SPEAKER_02: I've been trying to hire our first engineer for a year and like I can't like find anyone. And it's not because there's literally no one with the word engineer on their resume that they can hire, right?
SPEAKER_00: Hello, this is Michael with Harj and Brad. Welcome to Inside the Group Partner Lounge. So as YC Group Partners, we find ourselves repeating the same advice over and over again to startups.
SPEAKER_01: Before COVID, we'd often gather together in the Group Partner Lounge at the YC office to try to figure out why this was the case and how we could help startups figure it out faster.
SPEAKER_00: But now that we're all online, we're doing it in front of all of you. Today, we're going to talk about startup hiring. So Harj, frame this challenge for us because man, this is something that we debate founders with all the time.
SPEAKER_02: Yeah, so one of the most common things founders tell us they need to do during a YC batch is hire. And one of the most common bits of advice we give is to not hire. This is something we should talk about. And like, you know, where we sort of have headwinds in giving this advice is if you look at the list of the top YC companies or top startups, they have thousands of employees. So obviously you do have to hire in order to build a big company. We totally get that. And so when we give this advice to the startups to not hire so much, a lot of, you know, there's a lot of word out there saying, oh, like YC partners don't get how to build companies. Like, you know, you need to hire, you need to like really ramp up your hiring. And so we have to find like the right level of advice that lands with founders and gets them to make the right decisions.
SPEAKER_00: Yeah, for me, when I think about this challenge, what's tricky is that almost all the advice that's written online about hiring is written for post-product market fit companies. Folks that have products that users love and those companies trying to scale up to offer that part to more and more people. Most startups are pre-product market fit. So now we confront this like very large dilemma, like you're reading advice for a stage that not only are you not at now, but odds are you will never be at. And it turns out if you apply that advice to your pre-product market fit company, you might accelerate your death. So how do you deal with that? That's the challenge. So, Brad, why don't you start? What are the lies that YC founders and founders in general tell themselves about why hiring will solve all of their problems?
SPEAKER_01: Sure, well, to jump into a couple of them. So the big one is the thought that if you only have more people, we could get more things done. I hear this every week from a founder.
SPEAKER_00: We need more features, Brad. We don't have enough features. That's right.
SPEAKER_01: We need to get the Android app out. We need to get the iOS app out. We need specialists for each of those different apps. I've even had people tell me that we need to hire more people so that we can reach profitability faster. And.
SPEAKER_00: Did those people bring are they somehow paying the company instead of collecting salaries? They're receiving negative salaries.
SPEAKER_01: That's an interesting business model.
SPEAKER_00: Fascinating. Harsh, how about you? What are you hearing as the reasons why founders give to hire away?
SPEAKER_02: Yeah, I think another one is just it's a marker of progress. And so founders feel like investors will be more impressed with them if they have more employees. I think they feel like customers will be more impressed. And yeah, it risks becoming like a KPI, right? That you focus on. It feels good when you tell your friends to you like, oh, like, you know, how's the company doing? You know, oh, yeah, we're at like 100 employees now. So I think like, you know, things must be going great.
SPEAKER_00: I think this is one of those fun stats that like second time founders react to differently than first time. I remember when we were all going through YC, like number of employees might have been the primary KPI for every one of our companies. And I feel as though like after managing people, I'm like, oh God, if I could just do it with fewer people.
SPEAKER_01: That brings up, you know, another set of lies that the founders tell themselves. And we all told ourselves at some point, which is that just because you are a startup founder, it doesn't mean that you are good at hiring and managing people. And I think the first time around, you don't know that. And the second time around, maybe you do know that you are not good at those things yet. And I think, I think some of that is because when you're running your company, you're thinking about all these problems that the company has, all the problems that you're carrying around in your head. And then you magically hear that some smart person is available or looking for a job. And so that's another lie you can tell yourself is that I should hire that person because they're available. This is an opportunity that I need to seize. The thing is though, is like some companies do that, but they are very large companies that product market fit, not your startup right now. Google does that well.
