Hiring Your First C-Level Employees at a Scale-up
Below is a summary of the main conversations that took place in a recent Barclays Rise webinar on ‘Hiring Your First C-Level Employees’.
It features perspectives from three different angles: Alya Dikouchine (People & Culture Lead for 3S Money), Ellis Seder (Talent Agency, Santa Monica Talent), and Paul Wilkes (a VC Investor from osneycapital.com).
They discussed:
When you should hire your first C-level employee.
Funding, finding and retaining talent.
Future of work: fully remote, hybrid or office?
Salaries and stock options.
How to fit a C-level hire into your funding plans?
Paul: Hiring first employees is quite early on in the lifecycle of the business (pre-Seed, Seed, or Series A).
As a VC, we want a startup to make sensible assumptions about how much they think it’s going to cost to hire the relevant employee. For example, how long will it take you to hire them? It takes time to bring them in and settle them within the team.
Hiring a C-level employee has to be part of your use of funds. Make assumptions on timings and cost, get advice from experts like Ellis, and get a feel for what a person’s price in the market is. Can you meet that price?
What’s the cash and shares breakdown of first employees?
Paul: For your first employees it’s really about whether you can get them to buy into your vision. If they do, that’s a really good sign for an investor.
“Can you create that reality distortion where people buy into the excitement and vision of your business?”
Can you create that reality distortion where people buy into the excitement and vision of your business? If so, you may get a discount on the market rate compared to a company that is post its growth phase and so not as ‘cool’. That will then iterate itself into equity or stocks in some form.
Ellis: If your company is early-stage, it’s always good to give someone two options. One: a slightly higher base salary and lower equity potential. Two: a lower base salary with a higher equity.
Financially you want the candidate to take the second option but it gives you a good indication of their risk appetite, and also lets them know that you’re not going to compete with a blue chip company.
Who should be your first hire?
Ellis: I think it goes back to the founders and their skillsets.
Let’s say there are two founders: one technical and one commercial. You can work backwards from there… What’s missing? Is a COO needed as a first hire?
Alternatively, what happens if there are two technical co-founders? Maybe a Chief Revenue Office is needed.
What kind of person should you look to hire?
Alya: It’s really important not to try and hire a certain type of person.
By bringing on a real variety of employees or teammates, you have loads of different experiences and approaches that you can pull from. You get this real dynamic feel.
That startup fuel is what you want to hold onto for as long as possible. Just because we’re working with more and more clients, with more plans of actions and new products being rolled out, it doesn't mean our hiring criteria will change. Hiring is quite organic.
But I do believe hiring a Head of People as early as you can is essential. Whether interim or permanent. I think if you bring someone on with experience around people, talent and infrastructure, it’s going to solve a lot of future problems.
What’s the future of work? Fully remote, hybrid, or office?
Alya: There was a move into hybrid but now we’re seeing everyone just keeps coming back into the office. There’s the buzz of being able to go into a meeting room and action things quicker. There’s a speed and communication element that really powers through and you’re able to focus on getting stuff done and have vision alignment.
Ellis: It splits into three very clear categories: either fully remote, hybrid, or office-based.
I’m noticing that in financial services, FinTech, law firms and blue chip consulting it’s 4-5 days a week in the office. However, what’s interesting is that it depends on the function.
It’s hard to build a Sales team fully remote, although some companies are trying it. Whereas having your software development team fully remote has been a tried-and-tested model for the past 20+ years.
Maybe we’ll see the back office (Software, Finance, Support) go remote, middle office (Marketing, HR) go hybrid, and front office (Sales) work from the office.
Does remote vs hybrid make a difference in terms of investment appeal?
Paul: It really depends. I’m slightly sceptical about hybrid models unless there’s a real alignment on what days are in and what days are out.
But all in the office, or all out, are both completely valid models. The all-out model gives you a whole world of choice when it comes to talent, both time zone and cost wise.
