Founders need to handle many tasks in the early days of a startup, from registering the business to creating a roadmap for launching their products and services. During this busy stage, recruiting the first employees can feel like a daunting and time-consuming process – even if those employees are desperately needed.

A study of 973 startups in the UK found that, on average, startups didn't start recruitment for an HR role until they had 40–50 employees. This highlights how more of the recruitment responsibility is often placed on founders and early team members.

As founders of early-stage startups often have very little time or mental bandwidth, it can be easy to rush recruitment decisions and employ whoever is available. This is a mistake, given that a startup's initial employees can have a significant influence over its trajectory. With a little planning, you can take a thoughtful approach to recruiting the first employees for your startup. Here's how to do it.

What's in this article?

• Why early recruits are important for startups
  
• How to decide which employees to recruit first for a startup
  
• How to recruit the first employees for a startup
  
• Legal considerations during recruitment
  
• Best practices to retain early startup employees
  

Why early recruits are important for startups

The first recruits can have a significant impact on the success of an early-stage startup. Here are the reasons why:

• Foundation of company culture
  The initial employees have a fundamental role in shaping the company culture. Their behaviour, work ethic and interactions establish the norms and values that will define the organisation's character. This cultural foundation influences everything from employee satisfaction to brand perception.

• Role in innovation and creativity
  Those recruited early on often drive the creative and innovative processes within a startup. They are typically involved in the initial brainstorming and development phases, shaping the startup's products or services. Their ideas can set the startup apart in a crowded market.

• Influence on growth trajectory
  Early recruits can have a substantial impact on a startup's growth trajectory. They contribute to key decisions that can either accelerate or hinder growth. Their work in these formative stages can determine the pace and direction of the startup's expansion.

• Setting operational precedents
  Early employees often establish the operational precedents in a startup. Their strategy for solving problems, managing projects and executing tasks can become the standard for future recruits. This can have a long-lasting effect on the effectiveness of the startup's operations.

• Brand building and representation
  The first few recruits often act as the face of the startup, especially in its early stages. Their interaction with customers, investors and other stakeholders builds the startup's reputation and brand identity.

• Impact on scalability
  The work done by early recruits often dictates how scalable the startup's business model is. They implement the processes and systems that will support larger volumes of work, customers and employees in the future.

• Influence on investor perception
  Investors often look at the quality and performance of early recruits to gauge a startup's potential. A strong team early on can inspire confidence in investors, leading to better funding opportunities and more favourable terms.

• Determining long-term viability
  The initial team's ability to address challenges and adapt to market changes is important for the long-term viability of the startup. Their decisions and actions during the early stages can determine whether the startup is able to overcome obstacles and sustain itself in the long run.

• Creating a learning environment
  Early recruits often establish the learning environment within a startup. Their attitude towards continuous learning, experimentation and feedback can build the groundwork for an organisation that evolves and improves over time.

• Knowledge and skills transfer
  As the company grows, early recruits often become mentors and leaders for new team members. The knowledge and skills that they transfer are important for maintaining quality as the startup scales.

How to decide which employees to recruit first for a startup

Before you can begin recruitment, you'll need to define which roles you need to fill and the order in which you need to fill them. Here's how to determine exactly who you need to recruit:

• Assess your current capabilities
  Begin by evaluating the skills and expertise that you and your co-founders (if applicable) offer already. Identify any gaps in knowledge or capability that are key to your startup's success. This assessment will help you to prioritise the roles that need to be filled first in order to complement the strengths of the existing team.

• Define core business needs
  Know the core functions of your business. This may include product development if you're launching a tech company, while a service-orientated startup may prioritise client acquisition and service delivery. The roles that you need to fill first should support these core functions directly.

• Prioritise based on impact
  Consider which roles will have the most immediate and substantial impact on your startup's growth. For instance, if developing a minimum viable product (MVP) is your immediate goal, a skilled developer or product manager may be your first recruit. If market penetration is the priority, a sales or marketing expert could be more important.