SPEAKER_02: Yeah, I think there's also a confidence thing. So sometimes when I'm talking to founders, I feel like what happens is once you're a startup founder, you kind of forget how hard it is to make the leap to start a company and try and go from like zero to one on anything. Because you're just like slapped in the face by reality every day. And so like early stages of the stages, we're dealing with companies, right? Like the challenge is in just figuring out like, what's the first experiment to run, whether it's like sales, marketing product or whatever. And then it's really tempting when someone like comes along, who's got a resume where they were like VP of sales at some company you recognize like, Oh wow. Like sales problem fixed. And like you underestimate like, I'd like V tenured VP of sales might be amazing at managing a team of like a hundred salespeople, but like they are probably not as good as you at figuring out like how to make the first sales call, like how to get the first 10 customers, like all this stuff that you would assume they could do. But they might be totally lost. Um, and I think that's actually more common, right? Like, do you guys see that when you're talking to these companies and you're like, man, like you're a founder. Like this, you're like, you have a unique skillset, you know, you can't hire for that.
SPEAKER_00: Like, you know, the problem probably better than anyone else. You certainly know how your product works better than anyone who's selling it. Right. Way better.
SPEAKER_01: Yeah. That's the, the, the way that that looks like in my office hours is someone shows me a plan to hire some people and we have to go down the list and I have to say over and over again, that's your job. Nope. No, that's your job too. That's your job right now. Um, because there's just nobody else that can, can do a lot of the things that the founders do at this stage. You can't hire for some of this stuff, like figuring out what the customer wants, figuring out how to adjust your product so that it does the things that they need it to do. That's the founder's job.
SPEAKER_00: What about this one, Harj? I think you've seen this one. Like I need an exec team. It's time to start hiring execs. Like I never quite understand why, like, do you have any experience on like why that happens? Like what triggers that in someone's head to be like, Oh, now it's time. I need an exec team.
SPEAKER_02: I think it's the, I think it's the cargo cult thing, right? It's like, there's just so like the majority of startup advice and stories that are out there are from the already successful companies. And so if you look on the surface of, ah, like, let me go look at the about page of Airbnb, Ooh, like chief operating officer, chief blah, blah, blah, officer, like, like I had all those squares on my team page are missing. So I better like go hire those people in. Right. I think, I think a lot of it comes down to that.
SPEAKER_01: Yeah. And I think a lot of the times when I see it, it's because the founders already have the relationship with the person. Maybe it's someone they've worked with before, or they've known in some other context for awhile. And they figure, well, I'm going to hire this person eventually. I might as well hire them now and give them this fan. And that person just wants the fancy title. Cause that's important to them for legitimate reasons, but it doesn't mean that it's a good idea to bring them on right now before you have product market fit.
SPEAKER_00: You know, the other one I see a lot and it's, I actually had office hours today on this subject was a founder saying to me, it's like, well, we know we're going to have this problem in the future. So we might as well just hire the person who can solve it now. And it was like so funny. Cause I was like, as an advice giver, here's how we get in trouble. Like this is what I explained to them. I was like, well, your startup has like one or two six alarm fires burning any given time. Right. And those are where you should really be focused, but there's also like 50 smoldering fires. Right. There's like 50 little smoke coming up. Right. Some of them is going to turn into big fires. Some of them are not. And I always get yelled at when I tell people don't hire people or worry about the little, you know, the little smoke coming out somewhere else. And the founder always comes back to me a year later and it's like, well, one of those 50 things turned into a fire and I saw it. And if I had only done this, we could have prevented it. And I'm like, but the 49 other ones did it. And so like, it's still better to fight the fire after it's like a massive fire. And I think that that's intellectually frustrating. Right. Like you, you almost feel like you should be able to break the future and act. Whereas so much of the startup is just reacting to when things are horribly broken. I love the old, like, you know, we know what we need to hire because we know what's going to happen in the future.
