
User research
Competitor research
These activities, together with brand design and
design libraries, aren’t typically owned by distinct
individuals. Rather, they can fit into the studio
and rotation models discussed above. This also
provides career development pathways for your
designers, keeping them stimulated and supporting retention.
Understand how your business model
affects your design needs
The balance of needs between product and brand
design varies considerably between business
models. Pure software business models have a
balance of 2:1 or even 3:1 in favor of product
designers. Marketplaces are closer to 1:1, while
D2C will typically need more brand designers.
We split our design team in two: Assets
inside the app come from our product
studio, while marketing assets come from
our growth studio. We ensure consistency
but not 100% alignment. Product needs
to be unified, but growth needs some
wiggle room to appeal to different
audiences and for different purposes.
Antoine Le Nel, VP Growth, Revolut
Do you need a design executive?
A talented IC designer can have exceptional
impact, so as with Engineering, you will need to
offer a clear IC track offering career development
outside of people management routes.
Within a studio model, you can encourage a
mentoring path so that you develop the skills of
your more junior designers. Great mentors also
tend to make great managers, which is particularly important in design, as it’s unusual that
creative people aspire to be people managers.
It’s great to cultivate ‘mentoring’
designers, since so many designers are
anti-management, and want to remain
individual contributors.
Gabriel Hubert, Co-Founder, Dust and Product Lead (former), Alan
Only a minority of startups pre-IPO hire a design
executive. Directors represent the most common
level of design leadership. They generally report
into the VP Product or CPO. In this setup, marketing executives (CMO or VP Marketing) are
typically responsible for brand leadership. This
creates a dilemma for unifying brand design and
product design. The answer really depends on
how fundamental design is to the company’s
identity and competitive strategy. If it is, then
hiring a design executive, with unified oversight
including brand, could make sense. Either way,
you need to foster a joined-up approach to design.
Unifying design and brand at
Squarespace
For us, everything is brand. Every touchpoint tells a story about the company.
Siloed thinking leads to a Frankenstein
brand and organization, so my team are
the brand guardians.
In design, your startup’s product and
creative output is your strongest recruiting pitch. Design-centric startups such as
Squarespace can offer designers 20 ×
greater creative satisfaction than roles at
Big Tech companies. We offer impact
rather than bricklaying.
Until recently, we had the same designers working across product and brand/
marketing elements. I looked for malleable individuals, who were both creatively
and technically gifted. They enjoyed
working across a broad range of areas,
including media creative. We even created
our Super Bowl ads entirely in-house. This
has really helped with career development
and retention too.
David Lee, Chief Creative Officer
Analytics
Analytics encompasses two areas that have previously been fairly distinct in terms of technical
skills and therefore talent pools: data science
(DS) and business information (BI). This is
changing as low-code and no-code analytics tools
are more widely adopted, offering some DS
superpowers to more traditional, spreadsheetoriented BI analysts. The distinctions are blurring, and job titles with “data scientist” are
becoming more widespread.
Be clear about what you need in an analytics
role to make sure there’s a match between candidates’ technical skills and expectations. For
many analytics roles, “premium” DS skills—such
as real-time predictive models, machine learning
and data pipeline management—are not necessary. Building growth models and company-level
metrics dashboards, say, would benefit more from
deeper marketing and financial knowledge. In
early-stage companies, these important deliverables are often part of the remit of a Chief of
Staff or BizOps analyst.
However, in pure software companies (SaaS
or B2C Apps) the need to organize, analyze and
interpret product data is more pressing, and
you’re likely to hire a dedicated data scientist in
your technical team by 50 headcount.
With growth, further analytics hires become
necessary. True data scientists will almost all be
embedded within technical teams, often dedicated to squads. They will work closely with
Engineering to create a company-wide data warehouse, a “single source or truth” that pools and
integrates data across different systems and
functions.
The pressure to hire data analysts will also pop
up across multiple functions: Marketing, Finance,
Operations, Sales, CX, and People/Recruiting.
Analytics is perhaps the function where the
tension between centralization and localization
is sharpest.
So long as you have clear responsibility
and capacity for managing the data warehouse,
including integrations with other systems and
monitoring data quality, then hiring dedicated
and embedded BI analysts into separate functions
should allow you to scale effectively. The worst
scenario is a fully centralized analytics team
operating on a “ticketing” model. This will inevitably lead to frustrations and tensions.
At some point, you will need to bring in more
senior leadership to oversee analytics across the
business. The pressure to do so may come from
“orphaned” data analysts who are deprived of
learning or career progression opportunities, and
who are therefore hard to retain. Or it might arise
from the need to consolidate around one or two
preferred and consistent data visualization tools
and templates. Only a minority (29%) of pre-IPO
scale companies hire an executive-level (VP+)
Analytics leader, but half (49%) have already
hired a Head or Director of Analytics by the time
they reach 250 headcount. This individual can
potentially report into either a COO or a financial, product, or engineering executive. In pure
software companies, Analytics is more likely to
skew towards data science and report into technical leadership. But more than anything, the
decision usually reflects who’s the biggest data
nerd at exec-level, and who’s keenest to take it
on and drive it forwards.
Pathless paths
As you navigate your city, town or village by foot, you’re likely walking in the shadows of long-dead urban planners, who once pored over maps and charts to plot out streets and footpaths. Yet humans are unruly beings, known to deviate from prescribed routes and blaze impulsive trails of their own. Unofficial shortcuts known as “desire paths” will spring up wherever there is foot traffic—think of the dirt track criss-crossing a park in defiance of a meandering pavement, a secret route through a tangled wood, or the worn cobbles of a back-alley bypass. These lines are chronicles of walkers’ urges and yearnings, both to get from A to B as quickly as they can, but also to stray beyond the bounds of the known.
Confronted with this record of pedestrian disobedience, eager bureaucrats can respond with fences, walls and other tools of deterrence for the wayward. But the more enlightened might choose to listen to the streetscape.
In Finland, some planners wait for snow so they can chart walkways based on where people choose to tread. In London, the architect Riccardo Marini used trails of cigarette butts and bubble gum deposits to figure out where to place rubbish bins along Regent Street. And administrators at Ohio State University in the early 20th century paved the asymmetrical desire paths that students’ feet had cut into the main oval, the center of student life on campus.
Desire paths may look like acts of rebellion, thwarting perfection and structure. But if they are embraced, they showcase how order can emerge organically when we decide to channel the maverick impulses of the many.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Scaling your GTM team
Find your GTM motion
Tech startups end up focusing on one of two
GTM approaches: they can be product and
marketing-driven, or they can be sales-driven.
Your overall approach to product distribution is
known as your “GTM motion”.
Consumer-focused businesses generally rely
on product-led growth (PLG) or marketing-led
channels, as do SaaS products with a focus on
SMBs. For example, Squarespace and Square both
utilize consumer-style marketing, complete with
viral product loops and Super Bowl ads.
Startups targeting major corporations
(“enterprise” customers) and large companies
(“mid-market” customers) need to develop a more
complex GTM motion. To win contracts upwards
of $100k and through to $1m+, you face multiple
decision-makers (distinct from users), gated procurement processes, long sales cycles and thorny
implementation challenges. You need sales professionals to navigate these challenges, often
supported by sales engineers to address the concerns of technical decision-makers. Marketing
drives awareness, credibility and leads in support
of the sales team. Enterprise customers also
expect handholding to ensure the smooth onboarding and implementation of your solution,
and you will need to focus on continued customer
success to expand usage and therefore the value
of your enterprise accounts over time.
When your potential audience numbers
in the thousands rather than millions,
a test-driven approach to marketing is
limited. Defining your messaging and
positioning becomes more important.
Dominic Jacquesson, Index Ventures
The distinction between SMB and enterprise
often isn’t clear cut in B2B, with startups targeting both of these customer types. They might
combine self-serve customer acquisition for
SMBs, with sales to address mid-market and
enterprise opportunities. Marketplaces often
straddle the two GTM motions, with self-serve
user acquisition to drive consumer or SMB
demand, and sales-led approaches on the supplier
side. SaaS companies often move up the value
curve over time, from an initial self-serve approach targeting SMBs at low price points,
towards inside sales to acquire mid-market customers, and ultimately to solution-selling focused
on the highest-value enterprise accounts. This
reflects the progressive build-out of your product
offering, and a pursuit of ever larger contracts
to capture value. Some SaaS companies also follow a deliberate bottom-up strategy—a freemium
offer to drive high-volume adoption by individual
business users, which over time generates opportunities for monetization by selling to the overarching enterprises (e.g. Dropbox, Slack, Zoom
and Figma).
Zendesk and Figma—Contrasting
GTM motions
In 2009, I became employee #13 at
Zendesk. I was their first hire who wasn’t
either an engineer, or in CX—we had six
of each. The founders’ view was, “If we’re
selling CX, we better over-invest in it
and be amazing!” CX was the face of our
GTM team, as far as customers were concerned, for many years.
When I joined, the growth motion was
entirely through free trials, converting to
self-serve paid plans. All our customers
were tiny, and our product/market fit was
really with SMBs. We hired no sales reps
for another year, by which point we already
had 10,000 SMBs using the product.
The move upmarket was accelerated
by our customers’ trajectories—we had to
grow with them. Twitter was already one
of those “tiny” SMBs when I joined! But
we also wanted to move in that direction
strategically.
Our first sales hire allowed us to figure
out that we could land higher new customer ACVs more than via self-serve credit card orders.
We grew to four account executives before
we hired our first account manager to
focus on upselling. Marketing would feed
them leads, and we monitored if Sales
could convert these to higher revenues
versus our self-serve channel. It was
loosely A/B testing. These early AEs
are in crazy learning
mode. You don’t want to over-constrain
them, but you also don’t want this phase
to go on for too long. What can you learn
in two quarters? The goal is to collect
enough signal to decide whether, and how,
to invest in a sales team. At this point you
need to put more structure in place, to
avoid weird habits forming. For example,
you need to focus them on specific leads
and segments to prioritize. In retrospect,
we let the freeform approach go on too
long at Zendesk, which led to Sales cannibalizing the self-serve business, which was
uneconomic. You want to move into segmentation as soon as possible.
At Figma, I joined in 2018 as employee
#60. We had some customers on paid
plans, but were very early in monetization. Figma took a freemium approach,
with very different marketing dynamics.
It was much more of a bottom-up adoption approach—we had individual paying
users at Microsoft, Airbnb and Uber
already. Having proven that the product
could appeal to enterprise users from the
start, we had more flexibility to target
and win them.
We had three salespeople when I
joined, who were in that same learning
mode I had experienced at Zendesk. It was
all inbound, and mostly big brand-names.
We set a group logo acquisition target per
quarter, but with a focus on our top-tier
plan. This segmented our “professional”
(self-serve) from our “enterprise” (sales-assisted) tiers, reducing cannibalization risk.
These audience and sector differences
should drive your approach, and therefore the team you hire. Who’s going to
try your product? Who’s going to buy it?
Do you need cross-organization deployment from the start, or can bottom-up
deliver value to users? Figma users spread
the word for us somewhat, across decentralized design teams in enterprises. This
pattern was unlike Dropbox, which was
a highly horizontal product and appeared
on the radar of corporate IT teams much
sooner. By contrast, Zendesk used free
trial rather than freemium or bottom-up,
because it needed adoption by entire CX
teams to create value.
Amanda Kleha, Chief Customer Officer at Figma, previously SVP Marketing & Sales at Zendesk
Depending on the GTM motion that’s most
appropriate for your business model and sector,
you will need to build dramatically different
GTM teams in terms of size, composition and
capabilities: consumer-led models (B2C App and
D2C) are marketing heavy, SaaS companies are
sales-centric, and Marketplaces sit in between.
Scale your GTM team accordingly
In relative terms, as overall company headcount grows, GTM teams tend to shrink in PLG
or marketing-led businesses, and they tend to
expand in sales-led ones.
The reason for this reflects leverage. At scale,
in-house marketers can oversee expanding external
expenditures (paid digital channels, brand advertising, PR agencies, etc), without the need to add
headcount. GTM teams for B2C Apps drop modestly in relative terms, from 24% of employees at
50 total headcount, to 22% by 1,000 headcount.
On the other hand, individual sales quotas don’t
grow that dramatically as you scale. As a result,
you need to keep adding salespeople, as well as
teams to support your salespeople. You also need
to build a CS function, to support account retention and expansion. GTM teams for SaaS expand
from 26% of the total at 50 headcount to 36%
by 1,000 headcount, by which point your CS
team could be nearly as big as your sales team.
Differences related to your GTM motion
therefore have a dramatic impact on the size and
composition of your GTM team as you scale.
Marketing
Appreciate both sides of marketing
Marketing probably encompasses more skill-sets
than any other single function. The biggest tensions arise from the fact that you want marketing
to achieve two distinct things:
Storytelling—defining a category with
your brand at its core
Revenue generation—customer acquisition
Storytelling is a slow process, and it can take
years of effort to turn into tangible results in
terms of category and brand. Revenue generation
is an immediate need, and can deliver faster and
much more measurable results.
The challenge is that without storytelling,
you can’t achieve brand differentiation. As a result
you will hit a growth plateau: customer acquisition costs increase, and you lose ground to competitors. So the temptation to focus on short-term
revenue generation needs to be kept in check.
This distinction leads to three core profiles
in marketing talent:
Creative
Product-growth
Analyst
Very few individuals can achieve excellence
across all three of these profiles, even after long
careers. They reflect fundamental differences
(left brain versus right brain) in how people
approach problems. At scale, you’ll need a marketing team that includes all of them, and each
of the three profiles will branch into further
specialties. The precise sequencing and timing
to reach this destination will vary by company,
and as a founder, you need to navigate the “messy
middle” to get there.
Make an early hire in growth
Once you’ve released an MVP, your immediate
marketing priority is clear: growth and user
acquisition. For the great majority of startups, this means product-led growth. (The small
number of B2B startups that target enterprise
customers from the outset won’t focus on PLG,
but on sales-led customer acquisition.)
Focus on your PLG motion until your
ACVs exceed $100k. Only introduce
sales once your buyer and your user are
different people.
Kipp Bodnar, CMO, Hubspot
Early growth efforts should be a whole team
activity, not confined to individuals with growth
or marketing in their job title. However, there
can be two particular areas for a founder (or early
hire) to focus around growth:
Product growth hacking—continuous A/B
testing of variations to improve funnel
conversion, and to optimize viral loops to
drive further user acquisition
Testing the most promising marketing
channels—leveraging specialists to identify
which channels could really drive
acquisition at scale for you. At very early
stages, this typically boils down to either
content or performance marketing.
Founders, particularly highly technical
ones, often think they need a product
marketer asap. They love their product,
and they think all that’s needed for
distribution is a clear articulation of what
it does. No, no, no! You first need enough
users to actually create a feedback loop—
real users and customers, so that you
can create cohorts for funnel and engagement optimization.
Kipp Bodnar, CMO, Hubspot
Over half (51%) of highly-successful startups
appoint someone specifically in a growth or marketing role amongst their first 10 team members.
This proportion is highest in D2C (69%) and
lowest in SaaS (41%). When a hire is made, the
profile is most often earlyto mid-career (two
to five years of prior experience). This could be
a growth marketer, a product manager with a passion for growth, or even an early engineer on
your team with a flair for growth. You’re looking
for a combination of two skill-sets:
Creativity—to constantly come up with
test ideas
Analytical—so that creativity is directed
towards the most promising avenues
This individual needs to closely collaborate with
your engineers, as they’ll be constantly experimenting with the user journey and viral mechanics. But you also want to equip them with low/
no-code tools so that they can be as autonomous
as possible. For example, creating new landing
pages and testing minor alterations (copy, button
styling and positioning, etc).
Growth hacking is the key to continuously
improving your conversion of leads into users or
customers. It could also unlock viral mechanics
that generate new leads, which are really important, particularly when funding is tightly constrained. But in most cases, growth hacking alone
is insufficient—you’ll also need to find a scalable
marketing channel to drive high-growth. There
aren’t many great direct response channels anymore, so you need to take a view on which feels
more promising between content and pay-per-click (PPC). We then recommend that you
contract a specialist around that channel, with
sufficient budget to really test and optimize it.
You need to remove human error as
a reason why a channel didn’t work. So the
first time you test a channel, you need as
hard an answer as possible. If you have
a generalist run the test—be it Google Ads,
content marketing, or TikTok videos—
you’ll never know if they’re the reason the
test failed. But you also don’t want to
hire specialists before a channel is proven.
Instead, hustle your network to find
a specialist freelancer or agency.
Joe Cross, CMO (former), Wise
Give yourself a maximum of three months to find
scalable traction with a given channel. You (and
your growth lead) should work really closely with
the channel specialist so that you move as swiftly
as possible through defining and running tests.
You’re looking for a combination of reasonable
cost-per-lead (CPL) and customer acquisition
cost (CAC), with high-volume potential. If this
effort doesn’t work, move on and try a different
channel, with a different specialist.
Pinterest’s core acquisition channel was
Facebook. So was King’s. Airbnb used
Craigslist (and then SEO). Squarespace
used podcasts. GOAT used influencers.
RecRoom was early into the VR app store.
We’ve seen this more recently with OpenAI
plug-ins. You need to figure out yours.
Damir Becirovic, Index Ventures
Until you’re much later in your scaling journey,
you don’t want or need scattered acquisition channels. You need to find one core channel that can
generate a significant volume of leads, and then
ramp it hard and fast, aligned with the economics
of your conversion engine and emerging insights
into engagement and retention. Don’t get distracted into pursuing multiple channels unless and
until you start to plateau on your core channel.