Ellis: There’s possibly an argument for a two-tiered salary for remote versus in-office. In the US, if you’re a Google software developer and you’re being paid a Silicon Valley salary but you’ve actually moved to Arizona, do you still command the same salary for Silicon Valley?
I don’t see any reason why that couldn’t start happening in the UK, where you have a London salary versus a remote salary. Having said that, this needs to be handled with care and maybe you give people options.
For first hires, what type of job titles would you recommend?
Ellis: One challenge in the London scale-up market is the job titles are very inconsistent and there’s no synergy.
Let’s say you want to bring in your first Head of Marketing… What’s the job title? Is it VP Marketing? Marketing Director? CMO? Essentially they’re going to do the same role, but do different titles mean different salaries?
Essentially you need to ask: does the person have the capability to go to a board meeting and speak to investors? If so, that should equal a C-level title.
If you do give someone the C-level title then you’ve got little room for growth. There’s nothing higher! You can’t bring in someone above them, so you’ve really got to think about whether this is the person you can see being with the company for 5+ years.
How do you keep an exciting startup culture after you grow?
Alya: When I joined 3S Money last February to start the people function we were roughly 25 people. Now we are 80. It’s been a steep learning curve.
You create your startup or scale-up atmosphere. You decide, until a certain point, when you want to become quite corporate and stuffy about it.
So far we’re trying to really hold on to that startup sentiment because it’s the playground of the FinTech space. That’s the time where you can get the most done and be the most agile. But a more corporate culture is definitely coming where you have more and more structure with titles and job specs.
What do you think about the concept of Interim C-level consultants?
Ellis: I think something that’s overlooked is bringing in people early on an interim basis.
Typically founders think of needing a full-time Head of Product, Head of Marketing, Head of HR etc. But London’s got such a strong interim talent pool of highly experienced scale-up executives that I really wouldn’t dismiss interim as an option early on. You don’t have to give any equity away and you get a much higher calibre profile than if you hired on a permanent basis.
Again, if you look at the US, fractional consulting or portfolio careers are common. You notice it in HR, Marketing or interim CTOs versus trying to hire that full-time CTO (which can be really difficult and expensive).
What about salaries?
Ellis: We started noticing up to 50% pay rises last year (2021). I don’t think it’s sustainable in 2022 2H and 2023
As a candidate, it’s never been easier to interview. You can organise a video call and have 2-3 per day, whereas up until 2019 you may have had a couple of interviews a week because you physically would have to go to the office. We've seen candidates in 5-10 interview processes at the same time. This will stop soon.
Alya: Increased salaries really puts the pressure on internal teams to sell the same vision that the founders were originally selling. As these people are interviewing with multiple people that day, you’ve got to make sure you sell what the company vision is and get candidates excited.
I think that’s where partnerships with recruiters come in. I work with Ellis and that’s how we hired our fantastic Chief Revenue Officer.
I generally like to have trusting relationships with recruitment agencies, particularly for the C-level hires because, as you mentioned, it is a small world. You lose credibility pretty quickly if a number of people reach out as it makes it seem like you’re looking, but you have to make it look like you aren’t.
“I have to put trust in the relationship that I have with the recruiters that I work with, and trust that they understand our culture and the sort of people we’re looking for, which Ellis does.”
What’s the difference in salaries between the UK and US?
Ellis: When you compare London salaries to US ones, it’s still really good value to scale up a business in London which is why you see the American firms still coming over and building huge offices e.g. Google, Facebook and VC-backed US scale-ups. London salaries are lower than New York or San Francisco by quite a big distance.
A final word from Santa Monica Talent
Attracting and hiring your first employees is key to unlocking the potential of a startup or scale-up.
As you’ve read above, there are a variety of considerations to make when hiring. From having a distinctive value proposition, to finding the right talent to fit and grow with your organisation.
Want some help? Get in touch today for a free consultation.