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Gene pool engineering for entrepreneurs: Why first hires are important (1/11)

A founder, sometimes a business person or early CEO and maybe one or two engineers: this is the typical size of a startup team presenting to us for the first time here at Khosla Ventures. Let’s assume that we like the technology, team and market, and decide to fund them. Of course, in every pitch, there’s a lot of talk of funding and development milestones, and there also are outlines for which hires will happen when: “We will hire two more engineers in the first three months and a sales guy once we have a first rev on the product.” As the entrepreneur though, you may never have recruited a team before. You may not even know enough people in the industry to have a clue where to start looking for those engineers or that one right “sales guy.” How many people should you hire? Where should you look? How should you approach them? These are questions that are as important as they are inevitable for every single entrepreneur. Engaging them as early as possible is a key to startup success.

 

Why First Hires are Important

A strong team is the most important element of a company’s ability to achieve success. That wisdom is often stated but seldom turned into specific “actions.” I would suggest, especially in startups, a company becomes the people it hires. The first few hires help the founders create the environment they will all work in and help drive the product development process. It is also the team that drives (and interviews) all future hires and their ideas and biases get incorporated in the team. More importantly, without the right first few people, the culture of the startup might not be conducive to what the founders envision for its future. On the flip side, a few mediocre or unmotivated people at the beginning of the startup generally spell doom before the first product is released. There is always talk of startup culture, but it is the founders and their first round of hires that define that culture.

A company becomes the people it hires

So how does an entrepreneur find the right people? While entire books and journals are devoted to outlining management techniques and secrets and platitudes about good people are abundant, there are far fewer strategies outlined for building successful and, more importantly, “precisely engineered” teams through an “actionable and teachable” process. The standard corporate practice for both Fortune 500 firms and startup companies is functional recruiting or recruiting to fit a pre-cast organizational structure. While this can work because it creates a familiar working dynamic for a company’s management team, the approach is not sufficient or optimal for the special needs of technology startups. In technology startups, risk management and evolution of plans are the key requirements (hence my statement that a startup becomes the people it hires because they determine evolution of plans and risk/opportunity tradeoffs), more so than standard strategy, operational and business planning and financial management as in more mature companies. Although these big company attributes are also important in startups, much more is needed in a startup environment. In a startup environment, especially in the early days, one is not expected to solely fulfill a specific function – often it isn’t even known what exactly is needed, beyond someone who can add more than just their expertise and contribute to a dynamic culture. 

Successful startups seldom follow their original plans. The early team not only determines how the usual risks are handled but also evolves the plans to better utilize their opportunities and to address and redefine their risks continuously

Experience has shown me that successful startups seldom follow their original plans. The early team not only determines how the usual risks are handled but also evolves the plans to better utilize their opportunities and to address and redefine their risks continuously. One quantifiable, teachable and actionable hiring method successfully practiced by Khosla Ventures for developing the optimal mix of team member backgrounds and maximizing the probability of success is “gene pool engineering.” This process is not constrained to engineering positions, but we have decided to showcase it in this paper as an example. We suspect the applicability of this technique is far broader than just technology startups but the focus here is on technology startups and teams to address the needs for innovation and high-risk management.

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