Is your startup team ready to scale?

The transition from startup to scaleup begins when startups find product/market fit. Founders then shift from 'running experiments' to 'building a company'.

This is a period of major change, both for the organisation and the Founder/CEO.

The early organisation was the founder plus a small team of strongly goal-oriented domain experts. They required little management and worked in a flat, informal structure.

But suddenly you have a product that lots of people want to use and pay for. You are not just selling it but delivering a solution around it. You are not just building it, you are supporting it. You are no longer just engaging with forgiving early adopters but a demanding mainstream market.

Scaling now depends on the founder's ability to hire great execs - functional managers that are not just individual contributors but leaders in their respective domains. Now it's about achieving through others, a very different dynamic to how things began.

Deciding on the right structure and the key roles presents significant questions. Founders without the experience of a senior leadership role in a prior startup or larger organisation can often be uncertain where to start.

• Which roles to prioritise?
• How to scope the position?
• What to look for in a prospective hire?

Of course, every case is different. But having a prepared mind can help in making the early moves, whatever the circumstances.

As a starting point, today we share some key insights from serial founders and investors that have supported their early scaling journeys.

Priorities

The organisation must evolve beyond the core functions that brought it this far. But it can't all happen at once. Priorities are driven by a number of critical factors:

Firstly, a founder must give themselves more time to do things that only they can do. To do this they must build a team with complementary abilities. This demands a high degree of self-awareness: In particular, the confidence and ability to manage at the senior executive level and a willingness to 'let go'. Experienced investors are attuned to quickly spotting these traits in aspiring founders.

Secondly, the functions required will heavily depend on the type of business being built. Business models with high degrees of operational complexity will need to hire a broader range of capability and experience.

For example, an enterprise-grade hardware plus software solution with a services wrapper is going to be more complex proposition to deliver than a self-serve app. Founders without complex solution experience will need to convince investors they are fully across this challenge during due diligence.

Thirdly: Timing. Everything is geared to how fast the business is growing. Startups that are beginning to find a repeatable and efficient growth motion will have already formed functional teams. During this initial scaling, it's unlikely the business will have yet been able to attract seasoned executive-level operators. Team leads will likely be designated 'Head of ...' leaving scope to elevate this position to 'VP of ...' when the business starts to really take off. Experienced founders save the big titles for this moment.

CEO direct reports must become the key levers of growth. But serial founders know if there are too many, growth will slow. Experienced founders aim for 5 - 7 direct reports. This enables them to spend sufficient time with each one every week to handle points of escalation, agree priorities, and underscore the culture.

Scope

Defining the key exec-level roles is never straight-forward. Founders, depending on their backgrounds, will have high degrees of familiarity with some roles. But other roles may be less well understood. And these could be the most critical.

For example, a technical founder may feel at home writing the job spec for a VP Engineering. But what about a CFO, COO, VP Sales, or General Counsel?

Experienced founders become masters at seeking advice from others. That includes other founders, advisors, and non-exec board members. The key qualification is that they have the experience themselves. Been there, done it.

They learn from the best operators they can get access to outside the company. If they're hiring a VP Sales, they seek out and meet with those leading sales teams in businesses at a later stage of development. They aren't shy about asking for advice in scoping the role and assembling the right interview questions.

The added twist to defining the role is the expected rate of evolution as scaling takes hold. Experienced founders write the job spec focussed on the critical business needs for the next 12-18 months. Then they hire an exec that is a fit for that specific stage. Hiring too senior a person too soon is often equivalent to hiring the wrong person.

Hiring

Serial founder and investor, Elad Gil, wrote an excellent blog on the topic of executive hiring that we have drawn on many times before. Gil's detailed assessment provides a great checklist of the key traits to interview for in a senior hire.

The 3 most critical traits from Gil's list that we hear repeatedly from founders are:

1. Functional area expert. This seems obvious but it's about their experience of failure not just success. Where are the common points of failure for their function? Are they the right person for the current scale and trajectory of your company?
   
2. Ability to build/recruit/manage a team for their area. Do they have a pool of talent they can tap into? Do prior employees want to work for them again? Do they understand how to build out an organisation with multiple layers if needed?
   
3. Owner. Owns problems and solves them. Can they engage in a 'black box' abstraction of their function so the CEO can engage on it but does not need to be involved day to day? Do they think like a business owner? Do they share the core values of the founder and have a strong cultural fit?

Founder/CEO role evolution

Just as the Founder/CEO is hiring in execs against a 12-18-month job spec, so too must they consider how their own role will change. Some founders shift into scaling mode with barely a second thought. But for others, it's a less appealing prospect.

There are many founders that are just hard core 'zero to one' operators. They are visionaries and value creators. They love the startup dynamic. But they are not always natural scaleup leaders.

As we said at the top, scaling depends on the founder's ability to hire great execs. Sometimes that entails recruiting a 'replacement' for their own CEO role, either in part or in full.

In the first instance, this could be hiring a COO to take over a big chunk of the day-to-day running of the company. In the second, it could be appointing a new CEO to run the entire business as it scales.

Founders that 'self-initiate' on this replacement strategy possess high levels of self-awareness. Those that decide to step back in some way often cite frustration with managing large groups of people and all the complexities that come with that in a modern organisation.

Instead, they love strategy, they love product, or they love some other aspect of innovation - but that's where it ends. Perhaps they just want to be an individual contributor. And that's absolutely fine.

The worst scenario is that they don't self-initiate, and this becomes a board/investor-driven change. At best this creates some bruised egos. Prospective investors that sense they may need to be the ones to raise the flag will often just pass instead.

In summary

Scaling depends on the founder's ability to hire great execs. Now it's about achieving through others, a very different dynamic to how things began.

Recruitment priorities will be set by the type of business being built and the rate of growth. Above all, a founder must give themselves more time to do things that only they can do.

Experienced founders become masters at seeking advice from others. That includes other founders, advisors, and non-exec board members. Then they write the job spec around the critical needs for the next 12-18 months.

Hire for 'ownership'. Does the candidate think like a business owner? Do they share the core values of the founder and have a strong cultural fit?

Some founders love the startup dynamic, but they are not always natural scaleup leaders. Is that you? If so, are you self-initiating on your replacement strategy?

Let's talk!