Inside the Group Partner Lounge: Don't make these hiring mistakes

Hello. This is Michael with Harge 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. 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.

But now that we're all online,.

we're doing it in front of all of you. Today, we're gonna talk about startup hiring.

Saharj, frame this challenge for us because, man, this is something that we debate founders with all the time. Yeah. So one of the most common things founders tell us they need to do during a y c 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 y c companies or top start ups, 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 start ups to not hire so much, a little, you know, sort of word out there saying, oh, like, YC partners don't get how to build companies. Like, you know, you need to hire you 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. 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 are trying to scale up to offer that product 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?

Sure. Well, to jump into a couple of them. So the big one is the thought that if you only had more people, we could get more things done. Right? I I hear this every week from a founder. We need more features, Brad. We don't have enough features. That's right.

We 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 I I I've even had people tell me that we need to hire more people so that we can reach profitability faster. And.

Did those people bring are they are they somehow paying the company instead of collecting salaries?

They're receiving negative salaries.

That's an interesting business model.

Yeah. Fascinating.

Harge, how about you? What are you hearing as the reasons why founders give to hire away?

Yeah. I 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 too. You're like, like, you know, how's the company doing?

You're like, oh, yeah. We're at, a hundred employees now. So I think, like, you know, things must be going great.

I think this is one of those fun stats that, like, second time founders react to differently than first time. Like, 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. It's like and I feel as though like after managing people, I'm like, oh god, if I could just do it with fewer people.

That that brings up, you know, another set of lies that that founders tell themselves, and we all told ourselves at some point, which is that just because you are a startup founder 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, 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 and 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 that some companies do that, but they are very large companies. They have product market fit, not your startup right now.

Google does that well.

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 the tenured VP of sales might be amazing at managing a, like, 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 ten customers.

Like, all this stuff that that you would assume they could do, but they might be totally lost. 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 skill set. You know? You can't hire for that.

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. 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. No. No. That's your job too. That's your job right now, because there's just nobody else that can can do a lot of the things that the founders do at this stage. You 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.

What about this one, Harjit? 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.

I think it's it's well, I think it's the cargo culty 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. Oh, like, chief operating officer, chief blah blah blah officer.

Like like, I 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. 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 worked with before.

or they've known in some other context for a while. And they figure, well, I'm gonna hire this person eventually. I might as well hire them now and give them this and and that person just wants the fancy title because 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. 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 gonna 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 because I was like, as an advice giver, here's how we get in trouble. Like, this is what I explained to them. I was, well, your startup has, 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 gonna 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 then the finder 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 gonna happen in the future. I mean, especially over the last couple of year, like, can you imagine, like, you know, like, Airbnb, like, COVID hits.

That's gotta change up their business. Like, imagine, like, Instacart during 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 gonna happen.

And I think that's what founders don't appreciate. It's like when you when you don't have product market fit, you're really early and you just kinda 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. Like Boom.

Right. So let's let's go to the devil's advocate side, though. So, you know, Harj, you brought this up. Like, the first point, which I think is, like, really important is, like, if you're gonna be a big company, you're gonna 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? 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 and I get like, if you look at all the top YC companies, yes, they have a of employees, but they Michael, you've been there. You can see this. Airbnb, like, they didn't hire a thousand employees in their first year. Right?

Like, those employee hiring counts are pretty backloaded.

Well, let's take Airbnb as an example. Right? 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 eighteen months to hire their first employee before their first event.

Eighteen 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. I'm Stripe. Like, they they they certainly they slight so they certainly hired people. Right? But they certainly had a team. And if anything, actually, Stripe was a little like, it went against the conventional wisdom because I think you had a team of maybe eight to 10 people prelaunch.

But, like, the product took a while to kind of launch publicly and just like I I think they were just, like, three people for, like, the first year at least and possibly eighteen months.

So, again, like, with the timelines are probably, like, have a bit of margin of error in them, but the 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. So we actually encountered this in Justin TV and Twitch where we hired someone from YouTube who worked on scaling out their video 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's interesting though is that John wasn't the first person that worked on video. You know, Kyle, cofounder, 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 was nobody cared to watch video on our product. So saving money wasn't really the problem.

Any of these other devil's advocate positions you guys thinking about? Yeah. The 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 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 that's not the thing that's on fire to figure out.

Yeah. I think if we move to the takeaway here, what's so interesting is I find it so interesting how often YC's critiqued on these points, to be completely honest. Like, 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. 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, like, VCs are like, like, you guys know what you're doing. Like, da da da da da. 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 wanna 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. Yep. Like Yep.

And so it's interesting how, like, they somehow innately get, like, oh, a smaller number of really smart people are probably gonna be able figure this out way better than a large number of mediocre people.

I also think I also feel like with the the highest quality founders, like, they have just such high standards for who they wanna work with that, like, part of the reason why they're like, oh, man. It's, like, so challenging to find. So I've been trying to hire, like, a re 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? It's just because they like it's like it's like they have super high standards as you should.

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 this quality of, and, Harj, I think you said it, the instinct to overhire.

Like, it seems like whenever we encounter hiring advice, the 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 overhiring leads to higher burn, leads to lower runway. Like, they never make those connections.

And whenever we see a company post y c that's running low on money, it's almost always employee burn. Right? It's almost always salary burn. It's it's never some service they're using or some like it's always employees.

Yeah. Like, I've I've never had a company say, oh, 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. 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.

And that's what they realized that they just didn't it turns out that they thought they were gonna 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 gotta hire people and those that are inevitable. You can say, like it's what you were saying before, Michael. Right?

Like, when you speak to, like, the the second time or the the super successful founders, they're always like, man, like, I remember the days when it was just, like, five of us in a room and, like, you know, there were like, it's just, like, it was, like, an energizing time. And I find that sometimes the founders who overhire, like, it can be a lot more draining and cause burnout than you'd imagine.

Yeah. I mean, if we assume that there's a 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. 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 like, boom. Like, you hate your life. That's almost like a a equation for hating your life. At any given time, you probably have toxic people in your inbox every day.

Yeah. Maybe the way to wrap this up is that if you're post product market fit, ignore everything we talked about. Go crazy. Hire away. If you're 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 you're 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 and perhaps you'll come to a better conclusion. Alright.

Brad Hart, great to see you guys. Thanks, guys. See you next time. Thanks.