When you are involved in the European early-stage ecosystem, it is quite clear that the major issue we are facing is the very low percentage of startups that become scaleups (let alone unicorns… see Graph 1 vs. Graph 2). The reasons are numerous (financing ecosystem, risk adversity of entrepreneurs and investors, market size and/or legal environment, etc.). In this post, I focus on what I believe is the number one reason why Europe struggles when it comes to startup growth: talent (hiring, managing and retaining it).
There are 4 major hurdles to overcome:
1. Skills vs. Values
I have heard so many times that the more comprehensive the team, the higher its probability of success. Yes… but before that comes the alignment of values between the founders themselves and the team. That comes before the ability to cover all the functional and expertise areas. Do not focus only on skills; make sure the new hires embrace the culture of the venture. If they don’t, they will leave or stay for the wrong reasons.
Skills without shared values are useless
2. One-man show vs. Dream Team
The next challenge is to go from the one-man show or founder team–centric venture, where basically all is done by a very limited number of trusted people, to a scalable organization. It is not easy: You need to do almost everything when you start out (this is part of the success) and you have to stop doing everything when you grow (this will be vital for your success).
Wyatt Rosental, founder at VentureHub, says it in a different way: “At your company, if each individual employee is not performing in their job at least as well as your CEO could perform, you have failed either in training or hiring… On the contrary, if the CEO is able to transmit his/her rigor at all levels of the company, the resulting culture is powerful, autonomous and thus scalable….”If your team cannot live without you… you are not a leader; you are a striker
3. Talent vs. Speed
You have to differentiate critical tasks versus repetitive non-value adding tasks where talent is not as important. Urgency is an acceptable decision criterion for hiring when you can solve it with non-strategic new employees. It should never be a factor for an important hire. Why? Because it is hard to evaluate the cost of not hiring… but it is very easy to evaluate the damages created by having the wrong person in a given position.
Good hiring takes time but creates value in the long run; bad hiring just destroys value in the short term
4. Equity vs. salary
Probably the number one difficulty for a startup to achieve growth with a limited amount of money (that is, before a serious round of financing) is to attract talent when it cannot pay a competitive salary. I have been talking with a large number of entrepreneurs the past few months about the challenge they face in attracting talent to fuel the growth of their venture. I must say there is a big cultural difference between Europe and the US when it comes to balancing the lack of salary competitiveness of a startup compared to big players, and it is true… the culture of stock options and/or equity for ground-level employees is not very widespread in Europe (not to mention the legislation) but…
Ultimately, it is quite simple:Are you, or are you not, ready to share equity in order to fuel the growth of the company?
You want to attract and retain talented people? Be competitive, share ownership, align interests, delegate… and if they leave, make sure their exit is smooth: they can be the best or worst PR for your company.