SPEAKER_02: I mean, especially in the last couple of years, like, can you imagine like, you know, like Airbnb, like COVID hits that kind of change up their business. You imagine like Instacarturing Amazon buying Whole Foods, like that probably changed up the business. Like there's just, it's just like, yeah, like when you're at the earliest, earliest stages, every, like you need to be able to turn the ship, like very quickly on a dime kind of, because you just don't know what's going to happen. And I think that's what founders don't appreciate is like, when you, when you don't have product market fit, you're really early and you just kind of need to take it day by day almost. And like the bigger the ship is, the more people you've got to now coordinate to like get them rowing in the same direction and turn the ship. And if it takes you like three months to turn the ship, you might just be dead. Boom.
SPEAKER_02: So let's, let's go to the devil's advocate side though.
SPEAKER_00: So, you know, Hard, you brought this up, like the first point, which I think is like really important is like, if you're going to be a big company, you're going to have a lot of employees eventually, right? Like, can you speak to that? You know, big companies do have a lot of employees, valuable companies have a lot of employees. It's true. And like, and again, this is where the advice is nuanced and has to be personalized, right?
SPEAKER_02: So like, this is why, so when we're like, think when we're doing office hours, it's why we care so much about figuring out like, what's your growth rate? Like how much runway do you have? Just so we can get a read on, okay, what kind of company are you? And if it's like a post-product market fit and things are going well, accelerating, like that's when you start hiring. But like, if you're not, then the advice is not to, and I get, like, if you look at all the top YC companies, yes, they have a lot of employees, but like, and Michael you've been there, you can see this like Airbnb, like they didn't hire a thousand employees in the first year. Right? Like those employee hiring counts are pretty backloaded. Well, let's take Airbnb as an example. Right?
SPEAKER_00: So, you know, we'll screw with history a little bit and just say that like, they launched at that South by Southwest in the beginning, that would have been about six months before getting into YC. I think that means that outside of the founders, it took them 18 months to hire their first employee before their first event. 18 months. And it was six months post graduating from YC and raising money. And it was funny because, you know, the first person they hired was an engineer and it was two designers, one engineer, and Nate was like drowning and they still took six months to find someone who was great. And that helped establish the culture. I remember Stripe being very similar to that. Stripe, like they, they, they certainly, they slightly, so they certainly hired people, right.
SPEAKER_02: They, they certainly had a team. And if anything, actually Stripe was a little, like it went against the conventional wisdom. Cause I think it had a team of maybe eight to 10 people pre-launch. But like the product took a while to kind of launch publicly and just like, I think they were just like three people for like the first year. At least, and possibly 18 months. So again, like the timelines are probably like have a bit of margin of error in them, but the point is like, they, they really hired slowly at the start and then ramped up when they started becoming these like, you know, machines and rocket ships. So like another devil's advocate position is that like sometimes the specialist can save the company a lot of money.
SPEAKER_00: So we actually encountered this in Justin TV and Twitch where we hired someone from YouTube who worked on scaling out their video instructor, infrastructure. And that person, his name is John, was ridiculously helpful in saving us a ton of money. Like he taught us about free peering. Like he taught us everything. I think that what this company has done is it's, it's been a huge help to our company. I think that what's interesting though, is that John wasn't the first person that worked on video. You know, Kyle, co-founder, VP engineering was the first person he built the video system. And like, we only brought on John when we had the problem of spending too much money on bandwidth. And then he was the appropriate specialist to help us. But like our first problem wasn't spending too much money. Our first problem is nobody cared to watch video on our product. So saving money wasn't really the problem. Any of these other deviled advocate positions you guys thinking about?
SPEAKER_01: Yeah. The other broad thing though, that's good to acknowledge is that every CEO that ever gives a talk, any successful CEO that ever gives a talk about what they do and their most important skill always says hiring. And so yes, you're going to, as a founder, you're going to have to learn how to hire. You're going to have to build those muscles and get really good at it. Our job though at YC is to say like, that's not the most important muscle to be building right now. So yes, you will get good at it, tuck that away in your brain, but just not right now. That's not the thing that's on fire to figure out.
