For Indian early-stage startups, hiring can be as hard as ‘finding a breakfast place on the highway’

The 25 young companies that featured in LinkedIn’s list of top startups in India this year collectively created around 18,000 jobs in 2018 and are expected to create more than 19,000 new ones over the next 12 months. Yet, when I talk to the founders of early- and growth-stage startups, I am told that hiring is their Achilles heel.

From struggling to find the right candidate to ring-fencing existing teams from deep-pocketed rivals, who are looking to poach, hiring is often a hit-and-miss game in the Indian startup ecosystem.

“Hiring in the early stages is like finding a breakfast place on the highway,” an Indian entrepreneur once told me. Another one, who did not wish to be identified, narrated the story of how his entire team of developers was almost washed out in one day when a fintech soonicorn approached the techies with a 5x raise in salary and the chance to work with a popular entrepreneur.

Just like India’s fledgeling startup ecosystem, hiring for young companies is evolving and here are some trends that could help:

Skill vs hunger

The early employees at any startup are generally the believers who come on board because they have faith in the problem that the venture is looking to solve and in the vision and story of the founders. In a majority of the cases, it is not about a salary or other monetary rewards.

However, that changes when the startup raises the first round of funding. With cash in the bank, the founders start focusing on hiring people with the right skill set. Most founders concur that while technical skills are important, the other most important skills are learnability and hunger. Why? Because the shelf-life of technical skills is shrinking.

For instance, the shelf life for artificial intelligence is now 12 months, compared with five years earlier. Founders are also wary of super specialisation and prefer intersectional skills.

Role of references

Word of mouth or referrals are the top hiring channels when it comes to young startups. This is particularly true for mid- and senior-level executives or highly technical skills. For entry levels, many B2B startups design their own hackathons.

Some founders I spoke with prefer not to hire freshers considering the opportunity cost of the founders’ bandwidth that is involved. They prefer a trained worker with at least one year of prior startup experience. That is where the role of references becomes even more important since, in a hyper-growth environment, there is less time to train new employees. It is also a retention technique for existing employees as referrals are incentivised in most early-stage startups.

Gig it

Startups are early adopters of flexible talent. These young companies are finding huge value through the gig economy and show the most flexibility with 60% of projects posted by startups on the FlexingIt platform requiring 20 hours or less a week of capacity.

Startups have also shown openness to remote support with a quarter of assignments enabling remote work. FlexingIt has experienced a spike in demand for new-age skills such as data analytics, machine learning, product management skills, and digital marketing across their startup clients.

The elite bias

At the early stages, when funds have to be efficiently used, a recent trend is that of hiring from new and emerging IIITs and the IITs, such as IIT Dharwad and Jodhpur, and IIIT Trichy and Vadodara.

A startup I spoke to hires their best developers – as interns – from the lesser-known IITs and IIITs and pays them better. Their observation is that this talent is hungry and feels privileged when they are given major tasks at very stages and become part of the core team of a startup within three to four years. The startup is now hiring from local engineering colleges in Chennai, IIT Kharagpur, and IIIT Kurnool. They have also raised the entry bar and assignments, and have been able to hire up to 18 interns to 20 interns every cycle.

Diverse hiring

Language and regional diversity is an important trend in startup hiring, according to Serein, a company that helps organisations build inclusive workplaces. There may be a strong reason to look beyond just the limited pool of techies from metros, as an Indian entrepreneur told me that employees hired from non-metros, and not to generalise, are often hungry and driven.

Early-stage startups are predominantly equitable in terms of pay. The gender pay gap is narrower. Startups take safety – prevention of sexual harassment – quite seriously. Firms with a team of 15-20 employees are putting in place mandates of the PoSH law and they write gender-neutral policies. In general, they show commitment towards creating a safe space where everyone can voice their opinion.

While we have addressed how early-stage founders approach hiring, it is also necessary to talk about how prospective employees weigh in their options of working with startups. I call it the Employee Ikigai and will explain it in the following section.

Employee Ikigai

Ikigai is a Japanese concept that means “a reason for being”.

According to Saravanan Balasundaram, founder of Han Digital, a talent consulting and fulfilment company that has placed over 200 candidates in early-stage startups in 2018-2019, “candidates are looking for a) fair compensation b) career growth and new-age skills that they can acquire and c) company/founders. Candidates, today, expect autonomy and freedom and a flat organisation. They also aspire to work with founders who they can look up to.”

Vaitheeswaran K, co-founder, Again Drinks and Indiaplaza said, “A lot more people want to work for early-stage startups, however, the level of concerns have gone up too, due to the several horror stories about shutdowns that have recently emerged. Further, while employees earlier were willing to compromise and take pay cuts in lieu of employee stock ownership plans, are wary today. There are enough examples of employee stock ownership plans not converting to any meaningful returns. Hence, [the] founders face a lot more probing and pointed questions from prospective employees.”

Summing up his experience, Derick Jose co-founder of Flutura said, “The salary for tech roles in a B2B versus B2C startup can vary by 3x, from the sample size that I have observed. The reason is predominantly cash flow and funding muscle. B2C startups are adequately capitalised.”

Lessons from experience

My colleague, Asutosh Upadhyay, who is part of the investments team at Axilor, has been on the other side too. Today, he works with umpteen founders in the early stages and has this to say, “in the early stages, the founder has to clearly articulate what s/he is trying to build. Hiring is as important a conversation as sales or a VC pitch. Always remember when meeting prospective candidates that every person has a primary skillset and a passion. Encourage their passions and give them opportunities to grow in areas that interest them. Such early employees will always stay longer as you are respecting their passion. Try doing this with your first 20 employees at least:

Some practical hiring tips for founders:

1. Always slot 20% of your workweek for hiring meetings. It is preferable to meet people or conduct video calls. That is an important signal of your intent.
2. For senior hires, be specific and ask for help. Pose your problem statement and be upfront. Do not feel judged. There is no downside to this approach.
3. Always have a mentor who is your hiring coach. It can be a fellow entrepreneur or advisor. You cannot do it all.
4. Do not be too cautious on the spend. Weigh your opportunity costs. Tread the fine line between wastefulness and mindfulness.
5. Lastly, figure out a way to thank people!

In the words of Akshaya Bhargava, founder, Bridgeweave, “Joining a startup is like joining a family. It is up to the company to think of not just hiring employees but keeping in touch and having a good connection with these candidates till the day of joining. The company has to be committed to making the employee successful as much as it is to make itself successful. Similarly, the employee has to recognise that a startup is more demanding than a 9 am to 5 pm job with a large company or captive. There is no place to hide and there is an intensity that is unique.”

This article first appeared on Quartz.