Strong retention is the number one
priority for enabling your first real
growth-phase. A sticky product opens
the door to ramping up your marketing.
Antoine Le Nel, VP Growth, Revolut
Establish some brand basics
On the brand side of marketing with a purely
digital product, early brand guardianship will
typically rest with product design rather than
with marketing. But this also depends on the
skills of the individuals hired into each area.
Typically, your product design team will refine
your visual identity, which creates a palette that
your marketers can then work with.
Many founders think they need a brand
book and a great logo from day one.
But basically, so long as your brand and
logo aren’t actively detrimental, then they
can wait. Your brand in the early days
is simply your product experience. As you
figure out what customers like, you can
update a living doc which will become
your version 1.0 brand book.
Joe Cross, CMO (former), Wise
If your business model is D2C (or certain marketplaces), your immediate brand touchpoints
will include physical product and packaging,
as well as e-commerce channels. This requires
deeper early attention, probably including the
use of a third-party agency to help with brand
design and identity. But in these cases, you should
be leading the project directly as the founder.
Early branding also encompasses your tone
of voice—in your UI, and in any customer communications such as emails, social channels and
customer support. The focus should be on product delight as a free way of building brand
differentiation. Getting your product noticed
and talked about is essential early on. The tone
doesn’t have to reflect your personality as a
founder, but it needs to be clear and consistent.
You need to buy into it, and you have to figure
out who’s best placed to develop it.
Wise—Uncovering early brand identity
Joe Cross joined Wise as the first marketing hire, following a seed fundraise. He
had prior experience as a copywriter.
After reviewing the headline on the landing page copy, he tested amending it
from, “Send money for cheap” to “Bye
Bye Banks. You’ve had your fun.” The
following week, the image was picked up
in an article by The Economist. The message became a key element of the brand’s
identity as a customer champion and
disruptor, through to today, with Wise
being a post-IPO fintech valued at over
$7 billion.
Gauge whether you’re a natural at media
Paid marketing channels have become increasingly challenging. Comms and PR have therefore
become a more important way for startups to
generate awareness and even to drive acquisition
directly. Media coverage also boosts your credibility with investors, customers, talent and other
stakeholders.
Invest in comms, and over time everything
will become easier: hiring, signing up
customers, getting inbound interest from
investors, etc. It’s one of the best investments
you can make, but it doesn’t
happen overnight.
Vojtech Horna, Index Ventures
You need to find the comms approach where you
feel most at home. For some founders, that might
be media and conferences. For others, it may
be through building a close-knit community of
advocates and specialists (e.g. open source contributors), or as a writer posting thought leadership pieces through your own and other channels.
You can’t choose to ignore comms entirely, but
the most important thing is for your approach
to be authentic and to play to your strengths.
PR is only ever as good as your spokesperson. If you have a founder who loves media
and is great at it, awesome! Leverage that.
If you don’t, then just don’t do media
for a long time. You can teach people not
to suck at it, but you can’t teach anyone
to be awesome at it. Reallocate money and
time to where you can do better.
Kipp Bodnar, CMO, Hubspot
Invest early in comms if the founder has
a natural affinity with the media, or if
you’re operating in a market where you
need to shape your messaging and story
early on.
Ana Andreescu, Index Ventures
If you’re a natural at media, you need to keep a
tight lid on the amount of time it absorbs, and set
a high bar on the engagements you commit to.
There’s also danger in becoming a “celebrity
founder.” You’ll have to manage your profile all
the time, and the media will want to knock you
down eventually.
Comms and media take little mental
space, but significant actual time. Yesterday
I did two hour-long podcasts, and another
the day before. I hate traveling so I avoid
in-person conferences, which at least
wins me back some time.
Job van der Voort, CEO & Co-Founder, Remote
I warn founders of the dangers of LCS—
Local Celebrity Syndrome. They can
feel overly excited and validated after
a successful fundraise, so they do a local
tour talking to VCs, media, and speaking
at every conference that asks. But this
is taking victory laps before anything
substantive has been accomplished. Don’t
fall into the trap!
Danny Rimer, Index Ventures
Even if you’re not a natural, you can’t avoid
comms entirely. It’s part of the job description
of a CEO: internal comms (e.g. all-hands), key
milestones (e.g. fundraises), and moments of
crisis (e.g. layoffs). We highly recommend investing in some media training.
Founders who join our media training and
communication workshops comment that
just a few hours of dedicated time on these
topics provides a huge payback.
Vojtech Horna, Index Ventures
Unless you’ve already made waves with your
product—for example, if your company is building on a successful open source project, or if your
launch made a splash on Product Hunt—it’s tough
to break through in the early days. As a consequence, your funding announcement is likely to
be your first opportunity to connect with the
media. The essential step is to be clear and consistent in your messaging. This gets repetitive
and you may be tempted to riff and come up
with something new, but repetition is the key to
success.
If you and your co-founders give different
answers to the question of what you do
and why what you do matters, you know
you need to focus on comms. Consistency
starts with you!
Vojtech Horna, Index Ventures
Draw on your investors’ comms team to help you
develop your messaging, together with a point
of view on your sector and evidence to back it
up. You can also reverse engineer comms tactics
by studying startups with a strong media presence in adjacent sectors.
For pitching media to secure coverage, work
with a hungry freelancer (e.g. someone building
their own client list after leaving an agency).
Pay them in bursts for specific projects like
fundraising announcements or product launches.
Avoid big brand agencies—they’ll charge a hefty
retainer ($10 k/month is on the lowest side) and
you’ll still be a low priority for them.
Initial success in developing a reputation in
your market will lead to more conference speaking invites and requests to comment in the media.
At this point you need to shift to a more regular
cadence of proactive engagement and publicity.
By this stage, you may be able to leverage someone hired internally in a “storytelling” role (e.g.
a community, content or product marketer) to
coordinate your comms activity. Only retain
an agency if you find someone who really “gets
you” and shows enthusiasm for championing
your cause.
The timing to hire a dedicated in-house
comms specialist depends on several factors:
Your media profile—the more effective you
have been to-date with comms, the more
you can amplify your efforts with in-house
support
Sector and market—the more complex your
business (e.g. regulated sector or three sided marketplace), the more you’ll benefit.
B2C startups are also more likely to benefit
from an early comms hire relative to B2B,
as press coverage is more important.
Competitive pressure—If you operate in a
highly competitive sector, you need to
work harder for your voice to be present in
conversations and places that will be seen
by your customers.
Time pressure—if you’re being drawn into
a lot of comms management
Opportunities missed—Are there major
shifts in your sector that you could be
commenting on? Are you sitting on
proprietary data that could be turned into
media releases?
I would generally suggest bringing in
an in-house comms person after Series B,
and possibly after Series A in B2C.
Companies are more likely to make the
hire too late rather than too early, and it
then takes much longer to catch up.
Ana Andreescu, Index Ventures
Prioritize passion for your mission and belief in
your product ahead of comparing candidates’
experience. Comms people tell stories, so they
have to feel inspired if they are going to inspire
others. They need the ability to build relationships externally with media partners and also
internally, particularly with product and marketing, but also people and legal teams. The preferred
profile is someone with five to 10 years of experience from an agency or in public policy, although
you may have to flex to widen the candidate pool.
In-house experience in a pre-IPO company is also
valuable, but be wary of candidates with corporate or big tech backgrounds—they can find it
hard to adjust to a full-stack comms role.
In-house comms should report to the CEO (or
other co-founder who is a public face of the company) until the point where you have a true CMO
with a strategic outlook. Putting them under an
analytically-oriented marketing lead is a mistake,
as their mindsets and priorities will clash.
With greater scale, expect your use of agencies to widen, even when you’ve hired in-house.
Agencies may be used for strategic advisory, such
as in public policy, to extend your team during
busy periods, or if you’re entering new and unfamiliar geographies.
Scaling B2C marketing
Optimize core channels, hunt for
new ones
Once you prove the potential of a marketing
channel, be sure to hire in-house specialists to
run it, rather than continuing to rely on external
agencies or freelancers. As this “core” channel
matures and enables you to scale, focus even more
on optimization. When volumes are large, even
small improvements in conversion can make
a significant difference.
We all remember Usain Bolt. But he only
won his races by hundredths of a second.
It’s similar in growth—you optimize your
funnel by tiny percentages, with hundreds
of small ideas that collectively make you
the best.
Antoine Le Nel, VP Growth, Revolut
When acquisition through your core channel
starts to plateau, you need to find new ones to
sustain growth. Do this by carving out time and
budget for broader experimentation. Split your
marketing budget between 70% for the core, and
30% for testing new channels and campaigns.
This split may also be reflected in your marketing
team, with a separate growth-oriented generalist focused on these experiments, but who can
then draw on outside specialists. With further
scale, this role might evolve into a separately
staffed growth team. Alternatively, you may
rotate high-potential team members through this
growth team to drive learning and development.
It’s extremely important to incentivize
word-of-mouth. Virality is built, it doesn’t
simply happen. At Revolut, we use
referral programs, while Candy Crush
(where I used to be VP Growth) was
built on Facebook invites.
Antoine Le Nel, VP Growth, Revolut
When you’re getting signs that a second scalable
channel is working, rinse and repeat the approach
taken with the first: ramp it hard, hire in-house
specialists, focus on optimization, and re-balance
your budget and effort allocation to experiment
with fresh approaches.
Throughout these cycles, it’s critical to document
and give broad access to a “testing bible” to avoid
wasting effort and resources repeating the same
experiments that failed previously.
Invest in marketing analytics
With more user cohorts, acquired through more
sources, at different costs, and with varying profiles in terms of virality, retention and lifetime
value (LTV), you can become overwhelmed by
marketing data. But you can’t set or allocate a
marketing budget without granular LTV models
that indicate how much you should spend on
acquiring each new customer (cost per acquisition, or CPA) through each source. You will
therefore need to hire a dedicated marketing
analyst early, before you hit $1 million of run rate
marketing spend.
Once you go multi-channel and start investing
in brand building through advertising, you’ll need
to build sophisticated attribution models, making
the most of your data warehouse. These should be
closely integrated with financial models so that you
can forecast growth, and optimize marketing budgets within cash flow constraints. This will require
a marketing analytics team that works within a
broader analytics and data science function.
Widen attention from acquisition
to retention
It’s easier (and cheaper) to keep an existing customer than to find a new one. As your customer
base expands and diversifies, you need to put
more effort into retention. This includes investments in CRM systems and hiring around customer and community marketing.
Product marketing is about helping customers
to understand your products and features, and to
engage with them. It’s therefore more focused on
existing customers than on acquiring new ones.
If your product portfolio is complicated,
think about product marketing earlier.
A product can be complicated for many
reasons: maybe it involves a new UX
concept, or the pricing may be new to the
market, or it may require more from
the user upfront before value is unlocked.
Joanna Lord, CMO, Spring Health
Product marketers tend to get hired in B2B
companies (especially enterprise-focused B2B)
sooner than in B2C, as these products tend to be
more complex and technical. However, as you
scale, and add further features or launch additional products, the product marketing challenge
in B2C will become more pressing. You’re more
likely to bump up against competitors and need
to differentiate yourself, and you’ll have more
internal teams that communicate with customers:
Product, Growth, Customer Marketing, Community, CX, Customer Operations, etc. These
teams need aligned and tailored messaging that
describes how your product works and what
benefits it offers. The challenge of crafting the
right messages with appropriate materials for
each team increases, but so do the financial and
reputational costs of shortcomings. These factors
will nudge you towards dedicated product marketers, and eventually to forming a product marketing team.
Bring in marketing specialists
Keeping generalist marketers in the team is
important. They provide flexibility as well as
opportunities for developing talent internally.
However at scale, internal specialists will end up
running each channel (e.g. PPC, SEO, podcasts,
influencers, affiliates, email marketing) and each
major activity around brand (social, advertising,
events, community, comms/PR).
I’m a strong believer in marketing
specialists. When you’re early, hire junior
specialists, which is a double win because
they’re more hands-on. Senior specialists
come later, but they create leverage by
managing big budgets, so you can keep
your headcount tight. I only use generalists
for building multi-channel marketing
plans, such as for individual geographies.
Antoine Le Nel, VP Growth, Revolut
Using outsourced talent initially (freelancers or agencies) allows you to move
faster, while building conviction around
the ideal specialist profile you want
to eventually bring in-house.
Joanna Lord, CMO, Spring Health
Your precise mix and sequence of marketing hires
will hugely depend on your category and product. For example, developer relations could be
extremely important if you roll out an app platform (e.g. Roblox), but is irrelevant to most consumer-facing companies. The mix is also shifting
due to changes in the world of marketing. For
example, Apple’s policy changes in 2020/21
undermined the effectiveness of paid channels,
encouraging earlier investments in comms and
content. Likewise, influencer marketing has now
become a major channel in B2C.
Step up your marketing leadership—B2C
As your marketing team grows and includes
a broader set of specialists, you will need to
adjust your marketing leadership. Typically this
will shift from a Director of Marketing to a VP
Marketing. With further scale, you are likely
to appoint a CMO or other C-level executive
responsible primarily for growth
TeamPlan—Explore our entire library
of 210 highly-successful startups for
more detailed insights into their marketing team composition and leadership by
headcount stage.
Our recommended profile for a Marketing
Director:
Hire by 50 headcount
Six to 10 years of relevant experience
Execution-focused
Functionally T-shaped—deep in one aspect
of marketing but with an appreciation
of others
Capable of building and leading a team up
to 15 headcount
Our recommended profile for a VP Marketing:
Hire between 125 and 250 headcount
10 to 15 years of relevant experience
Analytically-focused—interprets data to
effectively allocate resources across
channels, and between shortand long term objectives
Functionally M-shaped—deep in two or
three aspects of marketing
Capable of building and leading teams up
50+ headcount—an effective “manager of
managers”
I’ve seen founders who hire a CMO
early, and then expect too much execution
from them. But I’ve seen others who hire
a director and expect too much executive
leadership or abilities to operate across the
company. It’s all about expectation setting.
Joanna Lord, CMO (former), ClassPass
Our recommended profile for a CMO:
Don’t hire before 250 headcount
15+ years of relevant experience
A “pragmatic creative”—blending both left
and right brain thinking
Organizationally T-shaped—deep across
marketing but also some understanding of
product, engineering, finance, etc.
Oversees comms and brand as well
as growth
Represents the brand at executive level—
willing to take unpopular but principled
positions, and highly attuned to the
zeitgeist
Experience relevant to building a
challenger brand
We’ll return to looking more closely at CMO
hiring (across both B2C and enterprise models)
later in this section.
Scaling enterprise marketing
Balance product marketing and revenue
marketing
Since most B2B startups will have started with
a product-led growth model, the shift to sales-led
growth for larger customers tends to be layered
over the existing PLG approach and team. Therefore some of the guidance offered earlier around
B2C and SMB marketing still applies. However,
once you have clear evidence of PMF, and founder-led sales is landing early customers, you will
need to introduce additional marketing activities
which support sales.
You’ll have two priority areas for your
enterprise marketing efforts:
Product marketing: generating awareness—
messaging and storytelling
There is virtually zero overlap between product
marketers and revenue marketers when it comes
to great talent. So your first two enterprise marketing hires are likely each to be strong in one
of these areas. The ideal situation is that your first
hire is a Head of Marketing—someone particularly strong in one of these areas, but who also
knows what they need to look for in a second hire.
Product marketers are storytellers. They craft
a compelling message and positioning, and
orchestrate the GTM motion accordingly. They
operate at the intersection of Product, Marketing
and Sales, but they dive deep into understanding
customer needs and competitor activity. Product
marketers bring user personas into focus, create
decks for internal alignment, collateral for sales,
content for your website and media campaigns,
and messages for you as the founder to keep hammering home. Their key goal in the early stages
is to generate awareness in the market.
Product marketers take all the technobabble
and turn it into messaging and collateral
that potential customers will understand
and be attracted to.
Robin Daniels, Advisor and Former CMO, WeWork, Matterport, Salesforce
Revenue marketers’ key goal is to generate demand and leads for your sales team. They take
the messaging you have and put it in front of the
right people at the lowest possible cost. This can
involve many channels, from white papers and
events to search engine marketing (SEM). In the
first instance, revenue marketers are analytical
and numerate, experimenting with channels to
find ones which are cost-effective and scalable
for lead generation.
The trick for effective growth is to balance
your efforts between the short-term need for
leads for your sales team (revenue marketing),
and the longer-term objective of defining a category and being trusted by your user community
(product marketing).
It’s a predictability versus magnitude
challenge. Sales want predictability,
but success requires magnitude.
Kipp Bodnar, CMO, Hubspot
Besides strength in either product or revenue
marketing, the ideal profile for your Head of
Marketing is someone with a sense of where it’s
best to place bets based on past experience—an
up-and-comer, mid-level profile. In the Bay Area,
where B2B talent is densest, this might be someone with eight to 10 years experience, a director-equivalent profile. In other US (or non-US)
hubs, with less availability of B2B marketers, it
might be closer to six to eight years experience,
a senior manager equivalent. Either way, you’re
looking for a rapid career trajectory, with evidence of past success plus ambition. That doesn’t
necessarily need to come from big-name startups.
Remember that you want someone who can help
build a challenger brand. Domain experience is
less important, and some B2C marketing profiles
may also be worth considering. Regardless, candidates must express passion for your product.
For me, the story is foundational.
Otherwise you can spend ages tweaking
digital channels without getting good
results. We’re in a golden age of storytelling
given the range of channels we can use to
communicate, but getting cut-through has
also never been harder. You need to keep
investing time in defining and refining
your message, and turning this into the
copy, messaging, tone-of-voice, design, and
other elements which bring it to life.
