Launching a startup, and particularly a tech startup, requires a delicate balance of vision, technical expertise, and operational efficiency. The founding team is the backbone of any startup, and as the business grows and attracts investment, personnel requirements evolve significantly. This article explores how founders assemble their initial startup teams, adapt their hiring strategies as they scale, and align their workforce with investor expectations.
Starting With a Business Idea
The first stage is to have a new business idea with potential to compete well against existing competitors to first survive, and then thrive. Only one in ten startups make it beyond 10 years. A startup has to have some inherent advantage over the existing incumbents. This frequently boils down to either:
- following an established business model in any particular business or industry sector, though with advantages of doing it cheaper, or faster, or with added benefits (such as more sustainable); or
- disrupting an established business model to create and occupy a unique marketplace position.
Anything else is just “me too,” and why would investors back a startup that does not somehow stand out or challenge the status quo?
Successful startup business ideas are often built on resolving a founder’s personal pain point, or developing a new business idea based on unique insight or passion to break the mould. This can give them a head start to fill a gap in the market, or correct a market failure.
Bill Morrow, founder and CEO of the angel investment network Angels Den, also used to say in his presentations that he looked for founders that possessed such a strong natural advantage that it could be considered almost illegal for them to be allowed to compete. This is not to encourage illegal activities, it is to emphasise the benefit of a stunning and outstanding USP.
Examples that come to mind are:
- Revolut’s co-founder, Nikolay Storonsky, refused to accept that currency exchange had to be so costly and take as long as he had experienced. When he found himself at a loose end after the collapse of global financial services firm Lehman Brothers, which he was working for at the time in London, he set out to solve the personal pain point and exploit a marketplace advantage.
- Chris Forbes and Julie Chen founded The Cheeky Panda to make tissues from bamboo. It is naturally stronger, more hygienic and is made with only 35% of the carbon footprint of paper tissues. Yet neither of the global market leaders, Kimberley Clark and Kleenex, had exploited this sustainable resource. Julie’s family in China handles the production side of the business.
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Chris Scattergood, FundamentalVR’s founder and CEO, with his three BOLD Awards in Lisbon Chris Scattergood’s early experience in the healthcare sector highlighted to him the limitations of traditional surgical training methods, such as high costs, limited access to cadavers, and operational challenges in accessing large simulators. Alongside fellow co-founder Richard Vincent, he recognised that VR could be a major technological platform, offering a transformative way to communicate, share knowledge, and learn. They founded FundamentalVR, creating what’s been referred to as a “flight simulator for surgeons” that provides a safe, measurable, and repeatable environment for healthcare professionals to refine their skills. FundamentalVR is a serial BOLD Awards winner.
Initial Startup Teams
In the early stages, startups typically operate with lean teams, often consisting of 2–5 core members. The focus is on building a minimum viable product (MVP) and validating the business idea. Members of startup teams usually have to carry out several different roles, so while there is a place for specialists relevant to the startup’s business sector, there is often a place for ‘generalists’ who can be adaptable and handle a variety of requirements.
Early hires must be flexible and wear multiple hats. A single team member in a tech startup might handle UI/UX design, customer support, and marketing simultaneously. Startups can often value generalists over specialists at this stage. It can also make sense to use freelance specialists and professionals. Platforms such as Freelancer.com and Fiverr have networks of thousands of crowdsourced gig-economy workers. They can provide the required skills for an indefinite period of time, and as the business evolves they can be replaced in startup teams by more permanent employees with the relevant skill sets.
Beyond personal skill sets, startup founders seek team members who align with the startup’s mission, and who are willing to endure the uncertainty of early-stage ventures. Equity-based compensation is common, as cash flow is often limited.
Getting freelancers to share a startup founder’s vision, and a startup teams’ sense of endeavour is not impossible. Though freelancers are not required to have long-term commitment, they still have a personal CV they want to enhance. Tapping in to their motivations, values, and professional aspirations can get them to go the extra yard. The gig-worker platforms can help identify the right sort of people for a startup.
Here is an example of the level of commitment that can be required. While working at a Swedish university, Australian researcher Lewis Horne identified a market opportunity for an urban electric vehicle. He set up a business he called Uniti to explore and exploit the potential. However, his limited resources meant recruiting a team of followers prepared to work without pay. Without pay they couldn’t afford rent. They slept each night in their work space at the university. When investment income eventually became available, after early-stage crowdfunding, the earliest members of Uniti insisted that newcomers should still live that way to prove their dedication to the business.
Crowdfunding is a way to secure early investment when the sums involved are not enough to appeal to venture capitalists, or a startup is still in a pre-sales period with no orders to impress potential lenders. Like Uniti, both Revolut and The Cheeky Panda also used early-stage rounds of crowdfunding. Successful crowdfunding is also a way to provide product validation to subsequent institutional investors.
