- Unicorns hire for a far wider range of experience and perspectives, creating a magic soup of thinking
- The best founders hire way more senior people much faster in the first 12-24 months post Series A
- And the tenures are shorter as they bring in new people for the next stage of the journey
Many people ascribe to the fact that for tech founders, their most important skills are why, when and how to hire extraordinary people.
When we look at the best founders in our portfolio around the world, they all share an uncanny ability to attract extraordinary, game changing talent into their businesses and are constantly looking to level up their teams with ever better people.
At Notion, we have always believed in the power of Game Changers, and Chris Tottman – a self professed people-geek – has turned that into an art form. He will pursue game-changing people for his companies for years – indeed one of his most recent hires was someone he had stalked for more than five years.
But we had a problem. We only had anecdotes to back up our assertions. Until now.
Enter Maddy Cross. Maddy is Notion’s Talent Director and is turning the art of hiring Game Changers into a science.
You can listen to this interview here or read more below.
Maddy has ingested and processed a huge amount of data on the hiring habits of the world’s most successful tech companies. What inspired you to do this?
There were three reasons.
Firstly, for a long time we had a gut feel about how to build leadership teams for our companies and certainly Chris Tottman talks about how it works. But we were giving advice to our companies – you need to move faster, you need more people with more experience, you need to look globally, you need people who have worked in VC-backed, fast-growth companies – but we didn’t know if that was true! We believed it, but if a founder challenged us, we couldn’t really back it up. So I wanted to make sure that what we were saying was correct.
Secondly, just generally there is a lack of data on people related stuff, apart from compensation. We are software company investors, so 80% of the money we invest in companies goes on people, so it’s important they get that right and there wasn’t really any data on how to deploy that capital.
Lastly, founders have so much going on, so it is easy to forget that at the same time as we are giving them advice on who they should be hiring they are also thinking about runway, their next runway, which office they are going to rent, how are they going to fit in a visit to a customer, how are their partners and how are their kids coping. So if we can give them data to back up your recommendations, it makes so much difference to them. So, for example, if I say to them “100% of unicorns had at least one person on their leadership teams that went to a top 50 university” it’s really easy for them to understand.
So it’s really those three things. We need data to back up our advice, to help founders deploy their capital well and to get the message to them quickly.
I was also inspired by the demonstrable impact of a few key hires in our portfolio. For the majority of game changing hires, there is a metric that changes when someone like that joins the business – for example if its a CRO you will see the results in the revenue – if its an amazing Chief People Officer you will see the results in employee engagement.
And all the data we needed was on Linkedin. We just needed to go through it.
We were looking for data to validate our beliefs but we also found data that gave us entirely new insights.
What did you learn and what surprised you?
One thing I expected, that is not true, was that average experience per person on the leadership team really mattered.
Just to give an insight into the dataset we have created. It is effectively a list of everyone who has had a president, chief or VP title in B2B SaaS companies that have become unicorns in the last ten years, which is about 1,500 people. We then took the same dataset for B2B SaaS companies (that raised a similar amount of money at Series A – between $3-15m) that did not become unicorns (which has a similar number of people in it).
So we have one set of businesses that have done exceptionally well, and another group that have done well but nowhere near to being unicorns.
Then within that dataset for every person with a President, Chief or VP title, we have the years of experience before they started the job, how long they were in that job and in what function, where they went to university for undergraduate and / or postgraduate, where they worked before, whether they had been in the military, and whether they had started a business before.
I was expecting to find a big difference between the two groups in terms of experience per person; I was expecting that unicorns hired more experienced people. But I didn’t find that at all. The experience per person is almost exactly the same.
The really big difference is just the number of people the unicorns hired and how quickly they hired them.
In the year after raising $3-15m companies that went on to be unicorns hired between three and four people at VP or C level whereas companies who did not go on to become unicorns hired half a person.
So in the first year after Series A, unicorns added roughly 35 years of experience to their leadership teams, whereas non-unicorns added five years. It’s a huge difference; just one year after raising Series A, unicorns have almost double the experience of the control group (NB they all typically start with the same number of people on their leadership teams of 3-4).
