Scaling Through Chaos

The Founder’s Guide to Building and Leading Teams from 0 to 1,000

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Foreword

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.

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

People Related Activites People Related Activites

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.

Discord
Jason Citron—CEO & Co-Founder
Clint Smith—Chief Legal & Safety Officer

Wiz
Assaf Rappaport—CEO & Co-Founder

Datadog
Alexis Lê-Quôc—CTO & Co-Founder

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.

SaaS
SaaS
Marketplace
Marketplace
B2C Apps
B2C Apps
D2C E-commerce
D2C Ecommerce

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.

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

Time to scale to 1000 headcount Time to scale to 1000 headcount
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.

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.

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

Number of founders by business model Number of founders by business model

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%).

Founding team technical DNA Founding team technical DNA

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.

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.

First 10 team members tech experience First 10 team members tech experience

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.

First 10 hires by role First 10 hires by role

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.

First 10 team by function and business model First 10 team by function and business model

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.

COMPOSITION OF EARLY STARTUP TERMS BY SENIORITY COMPOSITION OF EARLY STARTUP TERMS BY SENIORITY
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.

CTO IS THE MOST COMMON EARLY EXECUTIVE HIRE CTO IS THE MOST COMMON EARLY EXECUTIVE HIRE
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.

AVERAGE NUMBER OF “FIRST 10” STILL EMPLOYED AVERAGE NUMBER OF “FIRST 10” STILL EMPLOYED

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.

THE TALENT MIX AT 50 HEADCOUNT—BY FUNCTION AND BY BUSINESS MODEL THE TALENT MIX AT 50 HEADCOUNT—BY FUNCTION AND BY BUSINESS MODEL

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 SLOWS DOWN AS YOU SCALE UP TECHNICAL HIRING SLOWS DOWN AS YOU SCALE UP

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 ALSO SLOWS DOWN WITH GROWTH—EXCEPT IN SAAS GTM HIRING ALSO SLOWS DOWN WITH GROWTH—EXCEPT IN SAAS

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 ALWAYS STEPS UP AS STARTUPS SCALE G&A HIRING ALWAYS STEPS UP AS STARTUPS SCALE

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 SHOOTS UP IN MARKETPLACES AND D2C STARTUP OPERATIONS HIRING SHOOTS UP IN MARKETPLACES AND D2C STARTUP

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.

BREAKDOWN OF TEAM BY LEVEL, AT EACH HEADCOUNT STAGE (%) BREAKDOWN OF TEAM BY LEVEL, AT EACH HEADCOUNT STAGE (%)
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?

Clint Smith, Chief Legal & Safety Officer, Discord

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.

Surabhi Gupta, SVP Engineering (former), Robinhood

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.
  • Check compensation expectations early— Avoid wasting your team’s (and candidates’) time.²

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.
ASSESSMENT METHODS WHEN CONDUCTING INTERVIEWS ASSESSMENT METHODS WHEN CONDUCTING INTERVIEWS

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.

EXAMPLES—CONVERTING VALUES INTO INTERVIEW ASSESSMENT CRITERIA EXAMPLES—CONVERTING VALUES INTO INTERVIEW ASSESSMENT CRITERIA
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.

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:

SUGGESTED DISTRIBUTION OF PERFORMANCE RATINGS IN A THREE-POINT SYSTEM SUGGESTED DISTRIBUTION OF PERFORMANCE RATINGS IN A THREE-POINT SYSTEM

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:

TYPICAL PERCENTAGES OF TEAM FALLING INTO EACH OF NINE CATEGORIES TYPICAL PERCENTAGES OF TEAM FALLING INTO EACH OF NINE CATEGORIES

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.

Surabhi Gupta, SVP Engineering (former), Robinhood

Compensation

Create a compensation philosophy

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

internal promotions percentage internal promotions percentage

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.

Surabhi Gupta, SVP Engineering (former), Robinhood

Workforce planning

Plan your workforce months in advance

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:

AVERAGE ATTRITION RATES AT 500 HEADCOUNT BY FUNCTION AVERAGE ATTRITION RATES AT 500 HEADCOUNT 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.

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.

MOST COMMON EXECUTIVE HIRES BY 50 HEADCOUNT—PERCENTAGE OF COMPANIES MOST COMMON EXECUTIVE HIRES BY 50 HEADCOUNT—PERCENTAGE OF COMPANIES

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.

HOW MANY SEPARATE LEADERS DO COMPANIES CYCLE THROUGH ON THE ROAD TO IPO-SCALE? HOW MANY SEPARATE LEADERS DO COMPANIES CYCLE THROUGH ON THE ROAD TO IPO-SCALE?