Marketing candidates therefore really need
to be excited about your product. It just
makes them more motivated, and therefore
more creative.
Robin Daniels, Advisor and Former CMO, WeWork, Matterport, Salesforce
Align metrics between Marketing
and Sales
The critical short-term (quarterly) objective for
marketing is to generate leads which convert to
revenue. The metrics to track are:
Sales accepted leads (SAL) provided
by marketing
Pipeline-generated from these SALs
(weighted $ value, and % of total pipeline)
The actual revenue generated from your SALs is
useful to understanding overall funnel conversion. However, once there is a recognized opportunity, responsibility shifts to Sales to convert it.
As you establish your enterprise marketing
team, it’s critical to have a framework for setting
and tracking these metrics, via tagging of leads
and opportunities in Salesforce, Hubspot, or
other CRMs.
Lead-scoring needs to be a transparent and
collaborative process between Marketing and
Sales, otherwise you run the risk of marketing
wasting effort generating leads which are then
rejected by Sales. With scale, lead-scoring will
become increasingly sophisticated, as you learn
which lead sources and behaviors are predictive
of quality, and can embed these into new leadnurturing activity. For example, an attendee from
a webinar you host will generally have higher
scores and sales potential compared to a website
visitor from organic search. Time is also super
sensitive with leads, so you need to align capacity
between marketing campaigns that generate leads
and SDRs who can qualify them, together with
a real-time notification system.
When your marketing and sales teams
use different definitions for lead-scoring
and measuring success, conflict is never
far behind.
Shardul Shah, Index Ventures
Early on at Plaid, despite a ton of effort
around tracking ROI and conversion
through the pipeline, we didn’t have the
tooling or capacity to get clever around
attribution. The reality is that PPC,
content, business development etc are all
complementary and reinforcing. So the
key was a culture that focused on working
together rather than being individual
superheroes. Too often I see individuals
working on a particular channel or source
of leads who are incentivized to claim all
the credit they can, which leads to conflict
and mistrust.
Paul Williamson, CRO (former), Plaid
Alignment starts at the top, between
the CRO and CMO. The best marketers are
primarily interested in bookings, using
metrics that Sales agree to be reliable
leading indicators of bookings. The worst
are only interested in top and middle
funnel metrics.
David Perry, VP EMEA (former), Confluent
Look out for when you need more
storytelling
The metrics for longer term storytelling activities
are harder to quantify. However, product marketing feeds directly into effective sales en ablement, developing great sales collateral, and
educating the sales team on it, which helps with
pipeline conversion and upselling. Ultimately this
should show through in increased win rates and
net dollar retention (NDR). Conversely, if you
see these metrics slipping, it suggests that you
need to work more on storytelling and awareness-raising activities.
Even if more ethereal marketing activities
can’t be directly attributed to lead generation, you’re looking for upward trends in
terms of clicks, downloads, retweets,
YouTube channel subs, etc. If these are
heading in the right direction, you can
trust that they are helping. Loads of other
startups were copying Plaid’s branding
collateral, designs and styling, which I took
as a signal we were getting noticed!
Paul Williamson, CRO (former), Plaid
Develop enterprise marketing sub-teams
Over time, you’ll hire more specialist profiles,
with distinct competencies, to cover specific
elements of your broadening marketing mix. But
always look for collaborative specialists: individuals who think about marketing in a joined-up
way, across different disciplines.
Examples of specialties that can become dedicated marketing roles with scale:
Community marketing—word-of-mouth
and evangelizing: events, forums,
developer relations, partnerships
Marketing teams at Figma
Our marketing team structure at Figma
has been pretty stable since I joined five
years ago. We have six sub-teams, covering
product marketing, growth & demand
generation, brand design, content, community, and international. But roles inevitably branch with scale. For example, we
now have separate individuals on the
hook for product sign-ups versus marketing-qualified leads (MQLs). Some sign-ups
also became MQLs. But one marketer
collaborates more with product growth,
while the other works mostly with sales
leadership.
Likewise, we now have dedicated
employees for affiliate marketing, partner
marketing, copywriting, talent branding,
internal comms, and localization. We previously shared these tasks around, or used
freelancers and agencies.
Amanda Kleha, Chief Customer Officer
Hire a VP Marketing
As you build out this larger and more complex
marketing function and team, you’ll also need
more experienced marketing leadership. You
want someone who can operate at the VP level,
with likely 10–15 years experience, with evidence
of thriving in high-growth environments and
nurturing challenger brands through this stage.
They need to be capable of operating at the executive level, inspiring their team and creating
clarity of strategy. They are unlikely to come from
an internal promotion. While there will still be
a lot of experimentation, the focus is on rapid
execution to match needs, particularly around
revenue marketing. Your VP Marketing may
report to the CRO, otherwise to yourself as CEO.
I like to ask marketing executive candidates,
‘What is the most epic thing you’ve
achieved before?’ This tests for storytelling
skills, plus it allows me to gauge their
level of ambition about what ‘epic’ means.
Explore what they did, the impact it had,
and the learnings it generated.
Robin Daniels, Advisor and Former CMO, WeWork, Matterport, Salesforce
Decide if you need a CMO
The final step in marketing leadership, whether
in B2C or in enterprise, is a CMO. This is likely
to be someone with deep experience from bigger
companies, although probably still brands that
have VC-backed roots. Candidates should have
an established reputation in the industry, enabling
them to bring in senior leaders in various marketing sub-disciplines who might not otherwise
be prepared to work for your incumbent marketing leader. You should have a solid revenue generation engine by this point, and should be clearly
winning the product contest. The strategic prize,
and focus for the CMO, is to create a path to
winning in the category contest. So the CMO
reports directly to the CEO. In enterprise they
could report to your CRO, but most of these have
a sales background and are focused on revenue
generation. The CMO needs to have a seat at the
executive table, to ensure the organization is
aligned around the positioning message.
Less than half (38%) of the B2B companies in
our analysis had a CMO by the 500 headcount
stage, rising to just over half (53%) by the 1,000
headcount mark.
Where a VP Marketing is an excellent
marketer, a CMO is a business leader who
happens to have marketing skills. Where
a VP Marketing has a tough time jumping
out of their rail lines and dealing with
context switching challenges, a CMO brings
strategic breadth.
Kipp Bodnar, CMO, Hubspot
When your marketing leader sits under
the CRO, it can turn marketing into
a sales service bureau with a 90-day time
horizon—‘Give us more leads now!’
Robin Daniels, Advisor and Former CMO, WeWork, Matterport, Salesforce
By contrast, less than half the B2C companies in
our research had CMOs during their pre-IPO
journey (40% at 250 headcount, dropping to
33% by 1,000 headcount). Instead these companies opted for a CCO (Chief Customer Officer)
or CRO. These roles typically focus on growth,
and often also customer experience. This setup
recognizes the challenge of finding a single individual who can simultaneously drive both revenue and storytelling. Instead, comms and brand
may be carved out, with a different executive
owner who reports directly to the CEO.
Modern marketing is about more than
just resource allocation. You need a balance
with creativity. Ex-McKinsey types will
fail as CMOs, but so will ex-agency creatives.
But I do believe the CMO should be the
coolest person in the executive team, with
an understanding of popular culture and
willingness to take a stand.
Kipp Bodnar, CMO, Hubspot
CMOs have some of the shortest tenures (2.5
years median) of all C-suite executives; only Chief
People Officers are shorter. Why is this?
Thin talent pool—There is probably a
wider breadth of skills required in
marketing than in any other role. Very few
individuals can master a sufficient
proportion of them to make the cut
Misaligned competencies—Given the
breadth of skills in marketing, it’s critical
to identify the ones you really need in your
CMO, and to assess and hire against these.
Otherwise you’ll end up with the wrong
tool for the job
Exceptional communication—This is
essential for CMOs, and they can shine in
the hiring process. But this can also create
high expectations around execution that
aren’t backed-up once candidates get going
in the role
Fuzziness in measuring performance—
With a shift in emphasis towards higher
level and longer term strategic goals, it can
be hard for CMOs to prove their value
or success
There’s a palette of maybe 30 skills that
a marketing leader can have. You probably
only need to focus on three or four. But
if you make a mistake about which of these
are your priorities, you will mis-hire.
Work with board members and advisors to
help you clearly articulate which skills
you need.
Kipp Bodnar, CMO, Hubspot
When assessing CMO candidates, you need to
dig into the impact they really made in their previous roles, rather than relying on what they tell
you. More involved case studies are very useful,
so that you can get a better sense of how they
might approach your company’s situation. You’re
looking for astute questions and a first-principles
approach, as opposed to a “rinse-repeat” of what
they might have seen or done before. References
are also extremely important, to get a more objective read of prior impact.
Sales
Start off with founder-led sales
For the first year or two after you decide to start
selling—$0–1m annual recurring revenue (ARR),
at least—founders should be personally and heavily involved in sales activity, for four reasons:
Evangelizing—When you have almost zero
brand-recognition, the founder is the most
effective spokesperson
Senior buying audience—Amplifying the
first point, buyers in large companies will
expect to speak to you as the founder
Learning—There’s a huge amount of
learning that comes from first-hand
experience of how prospects respond to
your proposition: product gaps, competitor
insights, key objections raised, price resistance, buyer persona profiles, etc.
Lack of alternatives—You may be limited in
the caliber of sales talent you can attract.
Delegating precious customer leads to an
unproven salesperson is ill-advised
We, the founders and early product
team, sold $2 m of ARR before making
our first sales hire. You can’t outsource
the sales challenge, relying on an ‘ex
machina’ solution by hiring a hotshot
AE.
Assaf Rappaport, CEO & Co-Founder, Wiz
I spent nine months convincing 10 target
companies to take part in beta trials. They
weren’t paying close to what they pay
today, but it was still tough given that they
were committing to using a product with
daily usage when we were so early. I was
supported by a highly committed employee
who a friend had introduced, and he really
helped, even after two earlier experienced
sales hires didn’t work out.
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
Roles in your sales team will eventually be distributed between:
Sales development representatives/
business development representatives
(SDR/BDRs): responsible for finding new
customers and generated leads
Account executives (AEs): responsible for
closing sales, and managing the
relationship with an existing customer or
customer
Area or Regional VPs (AVP/RVPs):
responsible for managing a pod of AEs
Sales engineers (SEs): responsible for
helping to close sales with technical
assistance and assurances
Sales operations (Sales Ops): analysts and
planners who optimize sales effectiveness
by doing tasks such as territory planning,
quota setting, commission calculations and
funnel analysis
Sales enablement: staff to provide your
sales team with the training and collateral
it needs to succeed
Just over half (52%) of highly successful SaaS
companies make a sales hire during the 1–10 headcount phase. The large majority of these early
sales hires were SDR/BDR profiles as opposed
to full-cycle salespeople. However, by the time
headcount hits 50, almost all (98%) of these
SaaS companies hired someone in a sales role. In
Marketplaces (where this may be either a sales
or biz dev hire), the proportions are similar: 58%
by 10 headcount and 94% by 50.
I’ve yet to see a successful SaaS company
where at least one founder isn’t heavily
involved in sales for a very long time. You
desperately need early market feedback
to achieve PMF, and layering people
between you and potential customers is
just compounding your risk.
Seth DeHart, Startup Sales Advisor
As a result, we’ll provide a framework for founder-led sales before discussing how to transition
from founder-led sales to early sales hires, and
then how to successfully build and structure sales
teams at scale.
If you’re focused on a sector where you have
personal experience, you can leverage your own
network initially. These are likely to be beta
customers who worked with you as you built
your MVP.
We ran our beta in partnership with
twelve companies, all drawn from our
network. Within a year of our commercial
launch, these had all converted into
paying customers. After that it was all
about demand generation to drive more
sales leads.
Amit Bendov, CEO & Co-Founder, Gong
Experiment to find your ideal customer
profile (ICP)
If you feel anxiety about becoming a salesperson,
reframe your mindset: You’re running a set of
experiments, not selling. You’re looking for evidence that will help you move closer to PMF, by
testing hypotheses about:
Who are our ideal customers?
Where and how can we find them?
How can we pitch them most effectively?
What matters most to them?
What benefits are they willing to pay for?
In this context, even negative evidence is extremely valuable, as it allows you to tighten your
focus on your ideal customer profile (ICP).
Your ICP isn’t your total addressable
market (TAM). It’s the true group of
companies who will love your product
now. This may be a very short list,
and that’s fine. Starting very narrow and
expanding over time to include a wider
pool of prospects is the only way to
be successful.
Seth DeHart, Startup Sales Advisor
To run your experiments, start with existing and
engaged customers or users—beta customers, free
trialists, freemium users, self-serve paying customers, etc—even if this is a small sample. Also
look at churned users or customers. What can
you learn from all this evidence about the types
of profiles that do or don’t constitute your ICP?
Having crafted your starting ICP, create
a shortlist of ideal prospects to target, at the company level, and also the potential decision-makers/
buyers at these companies. Find ways of connecting with them through your network or via your
existing user base. Otherwise contact them via
cold outreach with a personalized message.
Early on, lean on your network for
customer leads. The warmer the intro, the
higher your chances of success. This may
be your personal network, or else leverage
intros from investors, angels, and advisors.
Meanwhile when prospecting cold, you
want to make your outreach as personalized
as possible, drawing on all available
sources of information.
Jacob Jofe, Index Ventures
We had about five European beta
cus tomers (banks), but nothing in the US.
So we sponsored relevant industry
conferences, sending team members from
Belgium to attend and to generate leads.
We added 10-12 new paying US clients
this way.
Felix Van de Maele, CEO & Co-Founder, Collibra
With cold outreach to prospects, your first objective is engagement—you just want a reaction.
Once you get this, you can work on converting
engagement into meetings. Test different outreach messages to see which works best. Once
you find initial success in booking meetings, you
have a signal on how you can add leads into a
sales funnel.
You’ve had this incredible career, built
an amazing product, and raised funding
from top VCs. Now you get to be an SDR!
You have to embrace rejection and
being ignored.
Seth DeHart, Startup Sales Advisor
With sales meetings booked, you can now test
hypotheses about what your sales process might
look like. But this is actually secondary to your
first objective of creating a repeatable process
for generating leads. This is the signal you need
to pivot your focus to hiring someone to help
you ramp and refine the lead generation process,
which will allow you to further refine your sales
process, leading to customers and revenue.
If you’re able to sell when you’re actually
not very good at sales, that’s an even
stronger signal of PMF.
Seth DeHart, Startup Sales Advisor
If you have a strong point of view on your target
industry, you can also experiment with early
content marketing, writing and posting insight
pieces on social channels to generate interest and
followers, which may mature into inbound leads.
However, even if you have some early success
with this approach, almost all B2B companies
need to demonstrate a repeatable and scalable
outbound lead generation motion.
Find a sales mentor
We also recommend that founders formalize an
advisor or mentor relationship in sales. If you
have prior experience with selling, this could
come later. But otherwise, the earlier you can
find an advisor, the better. At this stage, you want
someone who can help you tactically, and who
has sufficient capacity to get to know you, your
product and your audience. Otherwise they’ll just
be offering generic advice of limited value. Their
ongoing and deepening engagement will yield
compounding value, and you should be prepared
to properly incentivize (with cash plus equity)
the right person who commits time to supporting
you, and to feeling like a quasi-team member. As
you scale, you’re likely to need to switch to a more
strategic GTM advisor. Once again, you should
leverage your network and investors for recommendations on sales advisors.
The most common lesson for founders
is to focus on business value, not on your
product itself.
Jacob Jofe, Index Ventures
Once you’re generating leads, recruit
a sales pioneer
Once you’ve uncovered a lead generation motion
to engage your ICP, your ability to personally
sustain it, let alone to follow through the whole
sales cycle, is likely to be at breaking point. You
will just have too many other demands on your
time. Instead, you need to hire a “sales pioneer”
to accelerate your path to an effective overall
sales process.
A sales pioneer isn’t a VP or Head of Sales,
and isn’t just any AE. They are top 5%,
full-stack, entrepreneurial AEs who are
willing to do everything, from building
lead lists and cold calling to managing and
closing deals.
Seth DeHart, Startup Sales Advisor
Ideal sales pioneer profiles are individuals combining a year or two as an SDR/BDR, plus two to
four years as an AE. This has given them hands-on
exposure to the full sales funnel from lead generation to closing sales, and recently enough that
they know exactly what each step involves. They
should have experience in a high-growth company,
embracing the chaos and uncertainty that goes
with it. The opportunity you offer them is a chance
to build something from the bottom-up, to work
closely with an entrepreneur (you), and to accelerate their career progression.
Note:
Acknowledgement and
gratitude to Seth DeHart
for his framework and
insights around early-sales
which are embedded in
these sections. Refer to
our Reading List for more
of his resources.
Target an experienced and proven AE
who is motivated by maximizing their
equity stake at this early stage, indicating
ambition, mission-alignment and
risk appetite.
David Perry, VP EMEA (former), Confluent
Domain familiarity is less important for the sales
pioneer role, except in highly technical areas such
as infra or security.
Your sales pioneer should first concentrate
on building an SDR playbook—a repeatable and
scalable process for lead generation (i. e. booking
discovery calls and sales meetings). Initially, you
will continue to lead these meetings, with the
sales pioneer shadowing you. Over time, as they
become more confident and knowledgeable, you
can flip roles, with the sales pioneer leading meetings while you focus on the more technical questions and concerns of decision-makers.
Once you’ve established that you can progress
opportunities through the sales funnel, you can
hire a dedicated SDR, trained by the sales pioneer.
If this works, you can repeat with a second SDR.
