Find the Right Hires for Each Stage of Your Startup

This story appears in the June 2013 issue of Startups. Subscribe »

It might be a great idea that launches your startup, but don't kid yourself--your company's fate depends on your team. We spoke with serial entrepreneur Naeem Zafar, who teaches entrepreneurship at the University of California, Berkeley, and is co-founder and CEO of enterprise mobility startup Bitzer Mobile, to walk us through the steps you should take to assemble a group that's built for success.

Stage 1

The Founders
The first and perhaps most difficult step is to evaluate your business partner(s). "The quality of people in this phase will define the DNA of the company later," Zafar says.

"It's critical to be ruthless … Ask yourself every day, In the whole world, are these the best people I could be working with?" If the answer is yes, it's time to designate roles and divide responsibilities.

"When we were starting our last company, we decided that for anything technical, my co-founder would make those decisions ultimately--so we would not debate them ad nauseam--and for anything business-related, I would make the decision," he says.

Even if you never use the words company culture, keep in mind that the decisions you make now are defining exactly that.

Tip: Now is the time to figure out the company's equity structure, determining the precise division among the partners. Doing so will prevent expensive problems later.

Stage 2

Advisors, part-timers, contract hires
Zafar says five types of advisors are essential to any startup: a market/domain expert, a connector (a well-connected person who isn't afraid to make introductions), an industry celebrity (who is willing to lend a name but not necessarily be directly involved), a personal coach and a technical expert who knows the industry inside and out. Attend industry events to meet potentials. "See who you have the right chemistry with, who is intrigued by your idea and who you can rely on," Zafar says.

As the business starts to grow and tasks start to go undone due to lack of time (or you just forgot), it's time to bring in extra personnel. Determine what skills and talents you and your partners lack and seek out part-timers and contractors to fill in the gaps. Zafar suggests searching LinkedIn for people with the expertise you need, then sending a straightforward e-mail requesting a few minutes of their time. "Typically four out of 10 people will say yes if you approach them honestly, correctly and with an interesting topic," he says.

Tip: When enlisting outside help, make sure you have recruits sign a legal agreement that enforces confidentiality and confirms that you retain ownership of the work.

Stage 3

Full-time staff
When should you hire your first full-time employees? Often, according to Zahar, finances will dictate your readiness to take this step. When you score an infusion of capital--whether through bootstrapping, a bank loan, a venture capital firm or even friends and family--you're ready to add staff and kick your company into a higher gear.

Take care to hire the best people you can, those who believe in your startup as much as you do. "The first five hires you make will tell the next 25 people whether they should come [work there] or not," Zafar says. He suggests administering two tests: a skill assessment and a presentation. "I want to see how they handle giving a presentation, how well they think on their feet, how comfortable they are. It's quite revealing," he says.

Tip: Zafar says one of the biggest mistakes made at this stage is underestimating the value of a product manager. "In my company, after the first two or three engineers are hired, the next is a product manager, because you really have to have somebody from the marketing side shaping the product," he says. "Otherwise you end up with a monstrosity."

Quality control
"You have to decide: Are you going to hire people who have major strengths or are you going to hire people that lack major weaknesses?" says Naeem Zafar, a faculty member who teaches entrepreneurship at the University of California, Berkeley. "The funny part is people who have major strengths also have major weaknesses … the ultimate example would be the New York Yankees, or a pirate ship, where everybody is extremely good and has extremely big egos and they almost can't stand each other, but as a team they somehow make it work. Not every founder is comfortable with that; most want harmony. But harmony doesn't create excellent products."