by: Valto Loikkanen

Few days back there was this good question in linkedin Q&A’s:

How to recruit top talents to build a startup with you? How many people will you recruit when you are just starting up?

Below is the reply I posted (with few additional edits). This also cover parts one and two in “The process from idea to competitive startup” post, I have written earlier. Please note, this process is most relevant for startups with aim and potential for high growth.

Sweat equity model allows talented people to enter in a startup.

How to build your core team

Depending on the type of startup you are building, will lead to questions like; how many people and what skills are needed?, what milestones are you looking to hit, when and how fast?

Those will determine how you should look about building the startup. If you are aiming big, you will need to first look for co-founder or co-founders. There is a great post and podcast about this subject “How to pick a co-founder” at venturehacks. You may also want to see this post “Unlock Your Team’s Potential to Create Evangelists” by The FundingGuru.

After you have your co-founder and your product/service is in right stage, you can opt for what Wallace was suggesting “Get a nice chunk of VC and simply hire them and pay them what they are worth.” (if that is realistic option), or you can continue building the startup with your equity (shares).

So after co-founder(s), you can start to look for outside experts / service providers, that can join your startup with “sweat equity” type of deal and/or for core team employees, where you can opt to give shares + minimum salary even for top talents. More about this subject, see this video by my co-founder Jouko, about “Startups and Advisers“.

When you have these two routes (VC + hired employees for sweat equity + minimum pay), you need to choose the route that is achievable and makes the most sense for what you are doing. You should be calculating what will give you most value in the long run, IE. shares that you end up having & their value and the value of your team (resources, skills, commitment).

No VC (at least not a good one) will invest unless you can prove enough traction for the idea and product/service. And not unless you have at least one committed co-founder.

Being able to attract a good co-founder to join, + other core people on shares (+ optional minimum pay), is one very strong signal of traction on the idea and you also get committed resources.

If you are unable to attract top talent people with your shares, don’t expect VC’s to pay for those shares either, it’s a much harder sell.

In the very early stages, you will want to have very entrepreneurial and passionate people to join your startup (regardless of the position), those that agree and can absorb some limited financial risk (uncertain or very limited pay), without abandoning the startup before the agreed time/milestone is reached.

When you opt for “normal employee” type of deal, you better have enough money to pay them for the duration agreed. Because those type of top talent, will have plenty of options to choose from. And typically their personal life can not or they don’t want to be flexible on the compensation (no flexibility on personal finance, big spenders, spouse don’t agree etc.) – therefore, this option really is available only after you have raised enough cash or your are generating enough cash-flow.

In the answers there was also another good and thoughtful one given by Joe Abraham, where he starts with this advise:

Figure out what it is going to take to get your venture to a point where you have proof of concept and market traction. That is truly the only point when your business is considered “viable” and “investable”.

and then continues

Based on this established point (call it milestone #1), figure out WHO needs to be on the team to get you to milestone 1. Don’t try to recruit “top talent” at the management level yet. Focus your energy on the people who will actually build/sell your product.

Jump to original question to read his full answer.

Now that you are ready to start taking your idea or startup forward and build your core team, you may want to take advantage of our platform, where we provide you with the right tools to build your startup from idea to VC funding level. Including “service investment” tool, to create, promote and negotiate your core team & advisor deals.

Note, all accounts and roles for 2010 are FREE for registrations done before 31st of January.

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About the author

Valto Loikkanen Valto is a co-founder of Grow VC, an entrepreneur who has started several companies across Europe and the US in the web and mobile fields. Forward thinking and always seeking the next big web and mobile success, as an entrepreneur, investor and advisor. Follow Valto on Grow VC, Twitter, LinkedIn, Google+

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This entry was posted on Saturday, January 2nd, 2010 at 9:13 pm and is filed under Business Education, Private investors. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.