More data and evidence will enrich your understanding of the sales process (i.e. conversion rates
and cycle times from outreach to engagement to
discovery calls to opportunities, and ultimately
through to deals being won). This will reveal:
The economics of your GTM motion
Where you need to make improvements
Your optimal ratio between SDRs and AEs
As momentum builds, hire a Head of Sales
Once your sales pioneer is closing deals and can’t
cope with the volume of meetings that are being
booked, you have reached the point where you
need a Head of Sales, who can lead and scale the
overall sales team.
Your first Head of Sales may potentially be
your sales pioneer. It really depends on whether
you can see them stepping up from an IC role
into being a team manager. However, the more
conviction you have about your potential to rapidly scale sales, the less likely it is that your sales
pioneer will be able to make this transition. In
this case, you’re more likely to need an experienced
Head of Sales, or even a VP Sales hire. It can be
tough for technically-oriented founders to assess
candidates for Sales, be it your initial sales
pioneer, or the Head of Sales that you will hire
later. By nature, salespeople can sound very convincing. Leverage your investors and sales advisors to help.
I had no idea how to select my first sales
hires—all the candidates sounded great!
I had a talent partner from A16Z interview
eight of them. He made the decisions
on two, and they were both great.
Matt Schulman, CEO & Founder, Pave
I spent six months pursuing a VP Sales
candidate who I really believed in, and
finally closed him. He was the perfect hire
for us, a sales leader who has been able
to build the team below him. I’d do it the
same way again.
Eléonore Crespo, Co-CEO & Co-Founder, Pigment
Even at this point in building your sales activity,
you should stay highly involved as the founder
in closing sales, particularly for larger deals or
more strategic customers.
I sent personalized Loom videos to every
prospective customer, telling them what
their partnership meant to me, and about
the future of our product. The sales team
would shout across the office, ‘It’s time for
your emotional Loom, Matt!’
Matt Schulman, CEO & Founder, Pave
If your product is highly technical and the sales
process is complex, you’ll eventually need to
separate out SE from the role of the AE. This is
generally associated with enterprise ($100k+)
deals, but may also be required for lower value
contracts—for example, if you are aiming for
proof-of-concept (POC) deals. Even for more
technical products, you don’t necessarily want
to hire a dedicated SE ahead of embedding your
first, or even second, salesperson. During this
interim period you, a technical co-founder or a
more experienced product engineer can take on
the SE role in Sales. Alternatively, if you already
have some promising account expansion opportunities (for example, from early beta customers)
you might hire a hybrid Sales Engineer/Solution
Architect to work across both preand post-sales
opportunities.
Hold off on hiring your first SE until
you’re finding it tough as a team to cope
with the demands that Sales are making of
your time to provide technical insight to
prospects. These direct conversations are
a valuable source of feedback in the early
days for you and your engineering team.
Shardul Shah, Index Ventures
Segment your sales team to form pods
As your Head of Sales (or VP Sales) expands their
team, you’ll reach a breaking point in terms of
span of control. This is typically once you hit six
to seven AEs. After this, you’ll need to split the
team into specialties, with the first most commonly reflecting the size of customer accounts—
e.g. SMB, mid-market and enterprise. Buying
processes and sales cycles can vary dramatically
between these, so focus your more experienced
AEs on the biggest and most complex opportunities, with newer AEs handling smaller ones.
With further scale, industry segments with specific use-cases might bud off with their own
dedicated AEs (e.g. technology, banking, healthcare). Regional (geographic) segmentation
doesn’t usually come until much later, when you
have the scale to support separate sales offices.
The exception here is international expansion,
which almost always starts in Europe for US
startups. Time zones, culture and language
factors mean local boots on the ground are
a no-brainer. Read the Index Ventures handbook
on expanding into Europe for more insight.
These splits and specializations will be mirrored in your SDR and SE teams to create sales
pods. The typical pod is managed by an Area or
Regional VP (AVP or RVP), with oversight of six
AEs (a pod at steady-state).
The trickiest promotion in sales is from AE
to AVP (first-line manager). It’s almost a cliché
now, but the best sales reps rarely make the best
sales managers. Mitigate these risks by introducing transition tasks for AEs who are keen to step
into management roles—for example, management reporting or new rep onboarding. Check
if they do these tasks effectively, and if they enjoy
doing them. You really need to dig into the motivation of the AE for moving into management.
Remuneration potential shouldn’t be significantly
different, so check that it’s not primarily driven
by ego or status considerations.
Never put a first-time sales manager in
charge of a new vertical or region. It’s
a recipe for disaster. You’re better off hiring
externally.
David Perry, VP EMEA (former), Confluent
Avoid personal quotas for sales leads
Avoid situations where your Head of Sales (initially) or AVPs (later) have any personal quotas.
These will incentivize them to focus on their
own-sales, when you need them to focus on growing team capacity. Avoiding personal quotas
can be a challenge when you’re in the early stages
of growing a pod, but hold to this guidance.
It’s better to double-comp than to give
a Head of Sales or AVP a personal quota.
If you’re still growing the sales pod, give
the head a bonus (in lieu of commission),
based on hiring and ramping the new reps,
or on developing a sales playbook.
David Perry, VP EMEA (former), Confluent
Establish the right sales metrics
Sales metrics during scaling are particularly
focused on the size, reach and quality of your
pipeline, including pipeline coverage and re views. Clearly define the stages in your sales
process to give you visibility over pipeline progression and timelines. This will allow you to get
steadily better at predicting quarterly sales.
Your sales lead should be constantly reviewing pipeline differences by rep, by team, by
segment and by geography. This is essential
or performance management, and for setting
achievable but stretching quotas.
Sales leaders should be measured both on the
sales target (ambition), and on the predictability
of the target (execution).
Beware of hero deals that keep slipping,
and check what coverage reps have on
their quarterly numbers going forward.
David Perry, VP EMEA (former), Confluent
Managing AEs is primarily a function of measuring and coaching around the activities that
drive sales: calls made, demos booked, follow-ups
scheduled, and rating how closely these activities
are aligned against key decision makers at target
companies. Once you’ve hit GTM-fit, trust that
if these activities are happening consistently and
effectively, then sales will be generated.
The best performing reps have the highest
output metrics.
David Perry, VP EMEA (former), Confluent
Invest in SDRs
The healthiest and most scalable model for growing sales teams is by internally promoting your
SDRs to AEs, who then progress through different tiers of customers (SMB, mid-market, enterprise, and finally strategic accounts), with the
alternative progression route into management
roles. In high-growth you will inevitably also
need to hire AEs externally, but this brings
a greater risk of mis-hiring. SDR hires, on the
other hand, are usually young, dynamic graduates
whom you can coach for cultural alignment and
product knowledge while offering a solid career
pathway. With the right motivation and mentoring, SDRs can also successfully make the transition to become account managers, SEs or even
product engineers.
This model requires a focus on SDR hiring,
together with a nurturing style of management
for your SDRs and inside sales teams.
Plaid—Supporting sales scaling with
a university SDR recruiting program
Building an SDR engine is one of the most
under-appreciated areas of a business to
invest in. Most people view SDRs simply
as a means of developing and qualifying
leads. Yes, this is true. But the best AEs
you’ll ever have in a company will also
come out of your SDR team. They’ve
shown the grit and passion to duke it out
every day to get your product in front of
potential customers, over a multi-year
timeframe.
We introduced an SDR university
recruiting program at Plaid when we
were sub-200 headcount, driven by an
exceptional leader who had done this previously at Twilio. We targeted Bachelor
of Business programs in the UC system,
but also beyond—Wake Forest in North
Carolina became a big feeder. We started
with a couple of juniors doing internships, and built this out into a full-blown
program.
We invested heavily in making the program highly attractive to students, with
a focus on onboarding and learning. The
conversion from intern to permanent hire
was excellent, and the promoted AEs that
emerged from the program have stayed
with us for 4+ years. We also encouraged
internal mobility, with SDRs from the
graduate program successfully moving
into other roles across Plaid.
It was one of the best things we did,
generating massive ROI.
Paul Williamson, CRO (former), Plaid
SDR metrics are also activity-driven: the number
of calls made, emails sent, pipeline progression,
promptness of follow-ups, and net new meetings
booked.
It’s critical to show what success looks like.
Share the metrics for your most successful SDRs,
which will invariably show how much more productive they are in terms of activity levels.
Depending on your mix between inbound
and outbound lead generation, you may also split
your SDR team between inbound and outbound
teams (some sales leaders distinguish SDRs handling inbound and BDRs for outbound). Newer
or less experienced individuals are likely to start
with inbound before moving onto outbound.
Be realistic about AE ramping
Onboarding AEs tends to get harder as you scale.
Up to 20 reps, a three month ramp should be
sufficient. But by 40 reps, it could take four or
even five months, because a lot of the low hanging
fruit has been picked in terms of prospective
accounts. You also need to give more time to ramp
AEs in newer regions, particularly in new countries where brand awareness and lead generation
activity is likely to be weaker. Enterprise reps
will also have a longer ramp-time than SMB or
mid-market reps, reflecting longer sales cycles
and more complex relationships to establish.
These considerations all need to be factored into
your planning, budgeting and forecasting.
During the ramp-period, avoid open-ended
commission guarantees. Instead, tie these payments to the completion of activities critical to
successful ramp-up: getting product training,
building a territory plan, reviewing pipeline
metrics, setting up an event, securing meetings
with senior decision makers, etc.
AE ramping can be supported by buddying
up with a high performing rep, letting the new
hire sit in on calls, account planning meetings, etc.
Introduce Sales Engineering
In the early days of enterprise selling, someone
from your product or engineering team can take
on the SE role. But with scale, you need to staff
up a dedicated SE team. In essence, the AE is
responsible for getting the economic buyer’s
sign-off, while the SE is responsible for technical
sign-off (addressing concerns around privacy and
security, hosting, or systems integration).
When the business buyer is different
from the technical buyer, you need
sales engineering.
Paul Williamson, CRO (former), Plaid
Managing the effectiveness of AE and SE activity
should focus on deal reviews through this lens.
Was the loss due to a failure to get the economic
or technical decision-makers onboard, and why?
The best SEs also act as pseudo sales
managers to the AE, pushing back against
all activities that waste time.
David Perry, VP EMEA (former), Confluent
For highly technical sales, such as in infrastructure SaaS, a buddying approach is common, with
a dedicated SE per AE. This level of dependency
creates a question of where Sales Engineering
should report into. They could report directly
into the Sales function, but are also often a part
of Customer Success, since SEs also contribute
to post-sales implementation and account expansion, and their career development and progression intersects with professional services teams.
Over time, you are likely to create distinct teams
reflecting these objectives. But during the “messy
middle” phase where individual SEs need to wear
multiple hats, some degree of tension is inevitable
regardless of how the reporting lines are set up.
Introduce Sales Operations
Sales Operations (Sales Ops) is about giving your
sales team the support and coordination to ensure
that it’s working as effectively as possible. It’s
getting higher profile recognition now, with
a dedicated Sales Ops hire coming earlier in the
scaling process. The scope of Sales Ops includes
territory planning, quota-setting, commission
calculations, pricing and discounting guard-rails,
forecasting, pipeline hygiene, contract approvals
and end-to-end analysis of sales funnels.
In the early days before you have a dedicated Sales
Ops lead, responsibility for these activities is split
out, with a BizOps generalist or Chief of Staff
often taking the lead. Once you’re ready to split
into multiple sales pods, make a dedicated Sales
Ops hire.
Sales Operations is a cornerstone of
success as you scale.
David Perry, VP EMEA (former), Confluent
Salesforce is the anchoring software,
but we have so many different sales tools
now. Getting the data flow right is hard:
lead-scoring, tracking through the funnel,
attribution …
Amanda Kleha, Chief Customer Officer, Figma
Sales Ops activities sit between Sales and Finance. They need to work closely with both, but
can report to either. There’s also a trend towards
broadening Sales Ops into “Revenue Ops”, with
the role encompassing top-of-funnel lead generation activities in Marketing plus down stream expansion activity in CS. This integrated
approach can make it easier to surface pipeline
metrics and insights.
Most CROs would say they want to
own Sales Ops. I disagree. I want a Sales
Ops team that focuses on rigor, and
which will call me out on my BS. And
certain Sales Ops tasks, around pricing
and contract approval, absolutely need
to be separated from me, to avoid a
‘fox in the henhouse’ risk.
Paul Williamson, CRO (former), Plaid
Introduce Sales Enablement
Sales Enablement (or revenue enablement, when
it spans all GTM teams) refers to the collateral,
tools, data and training needed to ramp new reps
and to optimize sales productivity and performance. Training collateral is fundamental, such
as for competitive positioning. Collateral material supplied by product marketing often needs
further refinement to suit the “on-the-ground”
needs of your sales teams. Tooling is getting
increasingly valuable and sophisticated too—for
example, Gong’s product suite which uses AI to
identify what your best salespeople are doing and
saying to drive success.
The more product complexity you have,
and the more competitive the space,
the earlier you need to create an enablement
team. I’m advising a $15 m ARR company
in a hyper competitive space at the
moment, and telling them to massively
invest in sales enablement starting now.
Paul Williamson, CRO (former), Plaid
Business Development
The basic distinction between Business Development (BizDev) and Sales is that BizDev involves
forging long-term partnerships with third parties
to generate benefits, rather than upfront commitments to pay for a specific product or service.
While Sales is only usually relevant in B2B,
BizDev can be valuable for both B2B or B2C
companies. However, BizDev can mean very different things in different companies. A distinction can be made between three broad objectives
of business development in a tech company:
Product partnerships: enriching your
customer value proposition through
integrations with products that are
adjacent to your own
| For example, your HR software could
integrate with third party finance
software, enabling new data insights
for your users.
Distribution partnerships: growing your
user base or generating new sales by
leveraging the audience and reach of a
third party
| For example, you might offer an
affiliate commission on sales of your
product generated by an influential
blogger. Or you might give a large
systems integrator the training and
rights to implement your software
solution across their customer base
(channel sales).
Platform partnerships: Where your
product exists entirely within the
distribution ecosystem of one (or a few)
larger platforms, you want to cultivate
strong and strategic relationships.
| For example, mobile apps are almost
entirely distributed through the iOS or
Android ecosystems, so Apple and
Google are critical partners.
Both integration and distribution
partnerships really matter for us, especially
with accounting firms. Early on, I noted
that 30–50% of the sales pipeline for
businesses adjacent to us was generated
through partners, so I leaned into this
approach. All our BizDev now sits under
our COO, who decides on resource and
time allocation splits between pursuing
integration or distribution partnerships.
Michelle Valentine, CEO & co-founder, Anrok
Given the range of activities that can fall under
BizDev, it doesn’t necessarily make sense to have
a single team covering them all. Product partnerships will work closely with Product or Product Marketing; affiliate sales usually sit within
Marketing, while channel sales form part of the
Sales function.
We started at Revolut with a centralized
BizDev team. When you’re early, success
is as much about how quickly you close
your failures as it is about trying new
approaches—and central teams are better
at killing ideas! I now have my own BizDev
team focused on growth opportunities.
This is real growth hacking—creating zero
cost opportunities for cross-selling, PR,
or revenue sharing with influencers. They
sell the dream and are tough negotiators.
Antoine Le Nel, VP Growth, Revolut
Business development and partnerships
can sit anywhere in the org, it just depends
on your company. I don’t think it really
matters so long as you have strong
operational cadences: How do you set
OKRs, are they shared, and are incentives
aligned to drive cross-functional efforts?
Joanna Lord, CMO, Spring Health
As with Sales, early BizDev efforts will tend to
be founder-led and experimental. You will need
to figure out which partners have the strongest
overlap of interests with your own, and whether
there’s a mutually beneficial financial framework
that can form the basis of a partnership agreement. This is very similar to defining your ICP
in sales, but for an “ideal partner persona.” Initially you may need to structure bespoke deals,
figuring out the commitments and legal terms
on a case by case basis. Only once you have a
repeatable and scalable partnership “playbook”
does it make sense to hire someone dedicated
into a BizDev role. Over time, this might turn
into an outbound partnerships team which is
almost indistinguishable operationally from
more traditional inside sales.
It’s hard to identify in advance the clinicians that will prove to be most engaged
and therefore valuable for us. So our
partnership team needs to have the drive
and smarts to sustain intensive outbound
prospecting. We’ve found that hiring quite
junior salespeople works best, one to
two years out of college. We’ve also had
to figure out a commission incentive
structure that rewards clinician acquisition,
but also the engagement growth generated
over time through these clinicians.
Charmaine Chow, CEO & Founder, GetHarley
The return from investing in BizDev hires is generally longer-term than is the case for Sales: closing partnership deals tends to take more time than
for Sales, and you then need to factor in the partnership ramping up before delivering a financial
return. For this reason, quotas and commissions
are less suited to BizDev than to Sales, although
this can change if a repeatable and scalable
BizDev “engine” is identified. Instead of tracking
pipeline and pipeline coverage, BizDev metrics
involve:
Opportunities identified
How large these opportunities are
How tight they are to your “ideal
partner persona”
How they map on to pre-identified
strategic partner target lists
There’s some overlap between great BizDev talent and great Sales talent, particularly in enterprise sales. The best BizDev profiles will tend to
be thoughtful problem solvers who are willing
to get involved in the legal, financial, and operational details of how the partnership will work.
They often have a consulting or legal background.
However, they share with Sales the motivation
and drive to source, pursue and close deals.
