Employee Headcount

What the greatest technology investors say about Employee Headcount

EMPLOYEE HEADCOUNT POSTS (5 posts)

The following is a list of the post titles by author under this topic.  Scroll further down this page to find the actual blog post by your selected author.   Note that for this topic, following this list, all posts are by Fred Wilson.

 FRED WILSON (5 posts)

 Fred Wilson:  Hire Slowly & Wisely, not Quickly

Fred Wilson:  What's the "Right" Monthly Burn Rate

Fred Wilson:  Building Product is about having the Right Team

Fred Wilson:  Management is Relevant when Building Usage

Fred Wilson:  Fred Wilson: The CEO is responsible for hiring

Fred Wilson: The CEO is responsible for hiring

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“Most CEOs [Wilson] know[s] interview every hire [until headcount reaches over 100].   Even if [there’s an HR (human resource) head] and a top notch recruiting team, the responsibility for hiring is [the CEO’s]. A bad hire is [the CEO’s] fault. A good hire is [the CEO’s] success.  [The CEO should] make the final call on each hire until [the] company is developed [and strong enough] to start making these hires themselves.  That is how [to] build a great team,[culture and] company.”  Fred Wilson, MBA Mondays: Best Hiring Practices, Jun. 11, 2012;  http://www.avc.com/a_vc/2012/06/mba-mondays-best-hiring-practices.html

Management is Relevant when Building Usage

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

Once the product has been built, launched and achieved ‘product market fit’, “it is time to get more users or customers [as the company enters] the “building usage” phase.”

This means the team must now be built including more engineers to scale the product/service and more employees in product, customer support, marketing and business development, sales (if an enterprise/SAAS focus) and administration.  Team size will at least double from building product’s stage with upwards of twenty when the building usage stage is exited.

Management issues herein: 1. managing engineering (where most of the headcount now is), i.e., recruiting, retaining and sometimes terminating engineers.  “[The] right people [must work] on the right things, [teams must execute and] the right environment” must exist for engineering success. 

“[Many] technical co-founders and lead engineers [don’t] enjoy managing.”  Wilson suggests helping a lead engineer become a good manager or hiring “a VP Engineering who is a great manager and move [the] technical co-founder or lead engineer into a more technical role [ i.e., CTO or chief technology officer]”. 

2. Founder/CEO’s challenge of navigating more direct reports. With potentially 10 + direct reports, a founder/CEO in management crisis can occur. Wilson suggests “find[ing] [team members with] management talent or inclination and invest in their ability to help [] manage the team” while “building communication systems, business processes, feedback, and routines [to efficiently scale the business and team].  [He] suggest[s] that founder/CEOs [][work] with coaches [to build management skills].” 

While stage 1 (building product) focuses on individual contributors and stage 2 (building usage) continues as such, management becomes relevant at stage 2.  “Strong individual contributors are often not natural managers”, presenting the CEO with challenges.  Fred Wilson  The Management Team - While Building Usage Jan. 9, 2012  ; http://www.avc.com/a_vc/2012/01/the-management-team-while-building-usage.html

Building Product is about having the Right Team

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“The first stage of a startup, [] the Building Product stage is management light.  The team should be small [with typically five or fewer: the founder/CEO (usually the product manager), often a technical co-founder leading development, two or three developers and maybe a designer].

[] Building product is [about] having a small team [of] the right people [with] product, design and software engineering skills [who are] focused, committed and driven[,] [] working together, and [executing]. [] Management skills are not a requirement.”  Fred Wilson  The Management Team - While Building Product  Jan. 2, 2012;  http://www.avc.com/a_vc/2012/01/the-management-team-while-building-product.html

What's the "Right" Monthly Burn Rate

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“The number of people [is important in] getting the company building process right. Too many [slows] things down, burn[s] through too much cash, and increase[s] [overhead needlessly]. Too few and [you’ll] be resource constrained and unable to grow as [quickly].”

Wilson’s suggested fully-burdened monthly burn by stage for mainly consumer internet, software-based businesses (Fully-burdened includes salaries, rent, overhead, etc.):

“Building Product Stage – [] below $50k per month []

Building Usage Stage – [] below $100k per month []

Building The Business Stage – [] below $250k per month []

A good rule of thumb is to multiply the number of people [] by $10k to get the monthly [fully-burdened] burn. [] [Thus,] suggested team sizes are 5, 10, and 25 respectively for the [above three stages].” Fred Wilson  Optimal Headcount At Various Stages Jun 4, 2012;  http://www.avc.com/a_vc/2012/06/mba-mondays-optimal-headcount-at-various-stages.html

Hire Slowly & Wisely, not Quickly

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“[Wilson’s] strong bias on [optimal headcount] [] is that  less is more.  [Repeatedly] [he’s] seen the entrepreneur who wants to hire quickly fail and [] the entrepreneur [who’s] [] slow to hire succeed.”

In his experience with software-based consumer internet businesses, “[] [success] might be most highly correlated with a slow hiring ramp [] [during a company’s early years.]  Being resource constrained can be [good] when [] getting started.  It forces [] [a] focus on what's working and get[ting] to the rest of the vision later on. []” His advice: “[] hire slowly and wisely instead of quickly.”   Fred Wilson MBA Mondays: Optimal Headcount At Various Stages, Jun 4 2012;  http://www.avc.com/a_vc/2012/06/mba-mondays-optimal-headcount-at-various-stages.html