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.

average executive tenure average executive tenure

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

LEADERSHIP PERFORMANCE GRID LEADERSHIP PERFORMANCE GRID

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.

AVERAGE NUMBER OF EXECUTIVES AT EACH HEADCOUNT STAGE AVERAGE NUMBER OF EXECUTIVES AT EACH HEADCOUNT STAGE

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%).

PERCENTAGE OF EXECUTIVE APPOINTMENTS MADE AT EACH HEADCOUNT STAGE THAT ARE INTERNAL (%) PERCENTAGE OF EXECUTIVE APPOINTMENTS MADE AT EACH HEADCOUNT STAGE THAT ARE INTERNAL (%)

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.

PERCENTAGE OF FOUNDERS STILL WORKING AT THEIR COMPANY BY HEADCOUNT STAGE PERCENTAGE OF FOUNDERS STILL WORKING AT THEIR COMPANY BY HEADCOUNT STAGE

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.
CHIEFS OF STAFF IN LATER STAGES TEND TO HAVE MORE EXPERIENCE CHIEFS OF STAFF IN LATER STAGES TEND TO HAVE MORE EXPERIENCE

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 EISENHOWER MATRIX THE EISENHOWER MATRIX

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.

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:

  • Customer segments—e.g. SMB, mid market, enterprise
  • Multiple products
  • Multiple brands or business units
  • Geographies—e.g. US, EMEA, APAC

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 EMEA CS team report to the GM EMEA 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

GM EMEA—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:

Multi-product and multi-brand

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

DATADOG’S PATHWAY TO MULTI-PRODUCT STARTED NARROW AND DEEP
DATADOG’S PATHWAY TO MULTI-PRODUCT STARTED NARROW AND DEEP DATADOG’S PATHWAY TO MULTI-PRODUCT STARTED NARROW AND DEEP

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

M.C. Escher's “Drawing Hands” © 2024 The M.C. Escher Company – The Netherlands. All rights reserved. www.mcescher.com

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.

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.

TYPICAL TECHNICAL TEAM COMPOSITION BY COMPANY HEADCOUNT OF 50 TYPICAL TECHNICAL TEAM COMPOSITION BY COMPANY HEADCOUNT OF 50

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.

TECHNICAL TEAM MIX VARIES DRAMATICALLY BETWEEN BUSINESS MODELS TECHNICAL TEAM MIX VARIES DRAMATICALLY BETWEEN BUSINESS MODELS

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.

TECHNICAL TEAM SENIORITY MIX BY 50 HEADCOUNT—AND DIFFERENCES BY FOUNDING TEAM TYPE (%) TECHNICAL TEAM SENIORITY MIX BY 50 HEADCOUNT—AND DIFFERENCES BY FOUNDING TEAM TYPE (%)

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!

Surabhi Gupta, SVP Engineering (former), Robinhood

Take active steps to sustain innovation

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.

Surabhi Gupta, SVP Engineering (former), Robinhood

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.

Surabhi Gupta, SVP Engineering (former), Robinhood

But avoid over-specialization

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.

Surabhi Gupta, SVP Engineering (former), Robinhood

SPECIALIZATION—THE EVOLUTION OF SAAS ENGINEERING TEAMS (%) SPECIALIZATION—THE EVOLUTION OF SAAS ENGINEERING TEAMS (%)

Find engineers who are effective people managers

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.

MOST SENIOR ENGINEERING LEADER—SOFTWARE COMPANIES (%) MOST SENIOR ENGINEERING LEADER—SOFTWARE COMPANIES (%)
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:

  • Quality—bugs created, incidents recorded (with severity), reliability metrics, uptime, scaling validation
  • 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
  • People—hiring versus plan, funnel metrics (including offer acceptance rate), candidate NPS, attrition, eNPS

Open secondary engineering centers

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”.
PERCENTAGE OF STARTUPS HIRING A PRODUCT MANAGER PERCENTAGE OF STARTUPS HIRING A 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
  • Existing technical architecture imposes constraints

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

MOST SENIOR PRODUCT LEADER BY HEADCOUNT STAGE IN SOFTWARE COMPANIES (%) MOST SENIOR PRODUCT LEADER BY HEADCOUNT STAGE IN SOFTWARE COMPANIES (%)

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

DESIGN TEAM SIZE BY TOTAL HEADCOUNT AND BUSINESS MODEL DESIGN TEAM SIZE BY TOTAL HEADCOUNT AND BUSINESS MODEL

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

MOST SENIOR DESIGN LEADER BY HEADCOUNT STAGE (%) MOST SENIOR DESIGN LEADER BY HEADCOUNT STAGE (%)

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.

