A guide for early-stage Indian startups to lure the right talent

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An entrepreneur recently told me that hiring is among the top three priorities for the founder of an early-stage startup in India—besides building a good product and finding customers—and takes up at least 40% of her/his day.

It is also one of the hardest things to do, he said, because a young company needs the best talent possible at the least cost.

So, it is not surprising that as on Feb. 25, there were over 38,000 openings posted on startup jobs portal Angellist India, including nearly 22,000 at early-stage firms.

A bunch of entrepreneurs tried to find solutions for this problem at a panel hosted by Bengaluru-based accelerator and seed fund Axilor Ventures in December. The participants included Anuradha Agarwal, founder of language teaching app Multibhashi, Khadim Batti, co-founder and CEO of digital adoption platform WhatFix, and Sudarsan Metla Srihari, co-founder and COO of Dharmya Business Ventures, which owns the Postcard brand of Indian snacks.

Here are some takeaways that could help Indian entrepreneurs navigate the hurdles of hiring for early ventures:

Think long-term

The first few employees are typically hired right after the seed funding round. These employees need to be “hustlers” who can “get things done” and “figure out the playbook.” Some of the characteristics to look for are:

  1. Discipline
  2. Perseverance
  3. Curiosity
  4. Honestly
  5. Self-motivation

A mistake many founders make is to hand out hefty titles like “head of sales” or “head of talent management” while hiring the first few employees. While these fancy designations are a hack to lure potential candidates, they don’t always play out well.

As companies scale, some employees don’t grow at the same pace. So, if the company decides to bring in senior talent from outside at a later stage, there’s scope for conflicts.

In addition, it’s important for entrepreneurs to ensure they’re hiring professionals who have a mind of their own, instead of bringing in clones of themselves. For example, many tech founders who are engineers themselves tend to hire people with the same educational background for all sorts of roles at their companies. Batti of WhatFix warns against such comfort hiring. “My recommendation is to hire for complementary skills (as per the job’s requirement),” he says.

To hire for a role that founders don’t have expertise in, they must reach out to experts. “As I am not a techie, when hiring for our technology head, I took an advisor with me,” Agarwal says.

You get who you are

In the early stage of a venture, founders are mostly just salespersons, pitching their company to potential investors, likely customers, and even prospective employees. Of these, the first few employees are most likely to come on board because of the founders’ vision.

So, an entrepreneur must prioritise building a strong brand for himself and his firm from day one.

“Culture is who the founders are,” according to Metla of Postcard snacks. During the early days of a startup, how the founders behave becomes the template for everyone at the office, says Agarwal of Multibhashi.

For instance, in the initial days of WhatFix, Batti and his co-founders used cheap software for frugality, he says. As they scaled, the employees they had brought on board also started recommending the use of “low priced” or “open source” software, sometimes overlooking the quality. This got the founders to pause and reflect, and in time, they communicated to the team that their culture is not frugal, but “best in class.”

Now, WhatFix’s founding team make sure they take out time regularly to communicate and consciously enforce the organisation’s culture to their team.

Another important aspect to remember while building an organisation’s culture is transparency. Under no circumstances should an entrepreneur lie to employees or investors.

Try the tools

Using referral to hire early employees can prove beneficial as employees brought through recommendations and word-of-mouth have a 40% higher retention rate than others, according to Xobin, a recruitment and screening software firm.

References come in handy even if the candidate has been brought through a different route. Before making an offer, it always helps to conduct reference checks, including talking to former colleagues, bosses, or classmates.

“Early-stage hiring is patient hiring,” according to Agarwal of Multibhashi. “You can never find the right candidate immediately and hiring in a hurry can lead to mistakes.”

In addition, even if an employee is joining a startup on a salary that is lower than the previous one, it’s not essential to offer employee stock option plan (ESOP) right away. For most employees, salary gets corrected to market standards as the company scales.

“If you think the employee will stay with you for a long time, give them stocks,” says Batti. “Initially the founders can allocate 10% of the valuation to ESOPs and keep increasing the pool with every fund raising.”

Incentives and bonuses are other tools entrepreneurs can use when it comes to compensation, especially in sales and marketing roles. For a subscription or software-as-a-service (SaaS) startup, incentives can be linked to renewals of contracts.

Hiring rocks, firing sucks

Typically, by the time a startup decides to fire someone, it’s already late because the employee has been given several chances to fix her/his performance. This is particularly true for India where the pink slip culture is still pretty new.

But even then, a manager must engage with the employee who is being asked to leave.

At WhatFix, the human resource team used to fire employees earlier. But Batti now says that was an incorrect practice. Managers should be the ones to fire as the experience makes them much more cognizant during the hiring process itself, he says.