The ability to recruit strong talent

3 traits VCs love in teams (2/3)

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We’ve already introduced the three traits VC love to see in teams and done a deep dive in the first of them – domain expertise. In this lesson, we’re breaking down the second trait on our list – the ability to recruit great talent.

By the end of this lesson you’ll know why VCs care about it so much and, more importantly, how to convince them that you have it.

Why do VCs care about how good you are at recruiting?

To illustrate why VCs care about your recruiting ability I’m going to tell you a story.

Let's imagine there are two startups: RecruitCo and BroCo. These two companies are virtually identical. They're selling the same product in the same geography to the same type of customer. They've each raised $2 million from VCs, giving them 18 months of runway and they both plan to use this money to improve their products. There are a ton of features lined up.

Both teams realise that they don’t have enough staff to design and develop these features quickly, so they decide that they need to hire Product Managers (PMs). What’s interesting is that they take radically different approaches to doing this. Here’s what happens.

To fill its open roles, BroCo looks for help from a recruitment firm. Despite the fact that they’ve raised a lot of money, the recruiters tell them that stealing PMs from top organisations like Meta and Stripe is still out of their budget. The recruiters are the professionals, so the BroCo team takes their advice on board. They stop aiming so high. In the end they fill their positions with people from companies you've never heard of, whose track records aren’t particularly inspiring.

RecruitCo takes a different approach. They have the same conversation with the recruiters as their sister startup, however, they decide that they’re not going to settle for anything less than the best. So they fire the recruitment firm and make a list of companies with products that they love. They then use LinkedIn to find PMs employed at these companies and reach out to them in creative ways. They manage to hire two – one from Amazon and one from Slack – both of whom agree to join the company despite having to take a 40% pay cut.

Which of these two teams would you be more excited to invest in?

If your answer was RecruitCo – congratulations! You think just like a VC.

What does this story teach us?

Earlier in this module, we covered how important it is for VCs to be impressed by your individual team members. However, one thing that we didn’t discuss then, was the fact that VCs aren’t only concerned with the people in your team today. They also care about the quality of your future hires.

VCs know that you will need to hire people to succeed and, just like your current team, they want these recruits to be amazing. The more investors believe your team will attract rockstar talent, the more they’ll want to invest in you.

There’s just one little problem… they have no idea who you’re going to hire. No matter how much they pretend, VCs can’t see the future. However, this doesn’t slow them down. As you’ll know if you’ve spent too long on VC Twitter, having zero data has never stopped investors from forming strong opinions.

If you can somehow manage to convince them that you are ‘good at recruiting’ this is extremely positive for your fundraise. Which brings us to the question you’re probably asking yourself, “how on earth do I convince VCs that we’re great at recruiting strong talent?”

How do I convince VCs that we’re great at recruiting strong talent?

To show you how to do this, let’s take one more look at the story I told above. At the beginning, we have no opinion about RecruitCo’s hiring abilities, however, by the end we’re convinced that they are recruitment wizards. By looking at what convinces us that they’re great at hiring, we might find some tools that we can use in our own pitches.

The RecruitCo story contains three elements which, together, create the impression of a startup that can acquire rockstar talent:

  1. We’re given examples of RecruitCo successfully hiring people
  2. We’re made to feel that the people RecruitCo hired are impressive
  3. We’re made aware that RecruitCo was able to hire these people despite the odds being against them

What convinces us that RecruitCo are hiring wizards is a story about them successfully finding top tier talent. This makes a ton of sense – what’s better proof that a business can hire rockstars than the fact that they’ve hired rockstars before.

The important thing to note is that the mere fact of RecruitCo hiring someone isn’t sufficient. “We recruited a PM” is not enough to convince anyone that you’re God’s gift to hiring. The devil is in the details. The quality of who they hired and the circumstances in which they hired them transform this from a boring story about a basic business operation into proof that they are recruitment ninjas. The shape of the story matters.

If I look back at the teams I thought were great at finding talent when I was a VC, my belief that they were hiring wizards almost always came from me hearing a story with this exact shape. So, if you want VCs to believe that you’re capable of acquiring strong talent, tell a story which:

  1. Talks about someone you’ve hired
  2. Describes this person in a way makes them sound amazing – see here for guidance on what VCs find amazing
  3. Emphasises the fact that you managed to hire this person against the odds

Conclusion

Now that we’ve reached the end of the lesson, let’s have a quick recap of what we just learnt. First off we learnt that while VC’s love teams that are full of impressive people today, they will love you even more if they believe that your team will continue to hire amazing people going forward. Secondly, we learnt that the best way you convince VCs that your team can hire amazing people is to tell them stories about people you’ve successfully hired. Lastly, we learnt that for these stories to have the desired effect you should 1) emphasise the quality of the person that you recruited and 2) emphasise the fact that you managed to hire them against the odds.

In the next lesson we're going to provide you with practical guidance on how to tell these stories when you’re face to face with VCs. In it we’ll show you real footage of a founder using a story to showcase how great they are at recruiting and break down why it works so you can apply it to your own pitch.

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