This isn’t when these unicorns were famous, this is years before. So for example, when companies like Hashicorp were unknown brands.
The second most interesting thing for me personally is that, while Unicorns generally hired more people from top schools (100% had someone from a top 100 school versus the control group, where the number was 65%), they also did a much better job of hiring people that had no university education – hiring four times as many technical leaders that did not go to university as companies that did not become unicorns. So, what we are really seeing is that unicorns did an amazing job of hiring people, not only at the top of their academic game, but also people that were practically at the top of their game, that were so great at their functional expertise they had become VP or C Suite level, without going to university.
The key thing for me is that these founders are looking for differences in the people they want on their teams. People from top schools who are perhaps more structured in their approaches and thinking and top performers who have not had that education and approach things differently. And together you get this magic soup of thinking, but the common factor is that everyone is at the top of their game.
Another thing that’s especially interesting with these tech leaders, is that many did start a university course and then dropped out because they’d taught themselves to code. We know this from stories about Bill Gates, Mark Zuckerberg, Steve Jobs, but I still wasn’t expecting that to be the case so often.
But none of the findings are that surprising, when you consider some of the very best tech companies.
One thing that didn’t surprise me is that tenure in unicorns is shorter.
In unicorns, leaders tend to stick around for approximately three years, whereas in non-unicorns it’s closer to four years. What we are seeing there is that unicorn founders tend to be more brutal at letting people go when they are not at the same stage as the company. It’s not like a sacking, it’s more like “you were the amazing person that took us from $10m-£25m, but going from $25m to $50m isn’t your jam.” Then they bring in someone amazing to take the company on the next leg of the journey.
Whereas in non-unicorns, they just hang on to people for longer.
If you speak to someone like Bill Maciatis who was CMO at Zendesk and then CMO at Slack he’ll go somewhere for 2-3 years and give it everything he’s got. It’s high octane; he makes a lot of changes and does ground-breaking things, and at the end of that there is only so much energy he can give, so he moves on. These people burn bright, but for a short period of time.
We are doing our best to keep the data current.
Every time a new B2B SaaS unicorn is announced we add it to the data set and will then remove companies that are more than ten years old. So the data set is currently 2008 to 2018, and in the next few months I’ll strip out the companies from 2008.
We are also looking at businesses that have been valued high in a short period of time, but have not yet gone on to become unicorns, because they just haven’t had the time.
For some founders the data can be challenging and stops them from shying away about senior hires.
The data can change the preconceptions very quickly.
The conversation goes something like this:
VC – “We’ve just given you Series A money, who are you planning to hire and when?”.
Founder: “We are thinking of hiring a VP Sales or CRO, we’ll kick that process off in six to 12 months.”
VC: “The average unicorn is typically hiring their first VP or C level person within three months of their Series A, how do you feel about that?”.
That conversation would previously have been had over 3-6 months, can now be managed in 1-2 hours. It’s condensed the process, but it is slightly more prickly.
The way the data is presented is important
We chart out the company in question, comparing them to the average unicorn companies over a five year period, giving them a snapshot of how they compare.
The difference is often quite stark. For example, if a company is three years after Series A, then the average unicorn would have approximately 180 years of experience and often the businesses we speak to have 100 years of experience. So they have the same ambition, but an entirely different level of ability within their most senior team.
It’s important to state that we don’t use the data to point fingers, as there are a lot of differences in the data. For example, Asana didn’t have anyone apart from the two co-founders on the senior team. So its not to say it’s not possible for you to be an outlier, it’s more of a conversation to start a dialogue. Do you feel under-supported in any particular areas? Let’s look at some unicorns that were similar to you.
Given this data, what stops companies from going out and hiring great people?
There are so many great, great examples of founders making huge hires really early on and saying, “I could never have done it without them.” Look at Mark Zuckerberg hiring Sheryl Sandberg, Larry Page and Sergey Brin hiring Eric Schmidt – founders know these stories and yet they still find it hard to do. And I don’t blame them, because it is really hard.