Customer Success and Customer Experience
At the start, look for a customer generalist
Customer engagement at scale is typically separated across three separate functions and roles:
Customer Experience (CX): reactive user
support, addressing and solving problems;
measured on user satisfaction and
customer retention
Customer Success (CS): proactive user/
customer outreach to drive product
adoption, onboarding and engagement,
associated more with B2B than B2C;
measured on logo retention and growth in
account value
Community (sitting within marketing):
engagement with users through online
channels (e.g. social media) and events, to
generate goodwill, converting your users/
customers into brand advocates
When you first acquire users, you can’t afford to
hire dedicated individuals for each of these three
roles. It’s another case of navigating the “messy
middle”. Your overriding focus is on moving
swiftly from MVP stage to PMF, which depends
on rapidly identifying and resolving product gaps
and bugs.
You therefore want someone in the team with
a CX orientation to respond promptly, professionally and efficiently to user feedback and
issues. But as the pivotal contact point with your
early users, they also need an analytical mindset,
collating and analyzing user feedback into tightly
defined and priority-ranked issues that can be
fed back to your engineering team for action.
You’re looking for someone who cares as much
about your product effectiveness as they do about
customer happiness.
Our first CX agent brought so much
passion and was a force of nature.
She made every member of the team
spend time speaking with customers.
She had an outsized and positive impact
on our culture and values.
Tom Leathes, CEO & Co-Founder, Motorway
The more data savvy they are the better. This will
enable them to contribute to the design of growth
marketing experiments, as well as being a key
channel for feedback when you run them. This
will allow you to iterate more rapidly when testing
viral mechanics, price plans, or new features.
Past experience is much less important than
these other attributes. You’re looking for a highly
motivated jack-of-all-trades rather than a specialist. We recommend aiming as high as you can
in terms of intellect and drive. This could mean
a junior VC, management consultant or invest
ment banker who’s keen to get into startups.
There is no settled job title either: Customer
Advocate, Community Manager, Customer Success Lead, etc.
The more rapidly your user base grows, the
more urgent the need to hire into this role. This
is particularly true in freemium or free trial models, but it also applies generally to Marketplaces
and D2C, where delighting early customers is
crucial and where you need to identify shortcomings in physical processes (e.g. delivery failures,
supplier errors, etc) as much as in software. In
all these scenarios, we recommend that you hire
someone who wears the “customer-facing” hat
within your first 10 team members.
In sales-led models, your user base will grow
more slowly. You are likely to have a small number
of early beta customers, plus potentially some
early meetings with prospects. But given how
closely involved you and your engineering team
will be with these users, the need for a dedicated
customer-facing hire tends to arise slightly later.
Establish a CX team as your user base
expands
As your user base grows and your headcount
creeps up towards 50, you’re likely to need multiple dedicated CX agents to deal with customer
support issues. The feedback loop between
CX and your Growth, Sales and Product teams
needs to remain tight, but will be less critical
day-to-day
As you scale, CX feedback is more about
‘what’s broken’ versus ‘what’s missing’.
David Apple, Head of Customer Success (former), Notion
The size of CX teams can increase rapidly. To
some extent you need to accept this, as your focus
will be on building out new product features to
drive growth, more than on solving for every edge
case that could lead to user confusion.
You will inevitably build up some product
debt on the CX side in your early days.
Dominic Jacquesson, Index Ventures
However, you should think from early on about
ways of improving CX efficiency. Give your early
CX agent (or agents) projects focused on “one to
many” support. This might include a Help Center
with “how to” videos addressing FAQs, and social
media channels to share product and service
updates. Over time, this can spin out into an education team. Another early project could be to
set up NPS monitoring as an overall metric of
customer health.
When you have up to five to seven CX agents
in the team, you should aim for every one of them
to have the potential and hunger to progress and
grow. You’re not optimizing for call center style
efficiency and stability. Your CX team should
remain part of your overall customer organization, with career progression opportunities for
talented CX agents into CS, Sales, BizOps or
Product roles.
Build a multi-tiered CX team as you scale
In the early days, it makes sense to focus on hiring
highly ambitious people into CX roles, knowing
that you’ll need individuals you can rapidly promote. But as you grow further, it’s unrealistic
to fully staff CX teams this way. You need an
increasing proportion of the team who are happy
in their current position, which likely also means
a lower proportion of graduate hires.
It’s almost inevitable that CX is seen as the
“poor relation” in tech companies, at least compared with Engineering and other functions that
readily lay claim to being “core”. This needs to
be mitigated as far as possible, for at least four
reasons:
1. CX remains an important source of
insights into customer requirements for
product development
2. CX effectiveness is a key determinant of
customer NPS, impacting engagement,
customer retention and therefore topline
revenue
3. Prioritizing internal tooling and
automation is important to prevent CX
teams from ballooning in size as you scale,
which can dramatically damage margins
and economic viability
4. CX teams can be a valuable source of
talent for internal promotion into other
functions across the company
The relevance and importance of CX should be
reflected in executive reporting lines. Particularly
if kept in-house, CX should report to either CRO
or CCO, rather than CFO, to avoid it being seen
purely as a cost center.
Metrics at scale for CX:
Customer satisfaction (CSAT) scores
Customer wait times
Contact rate
Cost per interaction
Paying customers per CX agent (and by
segment)
Expense: revenue ratio
Team attrition and internal engagement
Benchmarking of these metrics is mostly
internal, tracked over time, but also with
non-competing peers. Vendors such as
Zendesk can be great connectors to
establish benchmarking groups.
All companies want to be customer-centric, but
CX team growth over time can severely dent your
margins. You need to focus on efficiently delivering a beneficial customer experience. For example, you want to push towards one-to-many
solutions to customer issues, but you shouldn’t
hide or deflect customers from being able to access one-to-one support.
With scale, CX teams develop multiple tiers
for escalating more complex or technical issues.
This naturally also offers a career development
pathway for CX agents. More experienced agents
can develop one-to-many CX resources such as
the Customer Help Center and social channels,
plus self-serve webinars and videos. This also
extends to quality monitoring and training of
newer agents, as well as digging into CSAT metrics, auditing chats and calls for tone of voice and
accuracy of advice offered. Your most highly
experienced CX agents will work closely with
technical teams to, for example, develop training
on new product releases and features.
We haven’t offered phone support
for years now. Our biggest CX channel
is live chat.
We introduced a self-serve, in-app
support experience last year and it cut
our contact rate in half. This allowed
us to invest even more into one-to-one
CX support, especially for larger, more
complex customers. While we optimize
for customer satisfaction, we aim
for improvements in ARR per full-time
employee for our non-quota carrying,
customer-facing teams.
Jonas Rieke, Co-Founder & Chief Operating Officer, Personio
If your CX team grows above 100 headcount, you
may benefit from a CX-enablement squad made
up of more experienced members, focused on
onboarding and training newer CX agents. This
squad can also offer general product training for
new hires across other functions in the business.
Get new CX agents into customer-facing work
as soon as possible, as this is the best way to
assess if there are likely to be issues. Ramp-time
shouldn’t be more than three months.
All new employees are offered time with
CX as part of onboarding, including
‘shadowing’ an agent helping a customer
via live-chat. Many take it up, and
in functions such as product, it’s just
so valuable.
However, if you develop a richer product offering, with multiple modules requiring distinct
expertise and training, you might struggle to
maintain a full-stack CX team. The pain point is
likely to present itself in slow onboarding of new
CX agents: if it’s extending much beyond three
months, you’ll suffer in terms of NPS metrics
and you’ll also be distracting your more experienced CX agents as they help out the newer hires.
In this case, you’ll need to split your CX team
between product modules. You can then offer
a tour of duty for CX agents between these specializations as part of their career progression.
You can also experiment with upselling
through your CX teams. This can be tricky from
a customer perspective, as they will be focused
on solving their immediate issue, and also from
a staffing perspective, as the skill-sets are different. It requires careful monitoring of the
trade-offs between customer satisfaction and
incremental revenue generation. Factors such
as price point, adjacency of product modules,
and complexity of decision-making will all feed
into whether it generates sufficient return and
whether it fits with your overall ethos and culture. It might be better to have a separate inside
sales team to which relevant queries can be routed
by CX team members.
Our CX approach at Squarespace has
no sales targets or incentives which
can damage customer satisfaction. This
is totally different from some of our
competitors, where CX is heavily focused
on upselling.
The natural CX career pathway should also
extend to other parts of the company. In B2B
companies, this will typically include Customer
Success or inside sales teams, but it can also go
beyond these.
We see our CX team as an important local
talent pool for internal mobility, and
celebrate our promotion metrics. More
recently, we have also partnered with our
technical team to offer a ‘coding camp.’
This has helped our technical hiring
efforts, also becoming a big part of our
diversity, equity and inclusion efforts.
We’ve developed a product expert role
that acts as the liaison between productbuilding and customer-facing teams. This
also creates a career path for customerfacing [CX] roles into the product organization. We have nurtured a number of
product managers this way.
Jonas Rieke, Co-Founder & Chief Operating Officer, Personio
Some of our best GTM people came out
of CX, and it was a pretty significant flow.
Paul Williamson, CRO (former), Plaid
The nature of CX and other operations functions
means that certain HR practices are prone to
failure, such as unlimited vacation policies. At
scale, though, there’s a tendency for HR policies
such as these to become more clearly articulated,
which helps to reduce the gaps between CX and
other teams too.
Try to be as aligned as possible in your
HR policies between CX and the rest of
the company, such as benefits. But accept
some flexibility and specifics. For example,
the nature of the CX role might limit
attendance at company off-sites and events.
CX teams are optimized in pods, with eight to
10 agents and a team lead. Beyond this, team leads
can’t effectively develop and performance manage their agents.
In my experience, CX team leads are
generally too nice and might need
ongoing coaching and training to ensure
that, besides being great advocates for
their teams, they are also keeping them
accountable, and having challenging
conversations when needed.
CX team attrition is typically higher than in other
teams. This can be mitigated by following the
guidance above around hiring and career pathways. But it also means you should track attrition
gross or net of internal mobility, and closely
monitor leaver reasons. It’s a red flag if CX agents
go on to similar roles at another company.
Once your CX team grows beyond about 50
agents, there’s a lot of insight to be gleaned from
data about structuring your CX team, and identifying opportunities for automation. This is
critical to controlling CX headcount growth, and
you might consider a dedicated CX data analyst
at this stage.
Insights are also valuable from a product
perspective. Top CX agents can be paired with
relevant product teams to provide a direct customer voice, and to anticipate potential pitfalls
with new products or features. This can avoid
situations where a product launch is followed by
several cycles spent fixing confusing features.
Technical teams are intrinsically happier
doing new stuff than fixing bugs. Over
time, the bugs list just grows and grows,
and you need a strong CX voice to keep
priorities in balance, and to provide the
data to support this.
Your CX system should include a tagging system for all tickets and feedback. This will drive
a quarterly Customer Voice report aligned to the
product cycle, which in turn shapes roadmap
priorities as well as providing valuable feedback
following major product releases.
There’s a danger that CX teams feel
disempowered from challenging the status
quo on policies, like around cancellations
or refunds. It’s important that the right
internal feedback channels exist, and that
CX team members are celebrated and
rewarded for pointing out workflows that
no longer make sense or might provide
a poor customer experience.
Tooling such as Zendesk play a critical role in
CX scaling and automation too, such as running
a smart help site and effectively routing queries
to the right team. Always use third-party tooling
for CX.
CX tooling should extend to CS and even
sometimes to Sales. Your CSMs will benefit from the
visibility of tickets for specific accounts.
It can be embarrassing if during a QBR,
a customer references a support interaction
that the CSM was not aware of. In enterprise, dedicated Slack channels including
the customer admin to report on CX issues
can also inform expansion opportunities
for AEs to pick up on.
David Apple, Head of Customer Success (former), Notion
We’ve constantly worked at CX automation,
process improvements and self-serve tools
for our continuously growing customer
base and more complex product suite. Our
CX team is roughly the same size today
(200 people) as it was when we started
implementing many of these initiatives
eight years ago, despite our customer base
growing from 200,000 to four million!
Over the next few years, we expect to see significant deployment of AI tools in CX to drive
automation and therefore efficiency.
In B2C, outsourcing CX to a third party can
make sense at scale for the sake of efficiency and
flexibility, or to more effectively cope with seasonal peaks and troughs. In B2B, CX needs are
more technical and we recommend that you don’t
outsource.
Scaling Customer Success—B2B
Start by hiring a Customer Success
Manager
In high-velocity sales, growth soon creates a significant number of customers, who need to be
onboarded and supported. This leads to a first
Customer Success Manager (CSM) hire, who
fully inherits customer relationships post-sale.
Their role may also include CX, with a core retention remit, plus any modest upsell opportunities
that these small accounts can offer. With continued growth, you’ll soon split this into separate
CX agents (reactive support) and CSMs (proactive
support, including onboarding and training).
When focused on SMB customers within
a huge market with short sales cycles, we’ve
learnt to direct Sales exclusively towards
acquiring new customers, while CS drives
expansion. Otherwise, it’s harder to align
incentives and plan capacity.
Jonas Rieke, Co-Founder & Chief Operating Officer, Personio
The “land-and-expand” motion becomes more
critical to growth if you’re targeting enterprises,
where the opportunity to grow account value is
much greater. In enterprise, AEs usually retain
primary account responsibility and quota ownership during this earlier phase of growth. You
might hire a CSM to focus on onboarding, product training and engagement. Alternatively, for
more technically-oriented products, sales engineers might initially fill the post-Sales role (as
a hybrid SE/CSM), supporting account expansion opportunities from a product and technical
perspective.
Enterprise accounts need much more
handholding and training. Unlike in PLG,
these are users who didn’t personally
choose to adopt your product. It may have
even been imposed on them. You need
to prove the benefits to these users to
drive engagement.
David Apple, Head of Customer Success (former), Notion
The nature of the CSM role will also vary by customer segment. In smaller accounts, the focus
will be on building one-to-many content such as
training videos, which can be made available to
cater for common use-cases underpinning product engagement and upselling. In enterprise settings, more personalized engagement will be
more effective. The focus is on ensuring that the
customer implements and adopts the product
as quickly as possible, and therefore starts to see
value.
Never assume that the customer will
figure out themselves how to use any
feature of your product. You need to hold
their hand, either via direct engagement
(for large accounts) or through effective
training resources (for smaller accounts).
David Perry, VP EMEA (former), Confluent
The break point between these distinct SMB and
enterprise approaches comes somewhere around
the $100k ACV point. Mid-market accounts
might sit around this breakpoint. You might have
to experiment with different approaches in the
early days, to discover what works best for you
and where the exact breakpoints are. For example, you might introduce a post-sale period (e.g.
three to 12 months) for mid-market client relationships to transition from the AE to a CSM.
Once you’ve settled on an effective route for
transitioning accounts from Sales to CS, the decision to hire additional CSMs will reflect capacity. When your first CSM gets overloaded, you
hire another. Over time, you will get better at
forecasting pipeline and account growth, and can
plan additional CSM hires in advance.
Build a multi-tiered CS team
CS teams start out smaller than sales teams. This
isn’t surprising, given that you have to acquire
customers (i. e. Sales) before you can focus on
retaining and expanding their value (i. e. CS).
However, in our analysis of successful SaaS companies, CS teams reach nearly the size of sales
teams by the point company headcount hits 1,000
(158 Sales compared to 140 CS).
The CS function tends to group together SE,
CSM and CX together with two or three additional teams that may be carved out as you scale
further:
Implementation—configuration,
migration, onboarding, training and
education
Account management (AM)—post-sale
account expansion, with net dollar
retention (NDR) goals and incentives
Professional services—In certain sectors or
verticals, it might make sense to add a
paid-for service offering, potentially
including consulting. This could be a
profitable team, and should at least be
priced to break even. Since service
revenues are valued at a lower multiple
than software revenues, VCs are generally
wary of founders who want to push
towards professional services, unless
there’s a clear case that they are supporting
onboarding and upselling into larger
accounts
The need for account managers is clearest in SMB
settings, where there’s a transition of account
responsibility from Sales (AE) to Customer Success (AM). As such, they are quota-carrying. They
might each look after a portfolio of clients totalling ARR of $1–2 m, with NDR targets of 115–
125%, depending on seniority. This incentivizes
them to figure out how to balance their time
between “churn-avoidance” versus upselling and
cross-selling.
I recommend incentivizing AMs on NDR
metrics with a 50:50 split between
personal and team portfolio performance.
This encourages collaboration, and
recognizes that accounts may shuffle
around quite a lot.
David Apple, Head of Customer Success (former), Notion
In enterprise segments, there’s a difference of
opinion with respect to introducing quota-carrying AMs. The choice is ultimately driven by
whether you believe that the skill set required
for acquiring new accounts is different from that
required for expanding existing accounts.
Where an AE has taken many months
building client insight and trust before any
deal is signed, it doesn’t make any sense
to transition the relationship to an AM
post-sale.
David Perry, VP EMEA (former), Confluent
It’s very tempting to say, ‘Our AE landed
this F500 client, so let’s keep them on it to
drive expansion,’ but not for us in the early
days. Initially landing this logo required
one set of skills; expanding the account
involved distinct but important operational
skills. For instance, getting the client
onto single billing, or finding the right
procurement lead for payment. Most AEs
would prefer the rush that comes from
securing new logos rather than navigating
optimal billing arrangements.
Amanda Kleha, Chief Customer Officer, Figma
Reflecting the greater hustle involved in acquiring new customers than in retaining and expanding them, AEs typically have a compensation
package split 50:50 between base and commission, while AMs are closer to 80:20 or 75:25.
Career pathways in CS teams often originate
with promotions from CX, and progression
involving taking on more, and larger, customer
accounts, with bigger expansion opportunities.
In general, the more technical your product, the
harder it is to hire externally for these skills, and
the more important nurturing talent for career
progression between teams becomes.
