To save some valuable time, you can start recruiting long before you get your investment in and you sign the term sheet.
Many years ago, I was COO at an Amsterdam startup. We were closing a $1.5M round and were working 80-hour weeks. Getting investors on board is hard work for many months. The last weeks of this fundraising were insane. For some of us, it involved pulling all-nighters and sleeping under our desks. But only when the money hit the bank, I realized: it has only just begun.
To raise, or not to raise
Fast-growing tech companies can raise capital to accelerate growth. Founders expect they can grow value faster than the cost of the capital. A rule of thumb that investors use, is that the return on their investments needs to be at least 35% per year. That is 6x the capital you raised after 6 years! Either way, you are paying for that as a founder. Not in dividends, not in interest, but in shares you won’t have at the end of the ride. In case you choose to raise capital, both founders and investors want to make the most out of it. How to deploy this capital in an efficient manner?
Access to talent: a paradox of choice
Most of your new capital will go into growing your team. You can choose to burn cash on no-cure-no-pay recruiting agencies. But the best option is to build the talent capability yourself. Because in reality, you need access to talent and a strong selection process going forward. This is an investment in time and can be defocusing. So it seems you will either burn cash on talent or become defocused from scaling your business. Or worse: have your fresh capital sitting idle on your bank account. Even though it’s the most expensive money you will ever own.
Signing term sheet = starting recruitment
The moment you sign a term sheet is a great moment to start recruiting. You will have your vacancy pipelines filled. And maybe even have a few employment contracts to sign right away. The fundraising period is way too busy for you to set up recruiting. You may need help from an external party or freelancer, that will act as a temporary solution while you build your internal capabilities. This party will combine job marketing, sourcing and selection strategies. Besides hiring the most crucial people, look for the following:
Learning: Every hire should increase your ability to hire the next. You learn what type of people and experience suit you, and which don’t. Software and processes will be set up to collaborate on open vacancies and improve your skills. A no-cure-no-pay recruiting agency is transaction-based and there’s simply no incentive for them to teach you to be better next time. Au contraire, let’s keep our little customer dependent on us!
Trust: Find a party that is unbiased and on your side. You need this party to be brutally honest, especially if either of you is messing up, or a candidate is not a fit. The best is to have them work from inside your office, to understand all the nuances of your team and culture.
Build your Employer Brand: Effectively communicating your employer brand will yield the best results. This includes values, perks, team, product and culture. Think of your employer brand as a one-way mirror you’d find in an interrogation room. A window into your company from a potential employee’s perspective and a mirror looking back at you. What do you see in the reflection? And what would a candidate see?
This impression will hopefully form something that attracts, retains and engages talent. In failing to communicate your employer brand, you will not connect with the best talent. Only showing what your company stands for and what it is like to work at your company will deliver optimal results. Find someone who can help you with that.
It’s people that make the difference
Even though today’s founders focus on raising funds and scaling the business, it’s the people that make the difference. Being capital efficient and smart about dilution means you should start recruiting from the moment you sign a term sheet. In case you decide to hire help, ensure they will improve your ability to recruit, you trust them and they leverage and build your employer brand.
[Guestpost, that originally appeared on Startupjuncture.com]