• Forecast future needs
  While focusing on immediate needs, also think about the roles that you will need in the next six months to a year. This foresight allows you to address current challenges while also preparing for future growth.

• Identify multiplier roles
  Some roles have a multiplier effect, meaning that they help other team members to become more productive or effective. This could be a project manager who makes sure that everyone is working cohesively or a marketing professional who amplifies the reach of your product.

• Consider budget constraints
  Assess your financial resources. Some positions may be valuable, but expensive to fill. Consider whether part-time recruits, freelancers or contractors could serve as a temporary solution until the startup is financially healthy enough to afford full-time specialists.

• Think about scalability
  The positions that you fill first should not only address immediate needs, but also have the capacity to evolve as the startup grows. For example, the first person recruited into a technical role should be someone who can tackle hands-on development initially, but also has the potential to lead a team as the company scales.

• Evaluate risk mitigation
  Prioritise roles that mitigate substantial risks to your startup. If compliance and legal issues are a potential risk, for instance, recruiting someone with expertise in legal affairs or regulatory compliance may be a priority.

• Balance operational and strategic roles
  While it's important to have people who can perform day-to-day operations, it's also important to have positions that focus on strategy and long-term planning. This balance helps a startup to maintain its current trajectory and plan for future success.

• Plan for diversity and inclusivity
  Consider how the roles that you're filling can contribute to a diverse and inclusive team. A varied team brings different perspectives and ideas, which is especially valuable in a startup environment where innovation and adaptability are key.

How to recruit the first employees for a startup

Recruiting your initial employees is typically a slow process. Although you can't speed everything up, using the right recruitment strategy can accelerate the process and result in a positive outcome. Here's how to recruit the first employees for a startup:

Preparing to recruit

Create a comprehensive plan that considers the role's impact on your startup, aligns with your business objectives and fits within the constraints of your financial capabilities. This preparation ensures that you will attract the right talent and that you will be able to support them effectively once they join your team, thus providing a strong foundation for growing your business.

You'll need a company and employee ID number before you can begin the recruitment process. Stripe Atlas can help you obtain these and offers discounts on recruitment and payroll software.

Developing a job description

• Identifying key responsibilities and qualifications
  Outline the specific responsibilities and duties of the job. List the qualifications needed, including education, experience, skills and any other important attributes. Be as detailed as possible to maintain clarity and attract strong candidates who are aware of the expectations of the role.

• Matching job roles with business objectives
  Each role should contribute to your startup's goals and objectives directly. Demonstrate how the job responsibilities affect the company's mission and vision. This will help you to find candidates who are a good fit with your business objectives, which will in turn have an influence on their motivation and job satisfaction.

Budgeting for new recruits

• Calculating compensation and equity packages
  Decide on an appealing compensation package for the role. In startups, this often includes a mix of salary and equity. Equity can be attractive to candidates, giving them a stake in the future success of the company. But be strategic about how much equity you're willing to give up, balancing the need to attract top talent with the long-term ownership structure of your startup.

• Planning for employee benefits and other costs
  Looking beyond salary and equity, you'll need to consider other costs associated with recruitment. These may include employee benefits (health insurance, pension plans etc.) and recruitment costs, as well as any necessary equipment or tools that the new recruit will need. Include these additional expenses in your recruitment budget to avoid financial strain in the future.

Sourcing candidates

When sourcing candidates, it's important to have a strong knowledge of the role that you're trying to fill and the type of candidate that would best fit your startup's culture and needs. Conduct a broad search using a combination of professional networks, specialised job platforms and university recruitment channels. This multi-channel strategy can increase the diversity of the candidate pool, as well as the likelihood of finding skilled candidates who are also a good fit for your needs.

• Professional networks
  Start by searching for candidates on LinkedIn, where you can also post job listings. Attend industry events and conferences to meet potential candidates in person. Remember to ask your personal and professional contacts if they know anyone who would be a good fit for the role. Personal recommendations can often lead to finding great candidates.