Consider the consequences of your
pricing model
Infrastructure platform companies are increasingly moving away from traditional SaaS pricing
(i. e. an Annual Contract Value agreed upfront
as part of the sale) to consumption-based pricing
(i. e. billing corresponds to the actual usage of
services in the period). This change has organizational impacts—for example, the focus changes
from closing deals before the end-of-quarter,
to influencing customer usage patterns at the
start-of-quarter.
Growing account value in a consumption
model is achieved through coaching and guiding
clients to try new use-cases. This puts more revenue generation focus on CS teams, led by CS
engineers (CSEs)—similar to SEs, with strong
technical skills, but focused on post-sale account
expansion rather than landing new customers.
CS metrics in the consumption model look
pretty different:
North Star becomes consumption retention
and growth; quarter-over-quarter and
year-on-year
CSEs have consumption growth and
metrics per account
Sales interface becomes messier than in
SaaS, and value attribution is much harder
Reflect on whether CS team growth
indicates a poor product experience
CS is undergoing an identity crisis at the moment.
Frank Slootman, CEO of Snowflake, has gone
so far as to claim that CS was invented to paper
over cracks in business models with overly complex products and processes. Slootman advocates
dissolving CS, and putting everything into Sales,
Sales Engineering, and Product.
This feels like an overreaction, but it contains
an important truth: as much as for CX teams, you
need to constantly seek ways to remove friction
from the user experience to drive adoption and
engagement. The fact that SaaS companies by
1,000 total headcount have almost as many
people in CS roles as they do in Sales underlines
the amount of friction that builds up, and the
margin improvement opportunity for companies
offering more intuitive and delightful product
experiences.
Figma—When Customer Success isn’t
necessary
It wasn’t until five years into monetizing
(more than 1,000 employees) that we felt
there was a need for a CS-type function
at Figma. I preferred hiring sales reps
who could own the customer relationship
through the entire journey, otherwise
things could get complicated. It helped
that our product isn’t particularly hard
to start using or set up. In addition, we’re
not in a new category—our paid users
aren’t beginners needing design education. They’re motivated professionals
who want to figure out how they can get
the most out of what our product offers.
Now that we’re shifting into more
top-down selling, we have to help clients
figure out how to deploy purchased seats,
in order to drive adoption.
More generally, I take the view that
relying on humans to explain and onboard
users into your product should be
reserved for products that are challenging
to set up. If it’s possible to create a selfserve product experience, you should do
this from the beginning. Reverse engineering it later on is truly challenging, as
you lack the organizational DNA. Instead,
your product experience—onboarding,
training, etc —becomes overly dependent
on humans. This kills your margins, and
is only economically viable if you have
really high ACVs.
Amanda Kleha, Chief Customer Officer, Figma
Keep CS and Sales aligned
There’s always some degree of tension between
Sales and CS, with Sales setting overly optimistic
customer expectations which CS then struggles
to meet. At scale, you can monitor the first year
NPS as one indicator of this gap. You can also
foster more CS involvement at the pre-Sales
stage, and build a list of common implementation
issues that might not appear on customer buying
checklists. Another approach is to institute commission clawbacks from sales on accounts that
churn within the first 12 months.
Sales always operate in a bit of a gray
zone. The question is how much of
this grayness you’re willing to accept.
Too much, and the reality ends up
disappointing customers versus what
they were led to expect.
Anonymous GTM leader
The key is to align incentives between
Sales and CS, so their goals are the same.
The wrong system of incentives will
inherently create land-grabbing and
conflict. Use shared NDR metrics, with
retention focus for small accounts, and
expansion focus for larger ones. But credit
both teams for overall success, even if
they’re not both directly involved in all
deals. Optimize for harmony.
David Apple, Head of Customer Success (former), Notion
Choose Between a CCO and a VP
Customer Success
Responsibility for CS teams can sit with a Chief
Customer Officer (CCO) executive. But more
often, given the potential for friction between
CS and Sales, companies appoint a VP or Director
of Customer Success who reports to the CRO. In
particularly technical products (e.g. infrastructure tools), some of these functions might also
be grouped within the engineering team.
Hire a CRO
In B2B companies, your revenue leadership has
to move up a gear in lockstep with the complexity
of your sales and CS organization. While you
probably already have a VP Sales and a CS lead,
you reach a point in scale where you need an
executive to take ownership of the entire revenue
engine—a CRO. Given that this remit also oversees 30–50% of your total headcount, the CRO
is a critical member of your B2B leadership team.
Typically, we recommend that you hire a CRO
when your sales and CS teams collectively reach
between 50 and 100 people. The majority of B2B
companies have hired a CRO by the time they
reach 500 total headcount.
Scope of responsibility for a CRO:
Sales and CS functions
GMs who own specific products or region
Business development teams focused on
distribution
May also be responsible for CX
Avoid making them responsible for
marketing
Becomes a trusted partner to the CEO,
shaping company-wide strategic decisions,
and often joining board meetings
By this point, you have probably established
a GTM motion, which is being executed by a
VP Sales. However, when considering the “ideal
profile” for your CRO hire, you need to think
about what your GTM motion is going to look
like in two to three years’ time. For example:
You’re moving upmarket, from inside sales
targeting mid-market prospects to
solution-selling into enterprises
You’ve had early success in shifting from
direct selling to channel sales (i. e.
partnering with third parties such as
systems integrators), and have decided
to go all-in with this shift
You’re committed to maintaining a focus
on SMB customers, with a primarily
Product-led growth motion and minimal
Sales or Customer Success. In this case, the
profile and title might be better reflected
as a Chief Growth Officer than a CRO
In each of these scenarios, the profile, experience
and competencies of the ideal CRO candidate
will differ dramatically. However, their profile
will typically include:
12+ years of relevant experience
Adopts a lifecycle perspective when it
comes to customer relationships
Balances short and long term perspectives
on growth
Almost always comes from a sales career
pathway
Brings a repeatable and scalable playbook
relevant to your GTM motion, with the
intellectual chops to adapt it to your sector
and product
Has a deep understanding of Sales Ops and
Rev Ops; uses data to guide their decisions
Proven track record of building and leading
a revenue team to drive high growth
May have specific sector experience, but
otherwise the talent pool roughly divides
between selling business applications
versus technical applications; not many
candidates successfully cross between
these two pools
Partners collaboratively with marketing
and product leadership, and is capable
of deeply examining the question,
“Why should customers buy from us?” and
not just, “How can we persuade them to
buy from us?”
While our analysis indicates that 30% of SaaS
companies have a CRO by 125 headcount, we
caution against such an early hire. Wait until you
have real proof of GTM-fit and sales momentum.
Until you have reached this point, finding an
excellent execution-focused VP Sales is more
important. Founders running a search for a VP
Sales can also be prone to offering candidates an
inflated CRO title. By nature, salespeople are
good negotiators. Avoid this pitfall.
If you’re experiencing particularly fast
growth, companies might require two (or even
three) iterations of the CRO on their road to
achieving IPO-scale. This partially reflects the
scale of the organization that they are leading,
a typical split being between the $10–50 m,
$50–200 m, and $200–1,000 m revenue phases.
It can also reflect different GTM motions evidenced by increasing customer ACVs. The CRO
capabilities for leading a $100k ACV business
(mid-market) is very different from a $500 k or
$1m ACV one (enterprise).
There are some specific requirements or challenges that tend to go along with hiring a CRO
compared to other C-suite executives:
Willingness to travel: Salespeople by
nature tend to be more extroverted. CROs
therefore need to build relationships and
motivate their teams in-person. These
teams are likely to be distributed, so
running sales kickoff meetings (SKOs) and
quarterly business reviews (QBRs) is very
valuable. This is amplified by travel
requirements in order to spend time with
customers, as well as time with other
members of the executive team. It really
helps if the CRO is co-located with the
CEO and/other executives, although this
shouldn’t be a hard constraint when
looking for candidates
Scope of responsibility:CROs can have
a tendency to ruffle feathers internally,
jumping into problems (or opportunities)
that might be outside their direct remit.
You need to provide extra clarity on their
boundaries, and how to arbitrate
differences of opinion. The most common
areas of friction are with marketing and
product
Compensation structure: The CRO is the
only C-level role where cash compensation
is largely based on revenue outcomes. The
typical structure is split 50:50 between
base and variable pay, compared to maybe
80:20 for other C-suite executives. This
partially explains the above point about
ruffling feathers. The CRO, together with
their team, is directly financially impacted
if other teams don’t deliver (or are
perceived to not be delivering) on, for
example, a delayed marketing campaign or
product launch
Operations
The size and composition of operations teams
are heavily dependent upon your specific business
model.
B2C App—community safety and
moderation, in-house professionals
(entirely sector-dependent: for example,
nutritionists, personal trainers, therapists,
physicians, interior designers)
SaaS—payments, Know-Your-Customer
(KYC) and Anti-Money Laundering (AML)
verification (fintech)
Operations teams are larger in D2C and Marketplaces where physical products are being produced and/or delivered to customers, relative to
pure software businesses such as SaaS and B2C
Apps. Operations team size also correlates with
customer and transaction volumes, so they tend
to be bigger in B2C companies relative to B2B.
We discussed CX in the context of the overall
customer organization earlier, although CX can
also be considered part of Operations—there
tends to be a strong cross-over of talent, leadership and themes between CX and broader Operations. For example, the need at scale to prioritize
automation in order to stop these teams ballooning in size.
We expect the adoption of AI tools to significantly accelerate automation in
Operations teams in the coming years, shrinking
headcount requirements.
Given the extent of differences that exist
between operations teams depending on specific
business model, sector and decisions around outsourcing, we have left them outside of the scope
of this handbook.
Lunch time, crunch time
Every day in Mumbai, 5,000 dabbawalas rise before dawn to collect homemade tiffin boxes, and ferry them by bike and train to 200,000 hungry office workers. Fast as fast food but fresh as farm food, the success rate for deliveries tops 99.9%. Not only that, but the dabbawalas do it all again in reverse, returning the boxes to the kitchens they came from after lunch.
The dabbawalas' operation evolved organically over 100 years. It relies on teamwork, timing and a remarkable coding system using colors, symbols and numbers. Couriers run relays with bikes and trains. Routes adapt nimbly to traffic snarls, transport strikes and seasonal monsoons.
There’s minimal tech and no top-down control. Most dabbawalas are semi-literate, yet their operation is the envy of advanced logistics companies the world over.
Finding order in a frenetic megacity like Mumbai is no mean feat. The dabbawalas are a study in the value of flexibility and self-organization, as well as the power of focus and relentless iteration.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Scaling your G&A team
Don’t undervalue G&A teams
Once upon a time, people in G&A roles (Finance,
HR and Legal) were lumped together as being
“risk-averse”—the folks who slow things down
by saying no. Thankfully both perception and
reality are now changing. That largely reflects
a deeper talent pool across G&A functions,
including thousands of respected executives who
have built their careers in high-growth companies. These executives embody a mindset of being
collaborative and constructive.
When hiring G&A leaders into highgrowth companies, you need to carefully
assess candidates’ risk appetite, their
willingness to make decisions with
imperfect information, and whether they
can navigate challenges in a spirit of
partnership rather than saying ‘no’. This
requires time to unpack, but it’s essential.
Yunah Lee, Chief Operating and Finance Officer, GOAT Group
G&A functions are crucial to success. The two
ingredients you need to keep scaling are financial
capital and human capital. Finance and People/
Talent teams give you the capabilities you need
to access and deploy these resources. Meanwhile,
legal teams ensure that you navigate a safe path
to growth. Risks multiply with complexity, and
tech companies are increasingly under regulatory
scrutiny.
G&A functions collectively make up 14–15%
of headcount as you scale from 50 people through
to 1,000, with relatively minor differences between business models:
Adopt a business partnering approach
You build functional teams as you scale: Engineering, Sales, Marketing, etc. However, certain
functions involve skill sets which are required
to directly support other functional teams. This
is most evident with G&A functions. In People
and Finance functions, the concept of shared
services is well established in larger companies—
“business partners” work closely (including
co-location) with specific functional areas, becoming highly integrated members. The most
common ones are HRBPs and Finance Managers.
These business partners are typically aligned
with Technical, GTM, or Operations teams.
In software companies, your first business
partner role is most likely to be an HRBP for
your technical team, as this represents such a
large proportion of headcount. A similar business
partnering model may extend to legal support, for
example, an in-house legal counsel focused on
commercial contracting, working exclusively
with the sales team.
Systems and procedures around these G&A
functions need to be consistent and tightly
enforced, given the compliance and risk management elements to these functions. Therefore, we
strongly advise that business partners retain a primary reporting line and accountability to their
corresponding G&A leadership. The functional
leaders that they work with are internal clients.
A similar pressure for embedded support
always emerges at scale for design and analytics
functions as companies grow. We discussed
alternative models for organizing these teams in
Chapter 8.
People and Talent
Given that this handbook is centered on themes
of people and hiring, we’ve already discussed the
capabilities, processes and systems that are
required from your People teams (see Chapters
3,
4,
5
and 6).
We also discussed the initial focus
on founder-led recruiting, followed by hiring
your first internal recruiter. This section will
therefore exclusively focus on how the
size, composition and leadership of
your People and Talent teams evolves with scale.
As your headcount grows, the balance between talent acquisition (Recruiting) and talent
retention (People/HR) shifts. In high-growth
through to 1,000 headcount, recruiting will continue to take up more than 50% of headcount
and resources across the overall People team, but
the need for increasingly sophisticated and robust
People processes and structures will build too.
We already support 35% of F500, and
the market is still there. The simple priority
for our continued success is to keep
recruiting and retaining the best talent.
Assaf Rappaport, CEO & Co-Founder, Wiz
“Right-size” your Talent team
Hiring is a fundamental constraint to business
growth, so scaling your Talent team is necessary
for success. Up to 125 headcount, your Talent
leader will be closely involved with all the hires
you make, and close to the individual recruiters
they’re working with. That means they can plan
overall hiring capacity without a formal model.
But with further growth, Talent team scaling will
shift toward a capacity planning model, prepared
annually alongside budgets, and reviewed by
month or quarter on a rolling basis:
Demand
New hire plan by function
Expected attrition by function
Adjusted according to internal promotions
and mobility to shift towards more
junior hires
Scoring each hire according to difficulty to
fulfill, for example: easy, average, hard.
This might reflect seniority, newness of
role, or familiarity with the region/country
involved:
| These scores might translate into
recruiting effort required (e.g. easy =
0.5, average = 1, hard = 2), and also
into time-to-hire assumptions.
Capacity
Current recruiters with individual
quarterly capacity, which depends on their
seniority (either hires per quarter, or
points-based capacity)
Shortfall or excess between hiring plan and
capacity
Recruiting team size requirement,
incorporating the time required to hire and
ramp-up new team members (minimum
three, but up to six months)
Use of contract or agency recruiters to
provide flex, especially if the hiring plan is
uncertain
A typical recruiter capacity framework
assumes five technical hires per quarter, or
eight to 10 GTM or G&A hires. This is
independent of source: referrals, inbound,
or outbound. But these figures also reflect
your brand strength. How hard do
you have to work to source and engage
top candidates?
Suzy Hathaway, Recruiting Director, Hashicorp
At scale, the organization of your recruitment team mirrors your sales team in
a few key ways. In 2021, our team included
functional and geographic recruiters,
sourcers and recruiting operations. Over
the past few years, we’ve built out
a complementary enablement function to
provide training, learning and development,
and best practices for our recruiting team
and our hiring managers.
Nadia Singer, Chief People Officer, Figma
Your Talent leader should sanity-check the hiring
plan emerging from the budget, to ensure that
it’s deliverable. For example, a common error is
for function leaders to front-load their hiring
plans at the start of the year, when this is unrealistic from a hiring perspective and needs to be
smoothed out.
In an ideal world, nobody wants to rely
on contract recruiters. The ramp-time
makes them less productive, and they can’t
build as close a relationship with teams.
But in an uncertain macro environment,
you need to balance a core in-house
team with some use of contractors.
Suzy Hathaway, Recruiting Director, Hashicorp
Within this overall model, recruiters will tend
to take a “business partnering” approach, aligned
with particular business areas as you scale.
The first such hire is almost always a technical
recruiter, since these are the most difficult roles
to fill. Technical recruiters will have a strong
focus on sourcing, which means going beyond
LinkedIn searches (although these are still necessary) to identify and engage with relevant
talent through more specialized channels and
communities. The priority is to become more
efficient at presenting great candidates to the
technical teams than the alternative model, where
technical teams do this themselves or rely on
agencies to do so. For more junior candidates,
technical recruiters will often also do a firstscreen interview with candidates, focusing on
values-fit and getting them excited about the
opportunity.
With further scale, you’re likely to add specialist GTM and G&A/Operations recruiting
business partners to your Talent team. These
individuals need to work closely with the HRBPs
and hiring managers in the corresponding teams.
They’ll also input into workforce planning. For
example, in GTM they will align team hiring with
revenue budgeting, working with the CRO and
Sales Ops lead.
Once you have “full cycle recruiters” in each
of these core functions, you can also scale your
Talent team through horizontal specialization.
This optimizes your hiring engine with separate
coordinators (also known as schedulers), and
sourcers.
Coordinators: Schedule candidate
interviews to keep them moving swiftly
through your process. They also schedule
debrief sessions, and execute on closing
processes: drawing up contracts, taking
references, letdown communication to
unsuccessful finalists, etc. One coordinator
might support four or five recruiters,
improving their efficiency as well as
enhancing overall candidate experience.