ANALYTICS TEAM BALANCE BETWEEN DS AND BI BY BUSINESS MODEL AND HEADCOUNT STAGE ANALYTICS TEAM BALANCE BETWEEN DS AND BI BY BUSINESS MODEL AND HEADCOUNT STAGE

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.

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.

EXAMPLE AT COMPANY HEADCOUNT OF 50 EXAMPLE AT COMPANY HEADCOUNT OF 50

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 (PREVIOUSLY TRANSFERWISE) FINDS ITS BRAND VOICE AT SEED STAGE IN A NEW LANDING PAGE HEADLINE
Wise
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

HOW AND WHEN TO HIRE FOR PRODUCT MARKETING HOW AND WHEN TO HIRE FOR PRODUCT MARKETING

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

B2C APP EXAMPLE B2C APP EXAMPLE

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

MOST SENIOR MARKETING LEADER BY HEADCOUNT STAGE—B2C APP EXAMPLE (%) MOST SENIOR MARKETING LEADER BY HEADCOUNT STAGE—B2C APP EXAMPLE (%)

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
  • Revenue marketing: generating demand— inbound, qualified leads

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

BALANCE LONGAND SHORT-TERM MARKETING GOALS TO MAXIMIZE GROWTH BALANCE LONGAND SHORT-TERM MARKETING GOALS TO MAXIMIZE GROWTH

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:

  • Digital marketing—SEM, affiliates, display
  • Organic marketing—SEO, content, podcasts, PR, analyst relations
  • 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

SAAS COMPANIES EXAMPLE SAAS COMPANIES EXAMPLE

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.

MOST SENIOR MARKETING LEADER BY HEADCOUNT STAGE (%) MOST SENIOR MARKETING LEADER BY HEADCOUNT STAGE (%)
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.

Y1 2 interns
Y2 4 interns
Y3 8 interns
Y4 16 interns

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.

SAAS COMPANY ANALYSIS SAAS COMPANY ANALYSIS
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.

CX HEADCOUNT RELATIVE TO TOTAL HEADCOUNT AND BUSINESS MODEL CX HEADCOUNT RELATIVE TO TOTAL HEADCOUNT AND BUSINESS MODEL

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.

Raphael Fontes, SVP Customer Operations, Squarespace

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.

Raphael Fontes, SVP Customer Operations, Squarespace

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.

Raphael Fontes, SVP Customer Operations, Squarespace

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.

Raphael Fontes, SVP Customer Operations, Squarespace

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.

Raphael Fontes, SVP Customer Operations, Squarespace

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.

Raphael Fontes, SVP Customer Operations, Squarespace

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.

Raphael Fontes, SVP Customer Operations, Squarespace

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.

Raphael Fontes, SVP Customer Operations, Squarespace

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!

Raphael Fontes, SVP Customer Operations, Squarespace

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).

CUSTOMER SUCCESS TEAM SIZE RELATIVE TO OVERALL HEADCOUNT—SAAS EXAMPLE CUSTOMER SUCCESS TEAM SIZE RELATIVE TO OVERALL HEADCOUNT—SAAS EXAMPLE

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.

MOST SENIOR CS LEADER BY HEADCOUNT STAGE—SAAS COMPANIES (%) MOST SENIOR CS LEADER BY HEADCOUNT STAGE—SAAS COMPANIES (%)

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.

  • D2C—manufacturing, logistics, warehousing, fulfillment, photography, retail
  • Marketplace—supplier liaison, merchandising, logistics, photography, payments, fraud
  • 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.

OPERATIONS HEADCOUNT RELATIVE TO TOTAL HEADCOUNT AND BUSINESS MODEL OPERATIONS HEADCOUNT RELATIVE TO TOTAL HEADCOUNT AND BUSINESS MODEL

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.

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:

G&A TEAMS GROW IN LINE WITH TOTAL COMPANY HEADCOUNT (%) G&A TEAMS GROW IN LINE WITH TOTAL COMPANY HEADCOUNT (%)

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.

Surabhi Gupta, SVP Engineering (former), Robinhood

Build your People team

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:

MEDIAN HEADCOUNT FOR INTRODUCING SPECIALIST ROLES INTO PEOPLE TEAM MEDIAN HEADCOUNT FOR INTRODUCING SPECIALIST ROLES INTO PEOPLE TEAM
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.

RATIO OF PEOPLE TEAM HEADCOUNT: TOTAL HEADCOUNT RATIO OF PEOPLE TEAM HEADCOUNT: TOTAL HEADCOUNT
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
PEOPLE TEAM LEADERSHIP BY HEADCOUNT STAGE (%) PEOPLE TEAM LEADERSHIP BY HEADCOUNT STAGE (%)

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).

