I’ve been employee #4, #5 (twice) and employee #6 at startups. I’ve also hired people for these early roles twice as a founder. While the focus is often on startup founders, the first few hires are often make or break in a startup’s success.
That’s why I’ve always been amazed at the lack of attention and care that founders place on how to treat early stage employees. Rather than focusing on bad behavior, I thought I’d focus on how the optimal way for founders to treat early employees who sign up for their vision.
Pay market salary
This is probably the hardest for founders. They are taking a nominal salary and they expect others to do the same. The mistake is for the founders to assume that the risk/reward equation is comparable for early stage employees and 99% of the time it’s not. If you’re a cool startup, you can probably get away with paying people lower than market rate. However, pay market rate or higher if you want top talent to stay and help build for the long-term.
If you’re hiring the right people at the early stage they are entrepreneurial, and maybe already have founded a startup or two themselves. The best thing you can do for them (and yourself) is to take whole swaths of your company and give them ownership. Hire a designer? Let them own design. Give product to your PM. The more ownership you give, the more buy-in you will have, so don’t feel the need as founder/CEO to own everything.
Be generous with equity
Set aside 20% for employee distribution and give half of that to the first 10 people you bring on your team. These are the people who will be just as responsible for your startup’s success as the founding team, so make sure that they get the equity they deserve. And for goodness sake, give them a four-year vesting period (w/ one year cliff). Five or seven-year vesting periods will just make your employees resent you. Four years is enough at any company and you can always keep interested people with RSUs after 4 years.
Be open and transparent
Early stage employees are taking a chance on you and the company, They can go somewhere else and get a 401K or a product roadmap that’s been baked out for two years. By taking a chance on you and the company, you should be open and transparent. I’m not talking Buffer/Mattermark transparent. I’m saying though that most information: revenue, burn, fundraising, partnerships…. i.e. “the stuff that really matters” should be shared as openly as possible. If things are going well, it’s great to share that with the team. If things aren’t going well, it’s better to treat your team as adults and help find a solution.
Early stage employees take enormous risks to join your startup. The more you do to minimize the risk, the happier your team will be.