For any company, great talent is key for hitting goals and building scale successfully, but hiring the best people is by no means done cheaply or quickly. Startups have it doubly hard, though: In addition to finding great talent, they have to convince them to accept lower compensation — and sometimes more work — than they would get from working for a larger tech company.
But the current labor market puts founders in a much better position. Speaking at a panel focused on taking advantage of a softer labor market at TechCrunch Disrupt 2023, Nick Cromydas, the co-founder and CEO of Hunt Club; Samara Hernandez, founding partner at Chingona Ventures; and Noah Gale, the co-founder of Tribe AI, all agreed that founders today have it better than they did a couple years ago.
According to Cromydas, the whiplash we’ve seen in the labor market over the last few years has created an environment that startups can and should take advantage of.
“There was a madness and a mania for getting the best talent the last two or three years that boosted compensation all the way up. If you were an earlier-stage company trying to hire really great talent, you were competing against growth-stage companies looking to go public. So it was really hard to hire meaningful folks, because everyone was chasing the growth-stage gold rush,” he said. “It’s a really good normalization for tech startups.”
Hernandez added that the currently less competitive hiring market also means that expectations are being reset around salary and compensation packages. Startups shouldn’t feel like they need to offer packages they can’t really afford to land the best talent.
The softer job environment means companies can hire slowly and thoughtfully, too, which wasn’t the case a few years ago. Cromydas suggested startups tap their networks and ask for referrals in order to fill roles with folks looking to buy in to the company’s mission. He added that the layoffs have also likely turned off a lot of the “tourists” looking to work at startups thinking they’ll get rich quick.
The layoffs of the past year have meant that there may be a lot of people who would accept lower compensation than they would have before, but it doesn’t change the fact that many startups are low on cash and trying to conserve as much capital as they can.
Gale said that startups should consider looking to add talent on a fractional basis for certain roles. Such a strategy lets companies access the pool of professionals who have left jobs in the last two years but would be too expensive to hire full-time. It also allows startups to tap people who aren’t looking for that kind of commitment.
“There are many folks who have left incredible companies like Tesla, Meta and DeepMind, and they no longer want to be in the grind,” Gale said. “So they’re looking for a new path, and some of them just want to be doing amazing work for 20 hours a week, and then spend a lot more time with their kids. That path is now available.”
Hernandez added that hiring contractors is another way to get good talent on board without having to make the sort of financial commitment a startup would need to with a full-time employee. However, she pointed out that companies should ensure everything checks out legally related to intellectual property and IP before they do so.
“I see a lot of that with pre-seed companies, where they don’t have the resources just yet to hire [people] full-time. But [the contractors] do it on the side as part of the job and they prove themselves. And then [the companies] raise a large round and they bring [the contractors] on full-time,” Hernandez said. “That’s a great way to test them out.”
Still, the panelists agreed that founders should stay realistic. It’s a good time to hire, but that doesn’t mean companies should hire beyond their means or open positions they are too early to justify — like pre-seed startups hiring a chief marketing officer or a senior sales lead.
But for the founders who can take advantage of the situation, it is a good time to be hiring.
“It’s still competitive,” Hernandez said. “But [startups] can offer more comparable salaries and people are looking for jobs. There are employees to fulfill those jobs and so it’s a good thing.”