The Unicorn Trajectory is a data project that compares the leadership hiring patterns of B2B software Unicorns, and B2B software companies (the ‘Control Group’) that raised the same amount of VC money ($3m-$15m) at the same time as Unicorns, but have never been valued at more than $100m. The dataset includes 50 Unicorns and 50 Control Group companies, and from within those companies it includes 1,442 people with VP/EVP/SVP or C-Level titles in Unicorns, and 514 people with VP/EVP/SVP or C-Level titles in Control Group companies.
The full report can be found here.
Looking only at the first 5 years after raising a first round of $3m-$15m, we can see a big difference between the experience of each leader in Unicorns versus in the Control Group companies.
Unicorns have a ‘least experienced member of the leadership team’ that’s statistically less experienced than anyone in the Control Group, and during Year 3 to Year 5, the Unicorns have a ‘most experienced member of the leadership team’ that’s more experienced than anyone in the Control Group. This gap peaks at 23 years, when an average Unicorn has a least experienced leader with 6 years behind them, and a most experienced leader with 29 years behind them.
And if we zoom out and look at the macro view of these stats: what does this mean as an overall theme for Unicorns vs Control Group companies? What it means is that Unicorns are hiring people from either end of the experience spectrum, so diversity is the obvious thing that jumps out here. There are a plethora of statistics and reports that cite the benefits of having diverse teams, that grace our headlines every day… and the data here certainly seems to back that up.
But the diversity lens is usually focussed on gender, race, and sexual orientation rather than on years of prior experience: so what does it mean to have people with fewer, and people with greater, years of experience working toward the same goals?
Cristina Fonseca – one of the few female founders of B2B software Unicorns – recalls making the first leadership hiring decisions at Talkdesk, which she co-founded in 2011 – “When we raised money from Jason Lemkin (he participated in the Talkdesk Seed round in 2014) we struggled to take next steps with growing the team. We knew the business was in great shape because we’d tried out a few startups before and this one was going better, but we really didn’t know how to take things from Seed to Unicorn.”
Cristina and her Co-Founder, Tiago Paiva, founded Talkdesk almost by accident. They participated in a Twilio Hackathon whilst running their previous startup, straight out of University at Instituto Superior Técnico in Lisbon. They won the Hackathon, and the prize of a Macbook, and Talkdesk went from there. At that point, they had 6 years of prior experience combined between the two of them, so a lot of their leadership decisions were guesswork with some fantastic natural intuition.
But there were gaps in their knowledge, owing – at least in part – to their limited experience. Tiago notes that: “The first VP of Sales we hired was the right one. We really nailed the $15-20m segment. After that, that’s when things started getting a little complicated… because then you need the person who’s dealt with the bigger deals, the more complex sales. You need someone to tell you “this is the sales team that you need to build”. I really didn’t know, for example, that we needed a sales enablement team. So, the VP Sales that you hire at that point? They need to know how to do it, they need to have done it before.”
Cristina and Tiago added 3 people to their leadership team in the year that followed, ballooning their total years of prior experience from 9 to 52.
“When you have a young company, everything is against you, so you really need to optimise for the best people to do their job. And yes, some people might grow into the role in a couple of years, but you just don’t have those couple of years.” – Tiago says.
Cristina agrees – “We hired Gadi as COO at that point and – really, it was too early for a COO – but he had a lot of very relevant experience. He helped us get to the next stage in a way that I don’t think we could’ve if he hadn’t been there. At that point in the business growth, it’s all about velocity. You have to bring in people who know the scaling playbook, and Gadi was one of those people”.
Gadi Shamia had 18 years of experience when he joined Talkdesk. He’d spent 6 years at SAP and then been COO of Echosign for a stint as well, so he certainly knew the playbook.
So what was it like for him, working with a junior team? “[The CEO] may be younger than you, and you may be more experienced than him in many aspects, but if you can’t find a few towering strengths that the founder/CEO has, don’t join. You will never really respect nor learn from him. If you don’t complement each other, it is not going to work.”
As a Founder with limited experience, this is exactly what you are looking for in someone who should join your leadership team: you are looking for someone who has spent time working with the playbook in one or more software businesses – they may have spent more time on this than you have, or they may have spent less – but what is critical is finding someone who has this playbook experience but who also recognises that they do not know it all, and that they respect whatever qualities and experiences got you to where you are, and want to fill in the gaps.
And what if you’re a Founder or a CEO with a lot of experience: should you hire leaders with less experience, to balance things out?
Mitchell Hashimoto, Founder of Hashicorp – certainly thinks there are benefits to it. “We hired David McJannet as our CEO in 2016 [around 18 months after their Series A] who had over 20 years of experience, which was a great decision, both operationally and in terms of the ease of growing.” Shortly before they hired David, though, they hired a handful of other people ranging from 3 to 24 years of experience.
One of those people was Jack Pearkes, who they hired as VP of Engineering and who had 5 years of prior experience. “I’d worked with Mitchell and Armon (Mitchell’s Co-Founder, Armon Dadgar) before so we knew what the dynamic would be like before I started, and they knew what my specific skills were. There were definitely downsides to having less experience than the average VP has – sometimes you can feel like a bit of an imposter in the role.”
“But you also have this rare experience of having done things from first principles. What you might lack in wider industry knowledge, you make up for with a deep understanding of how Hashicorp works, having been there from so early on. Not many people can say, for example, that they have experience in building distributed engineering teams in businesses that go on to become Unicorns – one of my unique value propositions is that I’ve built a team in that environment, and that’s not something that many VPs with 20+ years of experience have done before, but it is something that’s very useful to the business.”
“Working with people who have more experience, though, gives you this alternative view from a much higher altitude. There have definitely been times when I’ve thought that the decisions being made by more experienced VPs at Hashicorp were too aggressive, in terms of scale. But they had been there before, so they could see two or three years over the horizon and put measures in place for that level of growth, in a way that I couldn’t see or do. That kind of experience – you can’t make it up, you have to have done it before.”
Jack isn’t alone in this experience – the combination of having less experienced people in leadership positions in the very early stages, who take on challenges with really nothing to work from in terms of capital, brand value, or any other element of a ‘refined scaleup machine’, and then complementing them with VPs and C-Level people who have 20+ years of experience to take on the more tried and tested elements of the scaling process, is a pretty common phenomenon in Unicorns.
Zenefits brought in Matthew Epstein with 5 years of work experience behind him to be VP of Marketing and then brought in Jessica Hoffman as VP Communications a year later, with 23 years of prior work experience. Unity Technologies hired Brett Seyler to be VP Strategy with only 5 years behind him, shortly after they hired Tony Garcia to be their Chief Revenue Officer after 24 years of working. These are just a few examples of diverse hiring, in terms of years of prior experience.
A word of caution about hiring less experienced people in the very early stages of the Unicorn trajectory, though: there is only one example of someone being hired into a VP or C-Level position in the whole Unicorn dataset who has 0 years of experience (i.e. they were in their first job), out of 1,442 people. Furthermore, Unicorns on average hired 1.4 people with fewer than 5 years of prior work experience as VP or C-Level employees, out of a total of 26 people hired into VP or C-Level positions in each Unicorn. Hiring inexperienced but exceptionally high potential people is a great idea if done sparingly. If you’re a Founder and you look around the table and think ‘everyone here is in the biggest job of their life’, you probably aren’t in great shape for hypergrowth, but if you’ve got a few people at the junior end of the spectrum and few at the senior end, it’s a great sign.