Scaling the Team Post-Launch
Once an MVP gains traction and a startup secures initial funding (e.g., pre-seed or seed round), the focus shifts to scaling the product and customer base. Personnel needs generally evolve as follows:
Fewer Generalists, More Specialists
Shifting from generalists to specialists was a point made at the Tech.EU Summit in London in March by Elena Pantazi, a partner at the early-stage venture capital fund Northzone. This is likely to be in roles such as product development, sales and marketing people to bring the product or service to the marketplace, and customer support staff to manage user feedback and improve retention.
Raising funds to establish a Sales & Marketing team is a common reason for startups to run a round of equity crowdfunding. It often indicates that the startup team has reached a stage where they have developed their product or service as far as they can, and it’s time to take it to market. However, this can also frequently represent the point at which the founding startup team steps out of its comfort zone, and in to a hive of commercial activity they have little experience of and limited skill sets.
Gero Decker co-founded Signavio in Berlin, Germany, in 2009. It developed software enabling companies to understand, improve and transform all of their business processes. It was acquired by SAP in March 2021, and is now called Signavio SAP. Decker’s current roles are General Manager SAP Signavio and Co-Managing Director SAP Berlin. At the EU Startups Summit in April, he explained that he and his fellow engineers had believed that if they built the best product then customers would inevitably come to them: “if you build it, they will come.”
Then he discovered it was more down to the quality of the sales engine than the product itself.
He also realised that selling is not a skill that people are either born with or without. Selling can be learned by founders to take on the hard tasks of signing up the first customers and the first investors. The lesson here is to think hard about when to expand the team with a Sales specialist.
Increased operational support in Finance and HR are also regular ‘back office’ requirements as startup teams grow. Though again, crowdsourcing temporary resources could be a solution.
Operations/Production specialists will be required to establish and manage supply chains and quality control. Gaps in these skills are apparent where new products have been able to gain millions of dollars worth of pre-orders, yet not been able to build on customer demand to create a viable business.
AI Solutions
Alternatively, more people are suggesting that AI-powered software can help make a lean team more capable and productive without increasing the headcount and the wage bill. Tipalti is a good example of an automated payments service provider that frees up employee time for them to focus on other issues that contribute more to company growth.
At the Tech.EU Summit, Maren Bannon, Co-Founder & Managing Partner at January Ventures, warned against using early-stage investment as a reason to automatically increase headcount. AI can help startups to scale faster than otherwise, and she advised startups to keep teams smaller at a time when revenue may not yet be stable. She likes to see startups working on Product Market Fit more than training a dozen new staff simply because they can afford them.
Another aspect where AI can contribute is in staff recruitment, helping to actually recruit the right people for the right stage of a company’s growth. When budgets are tight, every hiring decision can be crucial. However, at a time when flexibility, plus ensuring a fit with company culture is very important, a too impersonal process could deter applicants who are looking for opportunities that swiftly offer a level of real involvement and empowerment. AI can also be a double-edged sword as potential employees increasingly use AI to enhance their CVs.
Company Culture Remains Crucial
All longer-term appointments should be made with two key thoughts in mind:
- Cultural fit
- Scalability
Hires who fit and support the company culture will maintain team cohesion. Ideally, they will also show promise to grow with the company, and eventually lead teams. However, that doesn’t have to be done in a hurry. Some VC fund managers are keen for specialists to keep specialising for as long as they can before a company promotes them to running a team to fulfil what had been their role.
Investors’ Influence
Finally, a word about investors. VCs often expect a seat on the Board. Startup and early-stage founders should select/accept board members carefully. The anecdotal claim that business directorships last longer than the average marriage these days may be an exaggeration, though the longevity of the relationship is a factor for founders to bear in mind.
Investors also often have their own ideas on types of people to hire. As businesses mature they may want to see seasoned professionals with a significant depth of experience guiding the businesses. The bold risk-taking founders that VCs back at the outset may start to seem a liability as businesses consolidate their market position and turnover. A “safe pair of hands” to protect the value of their investment can become more important in order to safeguard the promised returns to their investor networks.
Investors are effectively dictating a new company culture, in which even the founders may not fit. I know this, I’ve been caught in this situation.
A factor in favour of equity crowdfunding as an alternative source of investment in privately-owned businesses is that there are many investors, and it’s rare for any individual investor to ever push for, or deserve, a seat on the Board.
Conclusion
Building startup teams is a dynamic process that evolves with the company’s stage and goals. From a lean founding team with complementary skills to a professionalised organisation ready for investment, startups must strategically adapt their personnel to balance innovation, execution, and scalability. By anticipating future needs, fostering a strong culture, and aligning with investor expectations, startups can build teams that drive long-term success.