In our earlier growth stages at Datadog,
we sent handwritten letters to rejected
finalists. When you’re unknown,
candidate experience is critical for
building a talent brand.
Kira Busman, Index Ventures (Former Recruiting Lead at Datadog)
Sourcers: Research and map potential
candidates, either for individual reqs
(i. e. hiring briefs), or to proactively build
pipeline across a range of roles (or
geographies) that are likely to be needed
in the months ahead. As suggested above,
sourcers are usually most impactful for
technical roles in the first instance.
This structure also provides an internal career
pathway for your Talent team, from scheduler to
sourcer to recruiter.
Startups sometimes only hire seasoned
recruiters as they scale. But you need
a balance.
Suzy Hathaway, Recruiting Director, Hashicorp
Career progression for recruiters involves working on trickier and more senior positions. Experienced recruiters will know what questions to
ask hiring managers (taking a brief well), when
to push back, and how to pitch effectively to
top candidates. You should also broaden their
exposure to hiring for different types of roles,
which gives you more flexibility in your TA team.
There’s a risk of not providing career
progression opportunities for exceptional
IC recruiters. They are worth their
weight in gold, but often they aren’t offered
opportunities for role enrichment or
leverage, outside of management routes.
This is a major oversight, as they can be
10 × value-creators, akin to 10 × engineers.
Alex Duell, VP People (former), Cutover
Another specialist role within larger recruiting
teams is in recruitment operations (Rec Ops).
Similar to Sales Ops, Rec Ops is about ensuring
that you have the right distribution of recruiters
across your team, the right ATS tooling, and data
integrity, and are therefore able to track hiring
progress and generate analytics to optimize your
recruiting engine. We recommend hiring someone to oversee both Rec Ops and broader people
analytics, at between 500–700 total headcount.
To be data-driven, having someone in Rec
Ops is super important. The right analytics
allow you to educate the organization
about recruiting challenges and priorities.
Kira Busman, Index Ventures (Former Recruiting Lead at Datadog)
To build a scalable recruiting engine, you want
a balanced team between pure recruiting professionals, and others with management potential
who are drawn to mentoring people earlier in
their careers, or to leading the talent-related projects and programs that we discussed in
Chapter 4,
such as referral programs and graduate recruiting. Talent leaders need to balance the immediate
demands of fulfilling the hiring plan against
working on these various project areas to make
sure they’re having the highest possible impact.
Eventually a Chief People Officer should be
at the helm of your Talent team, overseeing both
recruiting and HR. Before that point, companies
in high-growth sometimes elect to keep these
functions separate, with both leads reporting
to the CEO (or possibly the COO). The choice
reflects the particular capabilities of your existing HR and Talent leads, and of your own capacity and focus as the CEO.
When I started at Figma in a talent
acquisition role, I reported directly to
Dylan [Figma’s CEO & co-founder].
The intention of this decision was to
build relationships with other executives
who would be key collaborators. I
worked closely every day with Marie,
our VP of People, including multiple
interfacing projects, such as compensation
and offers, leveling and DEI initiatives.
The exposure to Marie, Dylan and our
bench of executives gave me the skill set
to navigate multiple teams with ease, and
I believe was critical to my future success.
Nadia Singer, Chief People Officer, Figma
Recruiting metrics also evolve with scale, with
the top ones typically including:
Hiring versus plan (still the primary KPI)
Time-to-hire
Candidate experience
Hiring manager feedback
Funnel metrics—time and conversion
per stage, through to offer acceptance rate
Diversity metrics through funnel
Source of candidates, and conversion
to hires
Cost-to-hire
You can identify significant inefficiencies
by digging into your hiring metrics. In
particular, bottlenecks at the final stages
of the process, such as close rates, can be
quite costly and fixing them should be
prioritized.
Your very first People (as opposed to Recruiting)
hire is most likely to come during the 51–125
headcount stage. By 50 headcount, 47% of the
highly successful companies we analyzed had
made an HR/People hire, rising to 89% by 125
headcount. We recommend this first hire being
either a people ops specialist with four to seven
years of experience, or a Head of People. If you
already have a Head of Talent who has proven
their potential to grow into a Head of People,
the people ops hire can fall under them.
The level of HR leadership depends on
the strength of your managers. If you have
a lot of new and inexperienced managers,
you’ll need a more senior HR leader.
Albert Alabau, Chief People Officer (former), TravelPerk and Typeform
My first executive hire was an experienced
VP People, Karsten Vagner, introduced
to me by Sequoia when we were about 70
headcount and our growth was just moving
into overdrive. As a solo founder, he really
helped me as a strategic partner, to build
out the rest of my executive team, and also
around organization design.
Kate Ryder, CEO & Founder, Maven
If you’re planning to hire a Head of People, here’s
our recommended profile:
Someone with seven to 10 years of relevant
experience
Able to execute a basic company HR plan
as directed by the CEO
Able to assemble and oversee a small team
to deliver the HR plan
About 75% operationally hands-on, with
25% coaching and long-range planning
Ideally with a strong recruiting
background originally, but since extended
to include broader HR experience. They
can therefore take responsibility for the
combined Talent and People function
Alternatively, if you already have a strong
Head of Talent, you can focus on an HR
purist and leave the functions separate (but
collaborating closely) for now
There are pretty distinct camps of people
who succeed in talent acquisition versus
HR. Some folks are able to broaden from
TA to HR, and these are the most valuable
for high-growth startups. Almost nobody
from HR wants to move into TA!
Alex Duell, VP People (former), Cutover
The most pressing people issues at this point in
your journey are likely to be transactional or
administrative, for example:
Onboarding
Payroll and taxes
Immigration and visas
Remote worker and contractor
administration
HRIS basic implementation and usage
Employee grievance and disciplinary issues
Compensation reviews
Until you have a Head of People in place, avoid
over stretching, and don’t grow your People team
any further. With a Head of People, the team can
then scale through the addition of both generalists and specialists. Initially, you’ll probably hire
generalists with mid-level experience (four to
seven years), but ideally with a T-shaped spike
in a particular area such as learning and development (L&D) or performance management. This
will give your Head of People the capacity to
design and deliver “MVPs” for each core People
process, appropriate to your scale and as detailed
in Chapter 5.
It may also make sense to work with third-party specialist
contractors or vendors to accelerate progress.
As well as HRBPs we discussed earlier in this
chapter, at later stages of scaling, you’ll also
bring in HR specialists aligned with core People
processes:
Our early office manager did projects
with marketing, design, and then HR,
which they loved, eventually becoming
our L&D lead.
Lindsay Grenawalt, Chief People Officer, Cockroach Labs
Our analysis of the overall size of People teams
(excluding recruiting) yields an average ratio
of 1:50, which stays fairly consistent as total
company headcount grows. Internationally distributed and fully remote teams tend to need
relatively larger People teams due to the complexities arising from local compliance and internal communication.
I was too hesitant and slow in setting up
a well functioning global People team.
There were so many cultural differences
between the UK, Portugal, US, Brazil,
China, etc. I stepped too softly and was
too hands-off. It’s much better to go in and
be confident about the structure and
processes you want to implement to avoid
losing time.
Sian Keane, Chief People Officer, Farfetch
Step-up your People leadership
The decision to hire your first executive in the
people function is driven by the need for:
Expanded range, sophistication and
velocity of People processes
A credible peer to advise and coach your
slate of increasingly senior functional
leaders on people issues
Strategic leadership across both the Talent
and People teams
Orchestration and involvement across
senior and executive searches, building
towards a balanced and complete
leadership team
We generally recommend hiring a people executive by the time you have reached 250 headcount. Where founders haven’t done this, they
generally regret it. This hire might be at a VP or
CXO level, depending on existing team capabilities, growth rate, and overall organizational
complexity.
Our recommended profile for a VP People
(hat-tip to Ross Seychell):
Hire by 250 headcount
Nine to 15 years of relevant experience
Able to co-create the people plan with the
CEO including medium-term goals
Confidence to prepare and present people
plans to the board
Can shape overall workforce and
commercial planning, in collaboration
with other senior leaders
Reasonable understanding of several key
People processes, including compensation
and L&D
50% operationally hands-on, 50%
coaching and long range planning
Can design, implement, and drive decision making through people analytics
and metrics
Actively involved in senior hiring decisions
at the director level, and inputs into
executive hiring decisions
Our recommended profile for a Chief People
Officer:
Hire between 250 and 500 headcount.
While this is sooner than the data provided
above indicates, most founders we speak
to regret not having made this hire earlier
12+ years of relevant experience
Often also responsible for global facilities
and administration teams
As much a challenger as a collaborator,
holding other executives to account for the
creation and implementation of their
people plans
Can significantly change the company’s
trajectory through the processes they put
in place and the interventions they make
Drives long-range people vision and
strategy, aligned to overall commercial plans
25% operationally hands-on, 75%
coaching and long-range planning
Strong relationships with board members
Able to lead the RemCo
Becomes a trusted coach/advisor to the
CEO and other executives, building overall
team trust
Actively involved in strategic leadership
decisions
Executives in people roles have the joint shortest
median tenure of all functional executives—less
than 2.5 years for both Chief People Officers and
VP People executives. We put this down to three
factors:
Emotionally draining and lonely—People
leadership involves dealing directly with
the thorniest and most emotionally
sensitive issues in any business. This takes
its toll
Founder alignment—People leadership is
about embracing the company’s values, and
translating them operationally into a
culture that feels right. The need for deep
personal alignment with you as the
founder is therefore greater than for any
other executive role. Given that these are
emotional as much as rational choices, any
differences of opinion are magnified
Talent pool—There are still not many
proven People leaders with high-growth
experience who combine compassion with
a commercial focus. When you add the
need for close founder alignment,
compromises often become necessary
More frequently than for any other
executive role, internal candidates from
another area of the business can work well
as people executives. They are already
halfway to success if they’ve demonstrated
strong People leadership and built
internal trust and respect, particularly
with the founder.
Carlos Gonzalez-Cadenas, Index Ventures
Finance
Post-PMF (or Series A), you need to tighten your
approach to capital allocation and cash flow forecasting. Your investors will expect clear and
regular financial reporting, and your burn rate
will be growing rapidly as you expand your team
and GTM activity. At this point, you’ll want to
hire a finance generalist—someone with sufficient financial accounting skills to oversee your
external accountant, but who also views finance
as a source of data to support decision-making.
This person might be a Controller (six to 10 years
experience), or alternatively a Director of Finance
(eight to 12 years). They could be a qualified
accountant, or alternatively have an investment
banking or consulting background.
We hired a sophisticated finance manager
with 10 years experience as an employee
early on, rather than going cheap. Particularly because we’re a marketplace, with
complex accounting plus car delivery
logistics. He has scaled to become our VP
of Finance (Series C).
Tom Leathes, CEO & Co-Founder, Motorway
If you make a senior finance hire at this stage of
growth, they’ll probably need a junior to support
them on the more basic elements, particularly if
you have significant operational intensity (e.g.
vD2C E-commerce with early traction or crossborder activity).
As you scale, find a CFO
Once you’ve unlocked GTM-fit, the operational
workload will increase for your finance team.
You’ll need to hire a more junior accountant to
get through all the work, as well as a financial
planning and analysis (FP&A) hire to help build
your financial model and apply it to guide your
decision-making. Further hires will be focused
on each of these areas. For example, you might
need dedicated resources to track sales commissions, or accounts payable/accounts receivable
(AP/AR) and tax reporting for marketplace
transactions. In each of these hires, however,
emphasize quality over quantity—over-hiring
in terms of experience and caliber, especially
if you’re growing really fast. You’ll have roles
for them to grow into over time, and this
approach will give you a deeper, stronger bench
in the interim.
Your Finance lead (Manager or Director) should
have been able to scale successfully up to this
point. Some may have proven themselves capable
of stepping into a VP Finance-level role. But more
often, it becomes necessary to look outside the
company to hire either a CFO or VP Finance.
This is partially to engage with external investors
(existing and prospective), who will expect a
credible and strategic finance leader they can
interrogate concerning your numbers. It’s also
to free up the time of other executives from
overly detailed planning. This person will also
ensure that you have a solid counterweight to
collaborate with, and challenge, other executives
(e.g. CRO, CMO). For example, there’s a temptation for revenue leaders to cut corners in order
to hit short term targets: overly aggressive discounting or giving away too much in order to get
commercial contracts over the line. Your finance
executive is there to protect the long-term interests of the business.
CFOs in high-growth companies tend to come
from one of two backgrounds:
Qualified accountants who have worked
their way up from Controller to Director
to VP Finance. They bring rigor and a
detailed understanding of financial control
and compliance/risk
Financial professionals with a background
in investment banking (CFA), private
equity, or consulting (MBAs), who tend to
be particularly strong at FP&A and
strategic finance
Either of these backgrounds can work, all the
way through to IPO-readiness. You need to assess
that accountants have a sufficiently strategic and
commercial outlook to have credibility with
investors, and to support the growth ambitions
of the business. Conversely, financial professionals need to be operational enough to maintain
robust oversight of finance processes, even if
they mostly rely upon a solid Controller and
FP&A lead.
Where a VP Finance is about staying on
top of the details to give you peace of
mind, a CFO needs the ability to distill this
down to the most critical ‘1-2-3’ and
communicate this to you, your Board and
the rest of your executive team.
Yunah Lee, Chief Operating and Financial Officer, GOAT Group
A key area where your finance executive should
bring more rigor is around planning, budgeting
and forecasting. Planning processes differ a lot
between companies, and even between functions.
It often depends upon whether you’ve got analytically-oriented functional leads who like to
do it themselves, or specialists who would rather
work with a framework and guidance from
Finance. Regardless, having a finance executive
will allow you to step-up the rigor of the workforce planning processes we discussed in
Chapter 5
and Chapter 7,
providing more confidence with investment decisions and scenario planning.
The CFO needs to avoid being seen
as the policeman wielding a stick, either
criticizing or saying no. They should
be driving ambition alongside the
other executives.
Huw Slater, CFO (Former), TravelPerk and Typeform
It’s so different to be a CFO at a growthstage company than a finance leader at
a corporation. You need to fix things and
define metrics. The mindset and priorities
are completely different if you’re in
FP&A at Google.
Nina Achadjian, Index Ventures
Ultimately, your finance leader will roll up all
planning activity into a single model that drives
financial budgeting and modeling (balance sheet
and P&L, as well as cash flow). This model will
become increasingly sophisticated over time, incorporating real-time KPIs to facilitate “whatif” and sensitivity analyses.
CFOs now are really digging into deeply
understanding gross margins and customer
LTVs. This skill had been
undervalued for years, but has now come
back into sharp focus. The best CFOs will
use these insights to drive strategy and
priorities. The worse ones will use them as
a stick to complain and beat up on others.
Huw Slater, CFO (Former), TravelPerk and Typeform
It’s typical to add dedicated finance business
partners aligned with Technical and GTM teams
between 251–500 headcount. They can support
functional leaders with budget preparation and
scenario planning, and act as an early warning
system if performance is moving away from target, so that you can course-correct.
Specialist finance roles are uncommon before you
hit 750 headcount (or limited to specific situations—for example, fintech banking requires a
treasury function, and an active M&A strategy
requires corporate development).
As you scale you still want to keep your
finance team as light and lean as possible.
Let your bank handle treasury, and use
external specialists when necessary. Only
when you are near breaking point should
you commit to specialist hires, such
as investor relations, tax or corporate
development. Avoid job creation and bloat.
Huw Slater, CFO (Former), TravelPerk and Typeform
Our analysis of the overall size of finance teams
yields an average ratio of 1:35, with a range of
1:25 (25th percentile) to 1:60 (75th). There are
significant differences between business models,
with D2C averages being closer to 1:30, while SaaS
and B2C Apps are 1:40. This broadly reflects operational complexity and transaction volume.
Finance leaders often end up taking on other
responsibilities, such as corporate development,
legal, facilities and BI (business information). But
this only works if they have sufficient capacity
to do so—finance-related activity should always
come first. They are less likely to have capacity
if you have a more financially complex model
(e.g. D2C or Marketplace). But this is also about
balancing pressure on the CEO (or other executives), and determining who is best suited to run
each of these functions in terms of experience
and enthusiasm.
Legal
You’re very unlikely to need an in-house lawyer
at the sub-50 headcount stage, unless you have
critical sector-specific regulatory and compliance
needs in order to operate (e.g. licenses for fintech). Instead, you can continue to work with
your external legal partner. You may, however,
be able to delegate non-strategic legal issues to
your Finance Manager or Chief of Staff. They
might also have the capacity to drive cost savings
by identifying boutique firms to handle certain
legal issues on a fixed-fee basis (e.g. employment
or IP), or a solo practitioner to handle your commercial contracts at $250 per hour.
As you scale towards 125 headcount, the choice
to hire in-house counsel is in large part a financial
decision, once your external legal fees comfortably exceed the salary cost for an in-house hire.
This is particularly the case in sales-led SaaS,
where a high volume of commercial contracts can
make up the majority of your legal expenses. An
in-house Head of Legal hire can also ensure faster
turnaround time during sensitive sales negotiations, as well as developing and applying more
consistent principles around risk management.
The typical legal counsel profile will be someone
five to eight years qualified in the US (more likely
three to four years qualified outside the US). Prior
in-house experience is strongly preferable, as it’s
a very different style of working than in a private
practice, and doesn’t suit every lawyer. At a minimum, look for candidates who have been seconded to in-house roles for at least six months.
This role may report to the CEO, or alternatively
to the COO or finance lead. You want a generalist
who can assume responsibility across the full
legal scope, including identifying and working
with external firms when required.
