From Startup to Company: Navigating the First Hires

Welcome to the Venture Capital podcast with Peter Harris of VC and John Bradshaw, Utah's intern. And we are here ready to rock and roll. And at lunch today, yesterday, someone, someone asked you a question. Do you want to share that we can like debate and analyze and talk about it?

Sure. So I was meeting with the founder and you know, today it's like three people, two engineers, one business guy, and they are hiring their very first full time employee and he's trying to figure out, like, how do you go from being, you know, the founder that's building the startup to the founder that's building the company, right? How do you make that, that leap? Because when it's just like three, three people in a garage building something that's very different than when like now you're hiring, you're dealing with culture, you're dealing with hr, right? There's all this structure you need to start thinking about that you didn't have to think about before. And you need to do it because as you scale, right, your customers, they want customer success functions that you, you need to out start, like bringing on other people to help with sales, you need to hire more engineers that you can develop product faster. Like there's all these things that have to happen as you scale, right? And how do you go through that, that transition?

What did you say?

So I thought about it and I, what I actually ended up doing is I recommended a book, okay, called buy back your time. And the reason I recommended that book, I also recommended another one which is called who not how by Dan Sullivan. Both books kind of get to this premise of you need to start thinking about the value of your time as the founder, but also kind of the value, you know, tangentially of the rest of your team. And what are the frameworks you need to have in mind to one, identify where you should be hiring and growing and investing. And also how do you start creating mechanisms that allow you to pull back from micromanaging to allowing people to manage themselves? I just really enjoyed both of those books. The other thing that we talked about that I thought was really interesting is he highlighted, he was like, he's like, hiring is evil. What do you think of that? Do you think hiring is evil in the sense of a startup?

I'm completely lost by why he, he or she would say that.

Well, because it's more money, right? Like you're just spending a lot of money every time you hire. And if you look at a lot of startups, they end up collapsing because they, they scale prematurely, right? Which basically means they just hired a ton of people that they couldn't ultimately support, the business couldn't support, and then they collapse under their own weight. Right.

I think there's a lot of strategies and tactics for startups stop when they make. When they hire.

Tricky is tricky. Have you seen any that have been successful? And how did you think about it when you were at Tiny Torch? How do you think about it when you're at code base? Like, when do you hire.

In a startup? I think you hire only when it's absolutely painful and you. And you and the team can't do anymore and you're broken.

Okay.

I think generally you should hire people. You should never hire friends or family. I think you should hire people you've previously worked with because that'll be the highest indication of success.

Okay.

When you're determining where to make a hire. One of my, my mentors, Chris Knudsen, he gave an example because I had this question once years ago when I was doing Tiny Torch, and he said, list down every problem and every opportunity that the business is currently facing and put an actual physical dollar amount to the best of your ability to what the opportunity cost is, what the, what additional revenue would be for like an additional feature or someone else? Like, let's say, hey, customer support. It's. It's hurt. It's hurting. If we hired someone to help, what would. What would.

Where.

You know, like, hey, it frees up Peter's time 30%. We're evaluating Peter's time at X. We think it might bring in this much revenue and then it makes it a very quantifiable way to. When you start looking at all the costs to figure out what's your next move.

Yeah.

I think the question is, the root question is when do you hire? I think generally it's what's absolutely necessary. And if it sounds like they just have two or three individuals. Right.

Yeah, it's just three founders.

Three founders. It should be, hey, like, here's our biggest pain point. I do think there's a component of, there's. I mean, it's hard to outsource some tasks. Like when I was doing Tiny Torch, I could have outsourced customer support, but I felt like it made me an amazing product leader when at that stage when my pain point becomes the pain point of the client's pain point became my pain point. Then we got, we were innovating and doing things because we could listen to our customers that I don't think any junior person could do.

Yeah.

So in that case, when you Think, hey, we could hire someone for say, 25 bucks an hour to do customer support. I would argue that the real math, you know, like, you know, like, if you look at the math, it's probably not what the answer is, not what you probably expect.

Sure, sure.

I think the whole idea of working on my business versus in your business is a myth at that point. I think you don't really make that switch as a founder until you're at least a million in revenue per year.