FINANCE TEAM MEMBERS BY 50 HEADCOUNT FINANCE TEAM MEMBERS BY 50 HEADCOUNT

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.

FINANCE TEAM LEADERSHIP BY COMPANY HEADCOUNT STAGE (%) FINANCE TEAM LEADERSHIP BY COMPANY HEADCOUNT STAGE (%)

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.

RATIO OF FINANCE TEAM HEADCOUNT TO TOTAL COMPANY HEADCOUNT RATIO OF FINANCE TEAM HEADCOUNT TO TOTAL COMPANY HEADCOUNT

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.

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).

ALMOST HALF OF SUCCESSFUL COMPANIES HAVE A GENERAL COUNSEL BY 250 HEADCOUNT (%) ALMOST HALF OF SUCCESSFUL COMPANIES HAVE A GENERAL COUNSEL BY 250 HEADCOUNT (%)
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

Clint Smith, Chief Legal & Safety Officer, Discord

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.

Clint Smith, Chief Legal & Safety Officer, Discord

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

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.

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

Seth DeHart
Startup Sales Advisor

Alex Duell
VP People (former), Cutover

Daniel Ek
CEO & Founder, Spotify

Didier Elzinga
CEO & Co-Founder, Culture Amp

Raphael Fontes
SVP Customer Operations, Squarespace

Lindsay Grenawalt
Chief People Officer, Cockroach Labs

Surabhi Gupta
SVP Engineering (former), Robinhood

Pete Hamilton
CTO & Co-Founder, incident.io

Sam Harper
General Counsel (former), Deliveroo

Suzy Hathaway
Recruiting Director, Hashicorp

Gabriel Hubert
Co-Founder, Dust and Product Lead (former), Alan

Sian Keane
Chief People Officer, Farfetch

Marcia Kilgore
Founder, Beauty Pie

Amanda Kleha
Chief Customer Officer, Figma

Max Klijnstra
Co-Founder and Chief Growth Officer (former), Otrium

Divinia Knowles
Coach, The COO Coach

Simon Lambert
CTO, Birdie

Antoine Le Nel
VP Growth, Revolut

Alexis Lê-Quôc
CTO & Co-Founder, Datadog

Tom Leathes
CEO & Co-Founder, Motorway

David Lee
Chief Creative Officer, Squarespace

Yunah Lee
Chief Operating and Finance Officer, GOAT Group

Joanna Lord
CMO, Spring Health

Ara Mahdessian
CEO & Co-Founder, ServiceTitan

Michael Manapat
CPTO (former), Notion

Rob Miller
Chief Legal Officer, Moonbug Entertainment

David Perry
VP EMEA (former), Confluent

Assaf Rappaport
CEO & Co-Founder, Wiz

Hanno Renner
Co-Founder & CEO, Personio

Jonas Rieke
Co-Founder & Chief Operating Officer, Personio

Andrew Robb
COO (former), Farfetch

Sam Ross
General Counsel, Remote

Kate Ryder
CEO & Founder, Maven

Abakar Saidov
CEO & Co-Founder, Beamery

Matt Schulman
CEO & Founder, Pave

Ross Seychell
Chief People Officer (former), Personio

Nadia Singer
Chief People Officer, Figma

Harsh Sinha
CTO, Wise

Huw Slater
CFO (Former), TravelPerk and Typeform

Clint Smith
Chief Legal & Safety Officer, Discord

Soleio
Designer × Investor, Figma Advisor and former Dropbox and Meta

Thomas Soulez
Chief Product Officer, Silae

Michelle Valentine
CEO & Co-Founder, Anrok

Felix Van de Maele
CEO & Co-Founder, Collibra

Job van der Voort
CEO & Co-Founder, Remote

Adam Ward
Founding Partner, Growth by Design Talent

Paul Williamson
CRO (former), Plaid

Glossary of acronyms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

ACV

Annual Contract Value

AE

Account Executive (Salesperson)

AM

Account Management

AML

Anti-Money Laundering (regulations and checks required in financial services)

AP/AR

Accounts Payable / Accounts Recievable

APM

Application Performance Monitoring

ARR

Annual Recurring Revenue

ATS

Applicant Tracking System

AVP

Area VP (sales)

B2C

Business-to-Consumer

BDR

Business Development Representative (also referred to as SDRs, but sometimes refer specifically to Outbound Sales Activity)

BI

Business Information

BizDev

Business Development

CAC

Customer Acquisition Cost

CCO

Chief Customer Officer (or alternatively Chief Commercial Officer)

CFO

Chief Financial Officer

CIO

Chief Information Officer

CMO

Chief Marketing Officer

COO

Chief Operating Officer, but can also be Chief Operations Officer</