Top 4 Startup Hiring Problems (and how to fix them)

Although hiring the right person is important in every size of company, in every industry, there is never a bigger need to “get it right” than when hiring at an early stage startup. Here, mishires can derail the entire company. Whether it is a poor researcher hire that pushes out substandard models or a poor developer releasing buggy features, making the wrong hire is not an option. 

Hiring the right people continues to be one of the most challenging, mission critical pieces of the business. In fact according to Deloitte’s CEO Survey, 71% of CEOs expect a general talent shortage to continue. While hiring is difficult for any company, startups are at a distinct disadvantage when it comes to attracting talent vs their larger, more established peers. 

After working with hundreds of startups, we’ve identified the top 5 most common issues that startups face, and our best thoughts on how to resolve them. If you want a little additional extra support, feel free to get in touch. 

Lack of Brand Recognition in the Market

As of the writing of this article, according to Crunchbase, there are 13,381 United States based company in that are currently in the stages Series A, Series B, and Series C. If you’re not from the startup world and don’t know what that means, there’s a great breakdown here.

All of these companies need talent engineers, salespeople, markets, product managers, and more. Startups are not only competing against each other for the best talent, but they are also competing against behemoths like Google, Apple, Meta, Netflix, Amazon, and more. 

Each of those companies, and other household names, have massive brand recognition and are destination employers. Startups, although they mean the absolute world to the founder and early team, are just startup 12,304 out of 13,381 to the average prospective employee, unless you manage to change that. 

Without millions in budget to put into branding, here’s how you can elevate your employer brand to stand out from the noise and be attractive to candidates. 

• Clearly articulate your values on your website AND how the company has lived those values. some text
  • It’s not enough to simply say “We value and strive to embody X, Y, and Z.” Anyone can say that. Add examples of how and what your company has done to uphold those value. 
• Executive thought leadership.
  • Having a founder/CEO or executive leadership team that is not active on social media is a huge missed opportunity for free advertising, branding, and organic reach. LinkedIn, in particular, amplifies content far beyond the immediate 1st degree connections and will show it to hundreds or thousands of potential employees. If the executive makes a consistent effort to “show up” and be active, that will be rewarded exponentially with higher quality inbound applications.
  • Additionally, even if a candidate is sourced proactively, they are more likely to respond if they have seen the content and are more familiar with the brand name. If the executive does not have time to regularly create a short piece of content, have it ghostwritten by someone on the marketing team and have the executive approve it.
  • Podcasts and speaker panels are another huge, free opportunity to amplify the startups brand name within targeted circles. Podcasts like 20 Minute VC, The Tim Ferriss Show, and more often feature business leaders for 1:1 interviews that allow executives to establish themselves as credible leaders and give prospective employees the opportunity to do more due diligence and evaluate their potential future boss. Be cognizant of conferences and other industry events going on, and reach out to the event organizers for an opportunity to speak. All of this content can be highlighted on the company website under a “resources” section.

Lower Pay Than Enterprise Competitors

Startups are often cash strapped and can almost never match the expansive compensation packages that FAANG or other large public companies can offer.

While startups might be able to offer a somewhat competitive base and equity, large companies can offer top of market base, RSUs that are more accessible than illiquid options, unparalleled benefits, and aggressive annual cash bonuses. 

While you may be able to offer some unique perks like gym subsidization, mental health app subscriptions, etc. the blunt truth is that compensation will never be the main reason a candidate chooses your startup, particularly if they have larger company options on the table. 

While some companies choose to lean into the upside of their equity, this, in of itself, is a mistake. Many startups fail, and while you might wholly believe in the mission, candidates are evaluating risk. Equity is a lottery ticket and factually, while the upside might be huge, the reality is that they are often not worth anything. 

Instead of trying to compete on pay, focus on the impact that early stage employees can have.

By far, the most common reason that high caliber candidates opt to work at a startup instead of an enterprise company is the level of impact they are able to have. In a large company, the vast majority of employees are a small cog in a large wheel. They may be part of a large team that has input on one feature of one product for a company that has many products. Decisions will be largely made from executives with whom they have little contact and they have very little say in the overall execution of their position. Conversely, in a startup, the “plane is being built as its flown” and there is significant room for strategic input and direction from all levels of the organization. The fact that employees can have more agency and input on their department process is a key driver that pushes employees to startups. 

There is one caveat: At least try to be in the 50th percentile range of compensation or as close to it as possible. While money is not everything for startup candidates, candidates can’t pay their bills with impact. Being significantly below market on a base will put you at a significant disadvantage.

No Standardized Recruiting Process

The term “recruiting process” is broad and could warrant several articles on its own. However, for the purposes of this article, we can think of a recruiting process as a well defined, repeatable, scalable process that enables the company to bring on the highest caliber of candidates it can attract with minimal friction. 

A few considerations of process should include: 

• What is the company’s recruiting tech stack? Can all of them be integrated? For example, a startup might use Lever as an ATS, Gem for candidate outreach, LinkedIn Recruiter and/or Seekout for sourcing, and Goodtime for scheduling. 
• How does the company determine compensation for each position? How is it benchmarked? Popular options include Pave and Radford. At what percentage of average compensation would the company like to offer? 
• On a departmental level, and more granularly, on a role level, what is the interview process for each position? How many steps are there, who is involved, which alternates are available if an interviewer cannot make the interview, etc. 
• What are the company’s goals regarding candidate experience? How is this measured?
• What is the requisition opening process? Does the hiring manager have the ability to determine salary? Does the FP&A leader need to sign off? The CEO?
• How does the company document its recruiting processes? 
• Does the company leverage outside resources such as agencies or RPO firms? If so, when?
• How is the company incorporating DEI considerations into its recruiting process? Should there be goals for outreach to diverse candidates? If so, what are they?

Each of these considerations are only a small portion of the talent acquisition process that must be built in order to run a high functioning department that operates as a strategic partner vs strictly getting “butts in seats”. When a startup is in its earlier stages, many of these questions are still undefined and can lead to slowdowns and inefficiencies in the hiring process. Accordingly, executives and talent acquisition leaders must work to systematize their hiring in order to meet their headcount goals. 

Inexperienced Hiring Managers

In startups, particularly earlier stage ones, many hiring managers might be more junior in their career and are navigating the hiring process for the first time as a leader. Accordingly, it’s common for these junior hiring managers to be susceptible to common biases or misconceptions that they will need to be coached on. When so many hiring managers are new to hiring in general, this can lead to inefficient, slow moving hiring processes, and recruiters, whether in-house or agency, will need to coach these hiring managers on best practices so that the desired outcomes can be achieved. 

Consider, either with in-house HR leadership or an outside resource, creating a hiring manager training on the basics of interviewing and hiring best practices. Taking the time to invest in your manager's leadership skills will pay dividends by being able to better attract high caliber candidates.

Wrapping Up

While there are unique challenges that startups face when it comes to hiring, there are also unique advantages. The opportunity for growth, self actualization, and agency over one's own career is unmatched. If you can develop your employer brand to attract a large number of candidates in the market, develop the right compensation scheme, and don't drop the ball during the interview process, you'll be able to hire incredibly talented people.