Interesting perspective.

I think there are ways you can bring other experts in, like recruiting or other things, but I think at the beginning, like as a founder, you should be pulling from your network with people you've already worked with. I don't think you need an HR firm.

Yeah. So you're kind of on the. Like, do things that don't scale.

For.

The first little bit.

You're the project manager, you're the head of sales. Your customer support, your client success.

Yeah.

And I think what you're going to find is when you make a lot of your hires. One of the podcasts I was listening to that Jason Lemkin and Dave Gerhardt talked about Yesterday on the Exit 5 podcast. Like, I probably listen to this podcast about 10 times because it's something I'm currently looking at and analyzing. It says no matter who you bring in and no matter what they say in the interview, most of your initial hires are going to want to focus on strategy. It's why they're attracted to a startup, because in their mind, they think they can control the future. When you need people who are tactical.

Yep.

And that's going to be why. If they say why hiring is evil. I think the hardest part I've had in some key positions is I bring in someone to do tactical things and then the next thing I know, they want to do a strategy call every week.

Right, Right. So how do you. How do you find just the people that want to do tactical things and avoid the people that want to do strategy?

You hire fast, you hire slow and fire fast.

Okay.

I think you put it extremely clear in writing that when you're hiring someone, this is what you are looking for. This is what you're not looking for.

I think you can also build compensation structures in such a way that they're incentivized.

I'm a big believer when I looked at hires at some key positions, those that I think have performed the best typically had the best compensation plan that was tied to their KRAs, because then it's very clear to see when I Do this, I make more.

Right, right. If I don't do this, I'm not gonna make it.

But in a startup, it's hard because, I mean, everyone's KRA technically is getting more revenue.

Sure, sure. But I do think that there's this element of, I don't know, if you're the CEO, there's probably a bunch of things and pretty much everybody within the organization, there's a bunch of things that they could offload that aren't actually mission critical. Right. And that's what they talk about and buy back your time. Right. And maybe it's like you get an executive assistant and you offload your mail and your calendar to them and they screen out like 70% of what's in there and take care of it for you, and then you're only focusing on the 30% that's actually super relevant. I think there's also an element of like, sure, be involved in the customer success, but that doesn't mean you have to do all of it. Right. You can pull people in to take off some of it while still being engaged for some of it as well, which then of course frees up your time as a founder to do that. Right. I think, like, every position's a little bit different. So, you know, one of the big challenges I've seen is how do you make that transition from founder sales to a sales Org and a, you know, a true sales motion, Something we're doing.

Right now at code base.

Yep. Which is challenging. Right. And the thing that I keep thinking of thinking back to is if you can find somebody that can be 70% as good as you are, like, that's amazing. And you should definitely hire them and go for it and don't be upset that they're not 100% because like, that opens up more of your time, which is the most valuable. Right. But I think one of the traps is founder led sales. Like, the founder is the most passionate, the most knowledgeable, the best person at selling, and it's hard for them to look at new people that they bring on who underperform relative to them and say, like, this was a success.

So do you think in this case the individual had poor expectations.

For like, too high of expectations on, on the, on their sales reps? Yeah, I don't. Well, first, I'm not pointing to a specific example, just broadly speaking, conversations I've had with a lot of people. Yeah. I think they probably do have too high of expectations in some cases. Also, there's an element of, you know, I like the phrase there's only two kinds of salespeople. There's, there's new ones and good ones. Right? And so you do have to kind of churn through a bunch to find someone who has good alignment and actually good skill set to be able to sell. Um, but then, you know, I also think like, and we had this conversation too around what kind of people do you hire? Do you hire people that, you know, have a ton of experience in a specific space and so you bring them in to do a very specific job based on that experience or when you're small, you just go for somebody who has a lot of raw talent, right? And you're like, okay, today you're going to start in customer success, but we expect you to wear a lot of hats and grow over time and, and maybe that becomes a way in which you can guide that strategy mindset, right? Where, you know, I think of an example. So we had a student who was the first hire at Lucid. Started off as customer success was making like how to videos in the early days for clients, building out, you know, an education library on how to use a product and so forth. But over time, and he was straight out of undergrad, he had zero customer success experience. So this is very, very early days of Lucid. And he eventually became like their head of product and one of the top like product people in the state. And I think for them it was like, look, we're going to get somebody who is just got a lot of raw talent, we're going to give them opportunities and we're going to basically hold their feet to the fire on getting some of the tactical stuff done. But we're also going to provide opportunities for them to. And then they spend more of their strategy mindset, like not necessarily focusing on the direction of the company, but focusing on their own career and ambitions and where they want to get to, which I think might be an interesting way of tackling that problem. Okay, what do you think?

