How to hire the first employees for your startup: A guide for founders

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Atlas

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  1. Introduktion
  2. Why early hires are important for startups
  3. How to decide which employees to hire first for a startup
  4. How to hire the first employees for a startup
    1. Preparing to hire
    2. Sourcing candidates
    3. The interview process
    4. Making a decision
    5. Onboarding
  5. Legal considerations when hiring
  6. Best practices to retain early startup employees

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, hiring the first employees can feel daunting and time-consuming—even if those employees are desperately needed.

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

Since founders of early-stage startups often have very little time or mental bandwidth, it can be easy to rush hiring decisions and hire whoever is available. This is a mistake, since a startup’s first employees can significantly influence its trajectory. With a little planning, you can thoughtfully hire the first employees for your startup. Here’s how to do it.

What’s in this article?

  • Why early hires are important for startups
  • How to decide which employees to hire first for a startup
  • How to hire the first employees for a startup
  • Legal considerations when hiring
  • Best practices to retain early startup employees

Why early hires are important for startups

The first hires can significantly impact the success of an early-stage startup. Here are the reasons why:

  • Foundation of company culture
    The initial employees fundamentally shape the company culture. Their behavior, work ethics, and interactions establish the norms and values that will define the organization’s character. This cultural foundation influences everything from employee satisfaction to brand perception.

  • Role in innovation and creativity
    Early hires 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 hires can substantially impact a startup’s growth trajectory. They contribute to key decisions that can either accelerate growth or hinder it. 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 hires. This can have a long-lasting effect on the effectiveness of the startup’s operations.

  • Brand building and representation
    The first few hires 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 hires 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 hires to gauge a startup’s potential. A strong early team can inspire confidence in investors, leading to better funding opportunities and more favorable 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 hires often establish the learning environment within a startup. Their attitude toward continuous learning, experimentation, and feedback can build the groundwork for an organization that evolves and improves over time.

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

How to decide which employees to hire first for a startup

Before you can hire, 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 who exactly you need to hire:

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

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

  • Prioritize 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 might be your first hire. 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 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 they help other team members 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 might be valuable, but expensive to fill. Consider whether part-time hires, 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 you fill first should not only address immediate needs but also have the capacity to evolve as the startup grows. For example, a first hire in 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
    Prioritize roles that mitigate substantial risks to your startup. If compliance and legal issues are a potential risk, for instance, hiring 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 maintain its current trajectory and plan for future success.

  • Plan for diversity and inclusivity
    Consider how the jobs 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 hire the first employees for a startup

Hiring your early employees is typically a slow process. Although you can’t speed everything up, using the right hiring strategy can make the process go faster and result in a positive outcome. Here’s how to hire the first employees for a startup:

Preparing to hire

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 support them effectively once they join your team, setting up a strong foundation for the growth of your business.

You’ll need a company and employee ID number before you begin hiring. Stripe Atlas can help you get these, and offers discounts on hiring 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 know the expectations of the role.

  • Matching job roles with business objectives
    Each role should directly contribute to your startup’s goals and objectives. Show how the job responsibilities impact the company’s mission and vision. This will help you find candidates who are a good fit with your business objectives and influence their motivation and job satisfaction.

Budgeting for new hires

  • 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
    Beyond salary and equity, consider other costs associated with hiring. These may include employee benefits (health insurance, retirement plans, etc.), recruitment costs, and any necessary equipment or tools the new hire will need. Include these additional expenses in your hiring budget to avoid financial strain in the future.

Sourcing candidates

When sourcing candidates, it’s important to have a strong knowledge of the role 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, specialized job platforms, and university recruitment channels. This multichannel strategy can increase the diversity of the candidate pool, and the likelihood of finding skilled candidates who are also a great 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. Wellfound (formerly AngelList), for example, focuses on startup job listings. Also, consider industry-specific job boards that might attract the kind of talent 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 might invite you to job fairs. Participating in these events lets you meet soon-to-be graduates who are eager to start their careers and might 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 to communicate your company’s vision, culture, and the potential for growth and development within your organization. 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.

  • Behavioral and skill-based questioning techniques
    Use a mix of behavioral and skill-based questions. Behavioral questions help you 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 might be asked to solve a coding problem, for example, while a marketing candidate might 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 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 more growth potential might 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 afterward. Each team member will have valuable input on the hire; someone with a technical job may be suited to evaluate technical skills, while an HR employee could provide an entirely different perspective on a candidate.

Onboarding

The final step in the hiring process is onboarding, which will establish a solid foundation for new hires 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 hire’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 they’ll need for their job. This preparation shows that you are organized and eager for them to start contributing.

  • Integrating new hires into the team and company culture
    An effective onboarding plan goes beyond just teaching the new hire 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 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 start. This includes discussing their role, responsibilities, and how their work contributes to the broader objectives of the startup. Setting transparent expectations helps the new hire know what success looks like in their position and how they can achieve it.

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 labor laws that apply to your business, such as anti-discrimination laws and workplace safety regulations.

  • Contracts
    Become familiar with different types of employment contracts, such as full-time, part-time, and contractor agreements. Your contracts should explicitly outline terms of employment, compensation, benefits, confidentiality agreements, and termination conditions.

  • Tax IDs
    Depending on your location, you may need to register for a federal 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 federal employment taxes. In the US, these include income tax, Social Security, and Medicare taxes. Consider any state or local taxes that may apply.

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

Best practices to retain early startup employees

Once you’ve hired your initial employees, focus on retention. After investing so much time and money into hiring 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. Transparently 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.

  • Personalizing development opportunities
    Learn the career aspirations of your employees and provide them with opportunities to grow. This could include mentorship programs, opportunities to lead projects, or further training. Personalized 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.

  • Emphasizing the importance of mental health
    Recognize 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 counseling services.

  • Offering equity and nontraditional compensation
    In early-stage startups, where cash might 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 hiring 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 might not be readily apparent. Create pathways for advancement and communicate these opportunities to your employees. This can help retain talent who might 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.

  • 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. Know about the personal and professional challenges your employees face and provide support. Empathetic leadership can build a loyal and committed workforce.

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