It may be about the money. Often, at the point a company raises Series A, they have been bootstrapped and may not have spent more than £60-£70,000 on one hire and even that felt uncomfortable. And now here we come saying “you need to staff up your leadership team and you’re going to bring in three people with a basic salary of £150,000 each, and you’re going to pay search fees for each of them.” This can feel incredibly uncomfortable. So there is a cognitive change that needs to take place and I can completely understand why.
It may be that founders are concerned that they will hire people, in suits, who will run their culture. But the probability is that the person they are about to hire was previously in a startup, they are a professional second in command in startups and they know how to be culturally appropriate.
Another concern of founders is the ability of 3-4 senior game changers to be able to work together. But again, you are hiring people who have been in start ups before and they know how to work well with other great people.
A big one we see though is what I call ‘preemptive guilt’. The search for the senior person will span Europe, maybe further, so if, for example, you are in Stockholm, you will most likely have to relocate someone and their family. Straight away, the founder starts worrying about an imaginary Chief Product Officer, relocating their partner, their three children and their dog. “What if I can’t give them the perfect job, what about their children!!” That kind of guilt is way more common than you would imagine. But as a founder, you can’t take that guilt on. The best thing to do is to make every candidate aware of the risks associated with an early stage business, while also making clear you’d love them to work with you, to build an amazing business. But the decision to join you and relocate their family is theirs, not yours.
Founders can apply a simple framework to help them choose the right person.
I advise founders to satisfy themselves of three questions:
- Can they do they do the job?
- Do they want to do the job?
- Do I want them to do the job?
Can they do the job?
This is obviously about their skills and proven pedigree, interviewing against a job description, with five key bullet points you need the person to be able to do. And simply go through those five things. For example, build a sales strategy for the US: how have you done this before, how would you do it here.
Do they want to do the job?
This talks to their fundamental motivation, asking them deeper questions: what do you want from this job, where do you see yourself in the future.
Do I want them to do the job?
The last is about cultural fit. This is about values and going through each of the values and what it means to them. To test for this, you can ask them to give an example of how they have behaved in a certain situation. And its important to do this last, because it’s no good having someone you really like, who would be a great cultural fit, growing to like them and ignoring the fact that maybe they don’t have the skills or motivation needed.
The last part of the interview process is to get the candidate in with the leadership team and work through a challenge with that candidate, for example “how do we enter the US”. This gives a real world example of how that person thinks when they are on the spot and what they are like to work with. It’s so much better than asking them to do a presentation because this gives you a far better idea of what they are like to work with.
Don’t scrimp on the search fees.
Often founders try to avoid paying search fees, because it’s a lot of money. But when you think about the scale of the networks they tap into, they will genuinely be trawling the world to find the best person. And then imagine that they will have someone in the firm working on that brief 2-3 days a week, for up to nine months to a year. So if you end up paying them £50,000, it’s really not that much money for what is essentially a part-time job for the best part of a year.
We have a suppliers list of categorised and vetted recruiters and we share this with Accel, Balderton, EQT and a handful of other funds.
So we help founders understand why to use a search firm, then help them select a great search firm and lastly help them run a solid interview process.
There are a few companies that do this really well.
GoCardless are doing an amazing job and their CEO, Hiroki, is doing an exceptional job of putting faith in the people he hires and faith in their ability to work together whilst being respectful of the culture and it works incredibly well.
Hashicorp have an amazing track record of hiring exceptional people for the stage they are at and then, when they pass that stage, keeping those people in the business but bringing in people above them to help the company and those people grow. The way the founders were able to achieve this is by leading by example. A year or two after founding the company they stepped back from running the business as co-founders and brought in an exceptional CEO. They then did this with one of the VPs Engineering, who felt out of his depth as the company grew, hired his own replacement and stepped down to an engineer role. That VP Engineering had built tech teams in the hundreds in her previous role at VMWare, so was completely comfortable with the next stage of growth.