• Job boards and recruitment platforms
  Different job boards attract different types of candidates. For a startup, look for platforms that are popular with people interested in working in a startup environment. For example, Wellfound (formerly AngelList) focuses on startup job listings. You should also consider industry-specific job boards that may attract the type of talent that you need.

• University and college connections
  Connect with universities and colleges, especially their career services departments. They can help you list your job openings and may also invite you to job fairs. Participating in these events provides you with an opportunity to meet soon-to-be graduates who are eager to start their careers and may be a good fit for a startup setting.

The interview process

The interview process is not just about evaluating the candidate – it's also an opportunity for them to assess your startup as a potential workplace. Make sure that you communicate your company's vision and culture, as well as the potential for growth and development within your organisation. This two-way assessment ensures that the candidate is a match for your startup and that your startup is the right place for them.

Conducting effective interviews

• Structuring interviews for comprehensive assessment
  Plan your interviews to cover all necessary areas and topics. This usually involves a combination of different interview types, such as an initial phone screen, a technical or skills-based interview, and a final cultural-fit interview. Each interview should have a transparent purpose and a set of questions designed to assess different aspects of the candidate's abilities and fit.

• Behavioural and skill-based questioning techniques
  Use a mixture of behavioural and skill-based questions. Behavioural questions help you to understand how a candidate has handled situations in the past, which can indicate how they'll perform in the future. Skill-based questions assess their technical or specific job-related abilities. A developer may be asked to solve a coding problem, for example, while a marketing candidate may be asked to design a campaign strategy.

Evaluating candidates beyond technical skills

• Assessing cultural fit and adaptability
  It's important to determine how well a candidate will fit into your startup's culture. Ask questions about their work style, as well as how they collaborate in teams and handle uncertainty. Look for candidates who are comfortable with a startup's often fast-paced and ever-changing environment.

• Considering potential for growth and development
  Assess a candidate's potential for growth. Startups often require employees to shift roles as the company grows. Candidates who show a willingness to learn new skills and take on new challenges can be valuable assets. Ask about scenarios when they've had to adapt or learn on the job and how they approach professional development.

Making a decision

When making your decision, consider the immediate impact that the candidate will have on your team and how they will contribute to the company as it grows. The right candidate should fit into your startup's culture, be able to adapt to change and grow as the company does.

• Comparing candidates
  Compare each candidate's skills, experience and potential for growth. It's important to balance these elements. A candidate with less experience but who has more growth potential may be a better long-term fit than someone with more experience but limited growth potential. Consider how each candidate's strengths and weaknesses pair with the job's requirements and your startup's future needs.

• Gathering diverse perspectives
  Include key stakeholders in the decision-making process. Ask various team members to participate in the interview process or discuss candidates with them afterwards. Each team member will have something valuable to contribute to the recruitment decision. For example, someone with a technical job may be well-suited to evaluating technical skills, while an HR employee could provide an entirely different perspective on a candidate.

Onboarding

The final step in the recruitment process is onboarding, which will establish a solid foundation for new employees at the company. A thoughtful onboarding plan will make a new employee feel welcome and prepared, while also integrating them into the company culture.

• Setting up their workspace, tools and access
  Make sure that a new recruit's workspace is ready for their first day. This includes setting up their desk, computer and any other necessary equipment. Also, be ready to give them access to any software, tools and systems that they'll need for their job. This preparation shows that you are organised and eager for them to start contributing.

• Integrating new recruits into the team and company culture
  An effective onboarding plan goes beyond just teaching the new recruit about their job duties. It should also include introducing them to your team and immersing them in your company culture. Plan welcome activities or team meetings so that they can get to know their colleagues. Share your startup's vision, values and traditions to help them embrace the culture.

• Establishing goals and expectations
  Communicate goals and expectations from the outset. This includes discussing their role, responsibilities and how their work contributes to the broader objectives of the startup. Setting transparent expectations helps the new employee know what success looks like in their position and how they can achieve it.