Founders can be reluctant to hire someone in a
legal role, fearing they will be overly risk-averse
and therefore slow things down. However, the
opposite can also be true—teams often steer clear
of exploring opportunities because they’re concerned about compliance or legal ramifications.
Having legal expertise in-house can therefore
speed things up by providing the confidence to
move initiatives forward.
One of the most powerful things a legal
team can do is give permission to the
business to stop doing something that
they’d been doing because of worries
around risk. For example, we used to do
detailed onboarding checks for each
and every new client, which was overly
risk-averse and unnecessary. However we
now compute a risk score for every
customer, and focus our efforts on high risk
customers and certain product types.
Sam Ross, General Counsel, Remote
Hire a General Counsel as you scale
The complexity that comes with scale inevitably
brings up more complex legal issues, such as international contracts and employees, or cross-jurisdictional data protection and intellectual property
(IP) questions. At some point, you will benefit
from hiring a General Counsel (GC).
Three factors that influence when to hire
a General Counsel
1. Business complexity—Are you in a
regulated field like fintech or healthcare, or a semi-regulated one like the
sharing or gig economy? Do you have a
large percentage of customers or
employees outside the US (or your
home country)? Is there a risk of injury
or serious consequences if your
product fails or is misused?
2. Business velocity—How fast are you
growing revenue or headcount (e.g.
>50% year-on-year)?
3. Operational strength of your executive team—Do you have experienced operators yet in the CFO and
Chief People Officer roles?
If the answers to 1 and 2 are yes, then a GC
hire could make sense between 51–250
headcount. If the answer to 3 is also yes,
you may be able to hire a Head of Legal
instead, and delay hiring a GC until you
are over 500 headcount. If your answers
to 1 and 2 are no, you might not need a
GC until you are much closer to an IPO.
If your answer to 3 is also yes, then you
may not need a GC at all.
Core responsibilities of a GC:
| Corporate—fundraising, M&A,
stock option grants, board meeting
materials and minutes
| Contracts—client, partner and
vendor contracting, with self-serve
processes for simpler contracts (for
example, NDAs)
| IP—trademark and patent
programs, and internal processes
regarding the use of or contributions to open source software
projects
| Employment—jurisdictional
compliance, employee claims and
urgent personnel issues
| Litigation—managing specialist
outside counsel to initiate or to
defend lawsuits
| Privacy, security and regulatory
compliance—managing a global
data privacy program and a data
breach incident response plan that
address user concerns, corporate
reputation and legal requirements.
Driving or contributing to public
policy initiatives that relate to key
business goals
GC candidates will have deep in-house experience. They should have a strong working knowledge across all six practice areas identified
above, as well as experience with establishing
international operations (if relevant to your
company). Your GC should be able to engage on
equal terms as a partner to the CEO and board,
as well as to other executives. GCs will often
also attend formal (“minuted”) board meetings
as observers or as corporate secretary. As a
result, the GC should be a direct report to the
CEO (or possibly to a President/COO). Having
said this, experienced GCs should operate fairly
autonomously, requiring minimal oversight or
bandwidth from the CEO.
Ask yourself if legal or regulatory
factors are intrinsic and strategic to
your company.
Rob Miller, Chief Legal Officer, Moonbug Entertainment
Preferred candidates for any in-house hires break
the mold for lawyers in some ways. You are looking for a degree of risk-appetite, someone who
is comfortable with ambiguity, and with a pragmatic 80/20 approach to task-completion rather
than a perfectionist. Candidates should show a
genuine interest in your product and market, and
in how this is evolving.
If you’re in a regulated or semi-regulated
sector, prior experience in the area is critical, or
at the least in an adjacent or relevant sector. If
your business model involves an ambiguous legal
framework (for example, the gig economy or
crypto), the legal role is likely to extend to public
policy and regulation, so you want to assess candidates’ aptitude in these domains. GC roles in
fintech have specific demands, being much more
compliance-focused rather than transactionbased: licenses, banking regulations, and constraints on advertising and marketing.
If you’re selling to enterprise (or government)
clients, you should also look for specific experience with and interest in handling complex commercial negotiations, since this is likely to be the
most important and time-consuming aspect of
the role.
Tap into your network to identify candidates.
Your corporate lawyers and your investors in
particular may know lawyers in other VC-backed
companies who are looking to move on. Also look
for GCs who are active in legal forums such as
TechGC. Otherwise, this is a role where there
are a few specialist headhunters (in the US at
least) with excellent networks.
The first thing an in-house lawyer will do is
audit the organization for inefficiencies and
potential risks, and apply Band-Aids to them.
They will review due diligence reports for items
that have been flagged but not fixed, and meet
your existing lawyers to understand the issues
they’ve spotted or relationships they’ve struggled
with. They will also speak to your leadership
team, and to board members, to understand business dynamics, areas of concern and strategic
priorities. They should then develop a plan of
action that balances:
Cost savings—highly appealing to the
business. Optimizing external billings and
relationships
Risk mitigation—which will rarely get
people excited but is essential
Customer experience—for example,
through simpler or faster contracting
Business unlocks—an ideal outcome, if
there are opportunities to loosen
constraints that the business had
unnecessarily set itself, such as around
licensing
Strategic priorities—ensuring sufficient
capacity to handle fundraising, M&A, or
other critical projects
Capable and experienced GCs may also be positioned to take on a broader remit, particularly
around external elements such as:
International expansion
M&A execution
Partnership planning
Coalition building & public policy
ESG programs and reporting
Most of the time I’m a core member of
the executive team, aligned around growth
objectives. But when necessary, I’ll say,
‘Hey folks, I need to put on my [legal/
compliance] hat for a moment.’ This makes
it clear that I have a serious concern, and
I’ll alter my voice and demeanor too.
It’s unusual, so it gets noticed.
I’d advise any GC to become as familiar
as possible with all the company’s
constitutional documents. You won’t
need to refer to them frequently, but
when you do it will be for urgent and
crucial matters.
Sam Ross, General Counsel, Remote
Build a legal team
Legal teams scale quite slowly, with typical ratios
of 1:125 relative to overall headcount, although
they scale somewhat faster in regulated companies. There are three varieties of roles that you
want to balance in a legal team:
Generalist lawyers
Specialist lawyers
Legal ops (non-lawyers)
Certain specialties make sense as you scale, most
commonly around employment, data protection
and regulation. But keep your team weighted to
generalists—specialist lawyers tend to be illsuited to in-house roles, as they are often drawn
to edge cases and dig deep into nuance. You want
a bias to action, so it’s better to keep using external specialists until you have a clear cost-benefit
to bringing a specialist in-house.
For international work, you can also in many
cases (e.g. commercial contracting) leverage your
generalist in-house lawyers to research and handle matters, rather than needing either internal
or external legal expertise in each country. For
more procedural matters in different countries
(e.g. international trademark registration), your
in-house team can also source local freelancers,
rather than having to retain expensive local law
firms. With international hiring, you are best to
work with an “employer of record” provider, such
as Remote, to ensure compliance with local
employment laws and other regulations. This will
change once you build critical mass in a certain
country, and it becomes cost-effective to establish
your own entity with direct employment.
Generalist lawyers can be organized like
business partners, as we recommended for People
and Finance teams —aligned with the Technical
or GTM teams in the company, or with geographical regions.
I recommend building an in-house legal
team of practical, action-oriented business
lawyers oriented around helping the
company’s builders [technical] and sellers
[GTM] achieve their goals. What are
the needs of each area, now and in the next
12 months, and how can we resource
effectively against supporting these needs
to drive the business forward?
Enterprise deals in B2B can be highly
complex, and your legal team needs to
balance the sales team’s focus on quarterly
targets with protecting the company:
Is this too cheap, too long, are the
requirements on us too onerous or the
risks too high, and are we giving up
too much flexibility?
Dominic Jacquesson, Index Ventures
The trifecta between Legal, Finance
and HR is critical. These teams have
overlapping interests. If they don’t exhibit
a high degree of trust and camaraderie,
you’re in serious trouble.
Rob Miller, Chief Legal Officer, Moonbug Entertainment
Legal ops is seen as an increasingly important
enabler to scaling legal teams. Staffed by paralegals (with a career pathway to become full lawyers), the focus is on improving the efficiency
with which legal support is provided to the business: triaging requests, acting as first-line support
to deal with already-known or documented issues,
analyzing requests as a whole, and finding opportunities to document and share legal FAQs internally. However, at the scale of most pre-IPO tech
companies, there’s limited need to go deeply into
legal ops in terms of either staffing or tooling.
Beware of building unnecessary
infrastructure or tooling with uncertain
ROI benefits.
Sam Harper, General Counsel (Former), Deliveroo
Workflow tools are painful to embed.
Just focus on having a centralized
contracts database.
Rob Miller, Chief Legal Officer, Moonbug Entertainment
Breaking the mold
Do you need a central nervous system to think, remember or take decisions? The bright yellow slime mold known as P. polycephalum would say no, if only it could talk— which, in the absence of a body, let alone a brain, it can’t. Yet these brainless blobs have shown themselves to be adept at navigating mazes, picking the most nutritious food from a menu, and slowing their movements to conserve energy in anticipation of the temperature dropping. In a famous experiment, P. polycephalum recreated the Tokyo subway system when food was placed in the locations of urban hubs, constructing an efficient nutrient transporting network rivaling the work of human engineers. Researchers have since challenged it to model routes for multiple cities, global trade channels and even the ancient Silk Road, all of which the mold mapped handily.
The mechanisms behind these intelligent behaviors are unclear, but researchers think P. polycephalum uses forms of externalized memory and internal timekeeping— marking places it has already explored with translucent goo, and modeling time using its own pulsing internal rhythm. Evolving long before humans, up to a billion years ago, these remarkable organisms illustrate the power of using minimalist solutions to intelligently navigate complexity.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Conclusion and Appendices
Conclusion
Humans are unique in our ability to communicate, collaborate and create sophisticated tools.
In this sense, tech startups are a striking example
of what our species is capable of. They are the
most effective vehicle we have ever developed
for delivering innovation and impact—not only
in terms of products, but also in creative ways
of working, rapid iteration and strategies for
solving complex problems in the face of compressed timeframes and ever accelerating change.
This book is a resource for founders who strive
to be at the cutting-edge, adapting and optimizing their teams and organizations to thrive amid
the chaos.
The rapid advance of AI promises to fundamentally transform the nature of work across
industries. AI tools are giving us superpowers
which boost productivity and quality. We don’t
yet know whether these will lead to smaller teams
able to do more with less, or to similarly sized
units which can build ever-faster. What we
do know is that AI tools will become increasingly
sophisticated and tailored to specific tasks.
Coding copilots are being joined by assistants
for Sales, Finance, CX and other professionals, together with AI-enhanced collaboration tools, to enrich learning, creativity and
decision-making.
Our expectation is that CX and Operations
functions in particular will see AI tooling displace headcount, in order to boost margins. In
Technical and GTM teams, the best-performing
and highest-growth companies will be more
likely to recycle AI-driven productivity gains into
accelerated velocity, rather than to trim headcount growth. However, companies where PMF
and GTM-fit are not as strong will be more likely
to use these gains to reduce headcount growth
(and burn rates) by doing “more with less”.
Distributed and remote working is the other
profound theme which continues to shape the
nature of organizations and startups. Talent is
scarce, dispersed and not fully mobile—immigration is increasingly constrained, and people
are less willing to uproot and relocate for the
sake of a job. The tooling and “know-how” for
effective distributed teams is also deepening.
More startups will likely be remote-first from
the outset, tapping into the large pool of talent
that wants to work this way. Some founders will
prefer to stick with in-person teams, drawing on
colleagues that share this preference, but with
scale, we still expect an increasing proportion
of their workforce to end up being distributed
rather than based in an HQ.
However, the profound impacts we expect
from both AI and from distributed working relate
almost entirely to the “how” of doing work,
rather than the “what”. Teams will still need to be
hired, retained, motivated and aligned. Achieving
this will require management, leadership and
People processes in the face of the inevitable
stress and unpredictability of growing at breakneck speed. For better or worse, founders still
need to learn how to scale through chaos.
Contributors
We want to extend a big thank you to everyone
who generously gave their time to contribute to
this handbook, either as an interviewee or as a
reviewer.
Albert Alabau Chief People Officer (former), Typeform and TravelPerk
Maria Angelidou-Smith CPTO, Personio
David Apple Head of Customer Success (former), Notion
Rodolphe Ardant CEO & Co-Founder, Spendesk
Farnaz Azmoodeh CTO, Linktree and VP Engineering (former), Snap
Amit Bendov CEO & Co-Founder, Gong
Kipp Bodnar CMO, Hubspot
Charmaine Chow CEO & Founder, GetHarley
Jason Citron CEO & Co-Founder, Discord
Eléonore Crespo Co-CEO & Co-Founder, Pigment
Joe Cross CMO (former), Wise
Robin Daniels Advisor and Former CMO, WeWork, Matterport and Salesforce
Chief Operating Officer, but can also be Chief Operations Officer
CPA
Cost per Acquisition
CPL
Cost per Lead
CPeO
Chief People Officer
CPO
Chief Product Officer
CPTO
Chief Product and Technology Officer
CRM
Customer Relationship Management
CRO
Chief Revenue Officer
CS
Customer Success
CSAT
Customer Satisfaction
CSE
Customer Success Engineer
CTO
Chief Technology Officer
CSM
Customer Success Manager
CX
Customer Experience
D2C
Direct-to-Consumer
DS
Data Science
EA
Executive Assistant
EC
Engineering Center
ED
Engineering Director
EM
Engineering Manager
EMEA
Europe, Middle East, and Africa
eNPS
Employee Net Promoter Score
Enterprise
The largest corporations (typically above $1 billion in annual revenues)
EPD
Engineering, Product and Design (technical functions)
ESOP
Employee Stock Ownership Plan
EVP
Employer Value Proposition
ExCo
Executive Committee
FP&A
Financial Planning and Analysis
G&A
General & Administrative (group of functions including Finance, People, Talent, Legal, Facilities and Administrative support)
GC
General Counsel
GM
General Manager
GTM
Go-to-Market (group of functions including Marketing, Sales, Customer Success, Business Deveopment and sometimes also Customer Experience)
HiPo
High Potential (employee)
HRBP
Human Resources Business Partner
HRIS
Human Resources Information System
IC
Individual Contributor
ICP
Ideal Customer Profile
IPO
Initial Public Offering
KPI
Key Performance Indicator
KYC
Know your Customer (regulations and checks required in financial services)
L&D
Learning and Development
LLM
Large Language Model
LTV
Lifetime Value
Mid-market
Companies sized between SMB and enterprise (typically between $10 million and $1 billion in annual revenues)
MQL
Marketing Qualified Lead
MVP
Minimum Viable Product
NDR
Net Dollar Retention
NPS
Net Promoter Score
OD
Organizational Development
OKRs
Objectives and Key Results
P&L
Profit & Loss
PLG
Product-led Growth
PM
Product Manager
PMF
Product-market Fit
PPC
Pay per Click
PR
Pull Request (in software development)
QA
Quality Assurance
QBR
Quarterly Business Review
R&D
Research and Development
Rec Ops
Recruitment Operations
RemCo
Remuneration Committee
ROI
Return on Investment
RPO
Recruitment Process Outsourcing
RVP
Regional VP (sales)
SaaS
Software as a Service
SAL
Sales Accepted Lead
SDR
Sales Development Representative (also referred to as BDRs, but sometimes refer specifically to inbound sales)
SE
Sales Engineering
Self-serve
Where users can make purchases themselves through a website or app, without needing to speak to a sales representative
SEO
Search Engine Optimization
SEM
Search Engine Marketing
SKO
Sales Kick-off Meeting
SLT
Senior Leadership Team
SMB
Small and Medium-sized Businesses (typically below $10 m in annual revenues)
SMT
Senior Management Team
SRE
Site Reliability Engineering
TA
Talent Acquisition
TAM
Total Addressable Market
Technical
Also sometimes referred to as EPD (group of functions including Engineering, Product, Design and Analytics)
TL
Tech Lead
TLM
Tech Lead Manager
UI
User Interface
VC
Venture Capital
Forking paths
When physicists zap photographic plates with electricity, striking forms flare into being. These writhing, branching shapes resemble feathers, ferns, fungal networks and neurons. Called Trouvelot’s Figures, they’re named for their 19th century discoverer—a French émigré artist, entomologist and scientist, best known for creating thousands of hand-drawn illustrations of planets and comets, as well as introducing the invasive gypsy moth to the United States.
Trouvelot’s figures arise because electricity moves through matter by seeking the path of least resistance. This generates exponential complexity as each “split” reduces resistance overall but permits another bifurcation. Zoom in anywhere and subsidiary structures echo the whole, displaying geometric self-similarity across scales. It’s the same principle that steers a river delta as it flows to the sea, with water initially cutting a single channel before branching off into rivulets that spawn further streams. Simple, generative rules, relentlessly pursued, can produce beautiful phenomena bursting with possibility.
Read more stories of chaos at the end of each chapter
Stories of Chaos
Imprint
Copyright 2024 by Index Ventures. All rights reserved.
Researched and written by Dominic Jacquesson, VP Insight at Index Ventures.
Edited by Sally Davies and Zheela Qaiser. Additional research and analysis by Sifan Liu and Ian Hathaway. Contributions and insights from the Index Ventures Partnership and wider team.
Designed by SJG / Joost Grootens, Dimitri Jeannottat, Philipp Doringer, Alexandra Möllner
Design direction by Simon Smith
The information provided in this
handbook is a general guide and specific
legal and tax advice should be
sought when implementing corporate
and HR arrangements.
Scaling your GTM team
9
Scaling your GTM team
9
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