I think the idea of hiring a generalist is generally a good idea. I think it's also hiring generalists are really, really tough to find.

But if you go young and you're just optimizing for people who are really smart, right. I don't think that works. As you scale, right, you get bigger. You need people that have specific experience in certain areas because they can hit the ground running and add value faster and you don't need them to morph over time into different positions or wear lots of hats. But when you're a brand new startup and you're only three people. That next hire probably needs to be somebody that can wear a lot of hats.

The one thing I like to do. So again, I'm at a very different stage than this individual is I'm a big fan of hiring twice.

Okay.

So I'm looking at a lot of tasks as being very, very hyper focused instead of hiring a complete generalist. And I'll break up the. For example, at Code Base, we want to do a lot of events. So unannounced to either person. There are two people that were hired at Code base part time as a way to do a test. And I'm giving both the same information but just different domains.

Yep.

And it's very easy to see. In my case, I'm not a good manager. I want someone that I can say here's generic information. I want to see who proactively communicates. I want to see who proactively follows up.

Yep.

And it becomes very apparent between the two. When you hire two sometimes. Also like when you hire sales reps, I believe you hire two because it creates natural internal competition.

Sure.

So that. And I don't. In a lot of startups you can't do this, but in this person's case, they could hire a couple customer support reps hourly and in two weeks they'd probably have a good idea of who they resonate with more.

Yeah.

And in that case, instead of hiring a full time person, they could say. Because I think in. In a lot of places there are a lot of people who want to work would like fractional work. Uber's proven this.

Sure.

Instead of hiring a generalist, they could say, hey, I want to hire you to do one thing. My business.

Yep.

Hire a couple people, test them out for a few hours, figure out who's not performing and then. And keep the one who is.

Yep. Yep. Yeah. Kind of the Try before you buy.

I'm a big fan of Try before youe Buy.

Yeah.

Start small. See the test. In India, we used to do this a lot at Code Base. We'd hire engineers and we'd hire them just as a contractor. We'd see how they'd work with the team. And then when we. And we would keep them ready. So when we knew we had the next client looking for that skill set, we'd pull them. We then found out that was illegal in India. So like we quit doing that.

Yeah.

But that was like one of my favorite hiring tactics to keep people warm.

Yep.

I think from that side it also created trust because they also then knew us and it created a much, much better hiring match.

Yeah, yeah, no, I think it's smart. I mean, within University Growth fund, when we're hiring interns, you know, people ask all the time, what do you look for? And I am more on the like raw talent side of it. But these are people that are super young and that would change if I was hiring, you know, more of like a principal level position where I would want, you know, specific networks, connections, experience, knowledge. But for them, what I found is the students that end up performing the best oftentimes are the ones that are the most passionate about what we do. They're smart enough to get up the learning curve. That doesn't necessarily mean they have like perfect grades, but like, they're smart enough. And what I found is like, most people are actually smart enough if they're passionate about it. Right. Because they'll go deep in areas where they're passionate. And then you just need someone too that like, plays well, plays nice with others. Right. Um, but the other thing that I found is like, people that tend to be like super intellectually curious also tend to be a little more humble and, and so you don't run into that like arrogance problem in the same way. Um, I don't know, we just been like super fortunate. And the number of students I've turned down because I was like, you're not going to fit culturally is, is actually like really low. Which, you know, I think is kind of interesting for our space because, you know, VCs are kind of known as being arrogant and, you know, overly confident and kind of rude and all those things. Right. But, you know, we've been fortunate enough to attract some really great students that don't, don't have those characteristics. Like, they're just, they're just eager to learn and I think like, where they.