Legal considerations during recruitment

Complying with employment laws and regulations is important to avoid potential legal issues – especially for early startups that may not have a dedicated HR or legal team. Here are a few of the key legal considerations:

• Employment laws and regulations
  Educate yourself on any local or national labour laws that apply to your business, such as anti-discrimination laws and workplace safety regulations.

• Contracts
  Familiarise yourself with different types of employment contracts, such as full-time, part-time and contractor agreements. Your contracts should provide an explicit outline of the terms of employment, compensation, benefits, confidentiality agreements and termination conditions.

• Tax IDs
  Depending on your location, you may need to register for an Employer Identification Number (EIN) or a similar tax ID. You'll use this ID number to report taxes and submit tax documents to the IRS (in the US) or the respective tax authority in your country.

• Tax withholding
  Understand how to withhold and pay employment taxes. In the US, these include income tax, Social Security and Medicare taxes. However, you should consider any local taxes that may apply.

• Payroll systems
  Keep accurate and detailed records of all payroll activities. Many startups use payroll software or employ payroll service providers to manage this complex task and ensure that they can pay their employees correctly and on time. The payroll system should calculate gross pay, deductions (such as taxes and employee benefits) and net pay.

Best practices to retain early startup employees

Once you've recruited your initial employees, focus on retention. After investing so much time and money into recruiting the right people, you'll want to keep them, learn from them and use those learnings to attract the best talent to your startup. Here's how to drive employee retention:

• Cultivating a culture of ownership and innovation
  Encourage a culture where employees feel like co-owners of the business. Be transparent as you share company goals, challenges and successes. Reward innovative thinking and allow employees to contribute ideas freely. This sense of ownership can increase job satisfaction and loyalty.

• Implementing a thorough feedback system
  Develop a feedback system that is continuous and constructive. This could involve regular one-on-one meetings, performance reviews and anonymous feedback channels. The key is to make feedback a part of the company's routine, not just a sporadic exercise.

• Personalising development opportunities
  Find out about your employees' career aspirations and provide them with opportunities to grow. This could include mentorship programmes, opportunities to lead projects or further training. Personalised development plans show that you are invested in their long-term career growth, not just their current output.

• Building resilience and flexibility
  Startups often face uncertain and fast-changing environments. Encourage your team to have a flexible mindset by being open to change, learning from failures and adapting strategies as needed. Resilience training and stress management workshops can be valuable tools to encourage this mindset.

• Emphasising the importance of mental health
  Recognise the mental toll that working in a high-pressure startup environment can have. Implement policies that support mental health, such as flexible work hours, mental health days and access to counselling services.

• Offering equity and non-traditional compensation
  In early-stage startups, where cash may be limited, consider providing equity as part of the compensation package. This can attract top talent and pair their interests with the long-term success of the company.

• Creating a diverse, inclusive environment
  Focus on building a diverse team from the start. Diversity in thinking, backgrounds and experiences can lead to more creative solutions and a more effective workplace. Make sure that your recruitment practices are free from biases and create policies that support an inclusive work environment.

• Establishing clear pathways for advancement
  In a small team, traditional career paths may not be apparent immediately. Create pathways for advancement and communicate these opportunities to your employees. This can help to retain talented individuals who may otherwise leave for more established companies with well-defined career progression.

• Integrating work and passion
  Find ways to integrate your employees' personal interests and passions into their work. This can increase job satisfaction and make work more meaningful for them.

• Building peer learning and cross-functional collaboration
  Encourage a culture where employees can learn from each other. You can facilitate this through cross-functional projects, peer mentoring and regular knowledge-sharing sessions.

• Addressing the challenges of growth
  As your startup grows, be aware of the challenges that can come with scaling. This includes maintaining company culture, managing increased complexity and integrating new team members effectively.

• Practicing empathetic leadership
  As a leader, practice empathy. Be aware of the personal and professional challenges that your employees are facing and provide support. Empathetic leadership can build a loyal and committed workforce.