VC Doesn’t Make Recruiting (Much) Easier

One argument I hear in favor of big $$$ fundraising is that it will help in recruiting. It’s a logical enough belief but mistaken. It assumes there’s a linear relationship between the amount of funding raised and caliber of recruits.

It’s absolutely true that the top 10 startups at any point in time can have their pick of talent. I doubt many execs or star engineers would turn down a chance to talk about a key role at Stripe, Airbnb, etc. However, only a handful of companies have this luxury.

One way to think about fundraising is that it provides a series of keys that unlock access to different talent pools and amount is non-linear value:

🔑 Key 1: The first few million dollars are a signal to skeptical potential employees that your small startup has been “blessed” by a trusted 3rd party. However, most founders in this group are still struggling to convince friends to join their startups.

Employees might refer their friends, and a good VC’s brand will help get some extra applications to job postings, but tens of thousands of startups can claim a few million in VC. Entrepreneurs still need to hustle and get creative to fill seats.

🔐 Key 2: Once a startup is in growth mode & has raised $20M+, it’ll be seen as an attractive landing pad for a certain class of talent. E.g. Mid-level job hoppers who are 50%+ vested at their current company, looking for a resume bump and stock option diversification.

Startups that raise from elite firms, might be able to recruit star talent from their VC’s networks with irresistible offers, but it’s still going to be a sell job. I promise that startups in this category also spend a lot on recruiting fees.

🗝️ Key 3: When a company is on the IPO track and raises $100M+ in a single round, they’ll be able to hire all-stars much more easily. To some degree, this is the recruiting “easy button” founders dream of, which only gets accessed by a handful of companies a year, at most.

Also, the talent that’s motivated by fundraising is more risk-averse and mercilessly mercenary. We once backed a B2B company that was moving fast — $100M+ in revenue with 60%+ YoY growth. A+++ founders. Big market. Lots of potential.

Still, the week that Instagram sold, this company lost *10* FTEs. The Instagram acquisition had no strategic impact on this company, but the employees didn’t view the company as the next Instagram and wanted to a better lottery ticket. Disheartening to any founder.

So what’s a founder to do? Raise more money to become a unicorn? I think that’s a mistake. Capital isn’t a weapon. I think the solution is largely about building up your own talent internally.

Here are a few thoughts:

🎲 Take chances and invest beyond resumes

By previous job experience, most founders shouldn’t be CEOs. But a shocking number of them grow into the role pretty quickly. Founders should show the same belief in promising, but untested talent. Hire great, but unproven, athletes.

🌱 Invest H-E-A-V-I-L-Y in junior talent

Use your network to help find mentors for talented team members. Fund training. Assign your existing execs KPIs based on mentorship. Let your talent take risks and sometimes make mistakes that help with personal growth.

🤠 Empower bounty hunters

Finding great talent for the company must become every employee’s job. Possibly set up an employee referral program. This sounds so basic & even big company. It doesn’t fit every culture, but it can do wonders to convincing employees to own this.

None of this is easy. It’s complicated by VCs who push founders to find proven talent who has “seen it and done it.” That’s often the best course of action, unfortunately, it’s a choice few entrepreneurs have at their disposal.

Capital has no insights. It’s a poor substitute for creativity. This is as true for recruiting as it is for product development and commercialization.

What are the most creative startup recruiting hacks you’ve seen?

#CollectiveWisdom

Managing Partner Eric Paley recently shared this as a tweetstorm. We collected the tweets as a post for your convenience. Please share it with entrepreneurs you know who are struggling with hiring.