Know you're, you're the king maker aspects a little bit, you're their only chance to vc. So I would assume you would have a lot of humility.

Yeah, I mean, sometimes, sometimes we also beat, beat it out of them through our interview process because it's brutal.

Okay.

Like, I've had people come back and they're like, you know, they now work at like KKR and other places and they're like, yeah, by far and away toughest interview I ever went through was it with ugf.

Should we, we should record some of your interviews and then like fuzz out their faces and then go from there.

Do some react videos. But as it relates to startups, like, I think if I were in this Individual's shoes. Like, I think I would kind of be thinking the same way, which is, let me go find someone who's, like, really passionate about this and excited to work here and is excited to wear multiple hats. And then let's create an incentive structure that ensures that the stuff that's important, that needs to get done gets done and off my plate. But also create a map, a career map for them where they can develop the skills that will get them to where they ultimately want to be.

In your case, too, you're hiring a large number of identity of identical for like, an identical profile.

Yeah.

And you've done it over years.

Yeah.

Because it's tricky, like, when we're hiring accountants. The way I approach that process is very different from, like, a software developer.

For sure. For sure. And every. Every different. Right.

And I think part of what makes you really good at it is you've done it for 20 years now.

15.

15. Okay.

A long time. Feels like 20. But no. Yeah. The other things that I, you know, so part of the reason I recommended the other book, who not how is I really this idea of when you run into challenges in your business that you are. You're finding, like, the people that. That complement you and can do things you can't do. One of my favorite entrepreneurs is Ryan Westwood. And one of the things that I really respect about him is, like, he just swings hard for the fences when he hires people. He's like. I remember sitting down on a phone call with him, and we were talking about the CFO that he wanted to hire for one of. For the prior business, and he was like, I don't know if I can get this guy. This guy is, like, amazing. He's, like, done all of these things and he listed them all off, and he's basically retired. And, you know, like, I don't know if I get him, but I'm going to try. And he went out and not only did he get him to. To join the company, but he actually invested in the company.

Got him to mortgage his house.

Well, he didn't mortgage his house, but, like, pulled him out of retirement, got him to put some money where his mouth was. Right. And. And ended up getting, like, this phenomenal CFO that was, like, way beyond what he should have been able to get given the stage of the company. And I think there are a lot of founders that, like, they kind of settle for people. So whether it's the Peter Principle, where, like, they don't want to get outshone by the person that they brought in or they're just, they just convince themselves that that person would never join. Like, they don't go after the, the really big talent that they could get. And so I think there's an element of that too, of like, throw away the Peter principle, gain some humility, go find somebody that can do stuff you can't do, bring them on the team and shoot for the moon. Right. When it comes to who you're going after. Because you never know. Like, people join startups for all kinds of reasons. Right?

You're shooting an episode on that. Why do people join startups?

Why do people. Yeah, that's a good topic. So anyways, yeah, some good book recommendations. If you're looking for some books to add to your reading list for 2025, Buy Back youk Time and who not how I think are just great books that I've been reading, rereading and trying to apply in my own life in terms of like how I also manage my personal and business lives, but also how I think about hiring within University Growth Fund and working with our startups.

Who are also hiring, which is amazing.

Any other thoughts, John?

I think we crushed it.

Cool.

All right. If you want to like and subscribe, go to Venture VC FM and this episode will be there. Or you can like and comment below and then we'll follow up and try to answer your questions the, the best we. We have. And, and how would you have answered this question? You know, how, how do you, how do you make, you know, your next hire as a startup and is hiring evil?

I don't think hiring is evil. I just want to say I think spending is evil. Like inefficient spending. And when you hire, you should be hiring because there's a return on that investment. Right. And I think the trap people fall into is that they get the math wrong on that, that expected return. But if you're very clear about, okay, I'm going to hire this person, this person is going to generate this kind of return if we. If they don't, they're gone. Right. I think you avoid that and it becomes less of an evil and more of the way that you can scale your business. Anyways, thanks for joining. Tell us in the comments what you think. All right, we'll catch you on the next one.

Thanks, guys.