SPEAKER_00: Yeah. I think if we move to the takeaway here, what's so interesting is I find it so interesting how often YC is critiqued on these points, to be completely honest. I think about what a normal VC, someone who sits on a board, what most of their experiences with is with post-product market fit companies. Whereas what most of our experience with is with pre-product market fit companies. And so I can see why both founders hate our advice because nobody wants to be told they're pre-product market fit. And VCs are like, you guys know what you're doing? But what's so weird is that the smartest founders somehow kind of innately get this. Like the smartest founders, I find like they don't want to sit in a room of 30 people when they're trying to figure out a really hard problem. Like that's never how they succeeded in their past. And so it's interesting how they somehow innately get like, oh, a smaller number of really smart people are probably going to figure this out way better than a large number of mediocre people. I also think, I also feel like with the highest quality founders, they have just such high standards for who they want to work with.
SPEAKER_02: That part of the reason why they're like, oh man, it's so challenging to find. So I've been trying to hire like a real, I've been trying to hire a first engineer for a year and like, I can't like find anyone. And it's not because there's literally no one with the word engineer on their resume that they can hire, right? It's just because they like, it's like, it's like they have super high standards as you should.
SPEAKER_00: It was funny. We always had this saying in the company that every hire should increase the average IQ of the company. Yeah. And like whenever you start thinking about new people that way. You're like, maybe we could do it ourselves. We don't need that person. I think another interesting thing is this quality of, and Harj, I think you said it, the instinct to over-hire.
SPEAKER_00: Like it seems like whenever we encounter hiring advice, like the instinct to hire is always like, I need more people, I need more people, I need more people. And I think that like what those people never get is that over-hiring leads to higher burn, leads to lower runway. Like they never make those connections. And whenever we see a company post YC that's running low on money, it's almost always employee burn, right? It's almost always salary burn. It's never some service they're using or some like, it's always employees.
SPEAKER_01: Like I've never had a company say, I'm failing because we have so much money in the bank. We hear all the time I'm failing because we're running out of money and it's because they hired too many people.
SPEAKER_02: You know, another thing I often see is like good quality founders. Like one of the main causes of burnout is also like people problems. Um, and I said, they realized that they just didn't. It turns out that they thought they were going to love managing and having a great team and it would feel awesome. And it turned out to actually just drain all of their energy. And so again, like you've got to hire people and those that are inevitable, but you can say like, it's what you were saying before, Michael, right? Like when you speak to like the second time or the super successful founders, they always like, man, like I remember the days when it was just like five of us in a room and like, you know, like it's just like, it was like an energizing time. And I find that sometimes the founders who over hire, like it can be a lot more draining and cause burnout than you'd imagine.
SPEAKER_01: Yeah. I mean, if we assume that there's a five, 10% chance of any reasonable hire ending up being toxic and making it really unfun to work at the company, you know, who knows what the actual odds are, but like, those aren't great. It's better to just not play that game. I love it.
SPEAKER_00: Let's do that. Right. Five to 10% chance of just like a horrible fit toxic culture. And you only let go of 10% of the people you hire. Because of course you're an amazing hire. And you have a team of 25 people like, boom, like you hate your life. That's almost like a equation for hating your life at any given time. You probably have toxic people in your inbox every day. So maybe the way to wrap this up is that if your post-product market fit, ignore everything we talked about, go crazy hire away. If your pre-product market fit double down on everything we've talked about, hiring is probably not your savior. If you're confused and you don't know whether your post or pre-product market fit, don't hire to figure that out. Like figure that out first and then make this decision on whether you should hire or not. And perhaps you'll come to a better conclusion. All right, Brad Hartch, good to see you guys. Thanks guys. See you next time. Thanks.
