Monday, September 24, 2012

Employee #1 Is The Toughest Hire

It take significantly longer for most companies to hire their first employee than it does to hire subsequent ones.   Reasons & mitigation:

1. It takes time to build an initial pipeline.
Hiring is a numbers game.  Just like any other sales pipeline, you need to build up a series of potential prospects.  This takes time.  Additionally, the first employee is crucial in terms of culture fit, team quality bar, and early company network.  Many people wisely take their time to find a great first hire.

Mitigation: To shorten the time needed to hire employee #1, you will need to spend as much as half your time building a hiring pipeline.  There is no magic bullet for hiring - you need to grind through it (LinkedIn, Facebook, friends of friends etc.).  Many founders allocate insufficient to hiring early on and as a result take many months to hire their first employee[1].

2. You may screw up the first few offers or negotiation.
If this is your first time hiring, it may take you time to hone your pitch for why someone should join your company.  You may also mis-negotiate equity or compensation with the first few candidates.

Mitigation:  Ask other entrepreneurs, advisors, or investors for tips on selling and closing candidates.  There are specific tactics that go a long way in closing or negotiating with hires.  You can also ask investors or advisors to help close candidates, or for the market on compensation packages.

3. Employee #1 has higher equity expectations.
Many people interviewing for an employee #1 role will claim they could just as easily go start a company.  This is false.  Starting a company is harder then most people think and can be brutal.  Given this misperception, many candidates for employee #1 have unrealistic equity expectations (e.g. 10%) that don't surface until you make an offer.

Mitigation:  If possible, softly pre-screen people based on their expectations.  Do they keep talking about how they are taking on as much risk as you?  If so, they will probably ask for an unrealistically large chunk of the company.  Circle back to these candidates 6 months later when they are still working at large company X and have not started anything - they will be easier to hire at that point.

4. More people = more energy and more social proof.
Each additional employee adds more energy to the space your company is working out of.  Potential candidates can sense this energy level - which is hard to recreate with just 2-3 founders.  Similarly, as you add people social proof accumulates - more smart people have made the bet to work at your company.  Joining your company feels less risky.  Therefore, the more people you already have on board, the easier it is to hire.

Mitigation:  To provide additional social proof, have employee #1 candidates meet with your investors and advisors.  Provide external social proof via people who have already bet on your company and are part of your network.  To increase the "energy feel" of your work space, sub-let from another startup or let friends working on their own company crash at yours.

5. As you add employees, your company network grows and building a pipeline is easier.
Each of your employees bring with them an additional network of ex-classmates, co-workers, and friends.  The larger the company, the larger the extended network.  People often want to work with their friends or people they respect, so your company has more warm leads for its pipeline.

MitigationWork it.  Mine the network of everyone you can think of to build an initial pipeline for employee #1.  Hard work is the only way to get this done.

Any other ideas?  Discuss on Hacker News.

You can follow me on Twitter here.

[1] People often find it hard to understand that at a 2-person company hiring one person = 50% more productivity.  So rather then coding, you are actually more productive in the medium term spending your time on hiring then you are just working on things yourself, tempting as it may be.

Other Hiring Blogs: