When is the right time to hire a CMO?

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With growth being such an important metric for a company post-fundraise, it is of no surprise that one of the very first questions that arises after raising money is how to spend it, both in terms of people but also in customer acquisition.

As most small companies have the founding team acting as the marketing, sales, and product development team, it can be quite tricky to ‘scale’ across any one of those functions. However, the wisdom of having founders’ lead these three things until finding product-market fit is one I believe in and also recommend, mostly because it allows the founding team to be nimble in adapting their marketing strategy, the sales strategy, and the product to match the needs of the customers as per conversations they are having with the customer directly (vs. via an intermediary, who is typically newly hired and desperate to showcase worth, even if not entirely aligned with the company’s PMF context).

In an effort to unpack each of these, we will do a mini-deep dive into these three parts and cover the key things to consider as part of how to best use your newly raised funds.

Starting with Marketing, I sat down with my colleague Natasha Lytton, who is an experienced CMO, Head’s up Seedcamp’s Marketing in addition to leading our Platform. I asked her the typical questions I see asked (or those that sometimes people are too embarrassed to ask) around Marketing.

What is the most misunderstood part of ‘the marketing function’ within a startup?

  1. That growth belongs exclusively within the marketing department
  2. That one person can cover the whole stack of ‘marketing’ — ie performance and brand
  3. That short-term tactics are the wholly grail and that customer acquisition costs (CAC) you achieve today will last forever

When you should be doing marketing vs. someone else?

It really depends on you; your skillset, where you feel most comfortable and what’s going to be the most impactful use of your time. If you have zero marketing experience and know this is going to be a core function in order for your business to grow, I’d be looking to bring someone on to run it asap. I think, as founders, it’s essential you take an active interest in the story of the business, which is essential when it comes to shaping your narrative. Early-stage companies are driven pretty exclusively by the founder so, while you may not necessarily be buying Facebook ads or creating content to help drive SEO, you should be inputting on the story behind the business, defining what sort of legacy you want to leave in the world and thinking about how best to bring that to life.

What should be your first hire, a junior person or a senior person?

I’ve personally always been a fan of hiring people who can grow into roles. However, I think with the market we’re currently in, that’s changing a lot. You used to hire people with relatively little experience (maybe 4–5 years) but who had loads of energy, intellectual curiosity and passion to contribute and learn and grow alongside the business, In the current market, with everyone raising so much more money and expected to grow 100x faster than before, the need for people who’ve ‘been there and done that’ tends to dominate. I’d always be asking:

Will this be a challenge that this person will be ‘excited to do?’ as that will likely determine how willing they are to stick around. I’ve found senior people are more likely to take on roles in very early companies if it’s a different sector/experience for them whereas companies always tend to want to hire people who’ve churned out from competitor businesses, Here I’d add, it’s not essential that someone has direct experience in the sector you’re in for them to be valuable.

Is this person a ‘doer’ and someone who is willing to get their hands dirty

Is this person — be it senior or more junior — someone you feel you’d be able to trust and who can help take you on a journey

As one many a founder starts wondering if the solution to their marketing problem stems from simply hiring a senior marketing person, let’s move on to the core question:

What is a CMO?

Someone who leads the entire marketing function of the organisation. This is the person who should be updating the founder on what marketing is delivering, setting the marketing strategy, working with the CFO to define budgets and reporting (as and when necessary) to key stakeholders — ie investors — on impact.

When should you hire a CMO?

Really depends on the stage of your business. If you’re hiring a CMO and it’s a marketing team of one, you’re not really hiring a CMO. I think a lot of this comes down to titles and how this sits within your organisation as a whole. People are increasingly less willing to give out C level titles pre-Series A (which I think is right). A ‘proper’ CMO should signify someone who is going to come in and own a substantial budget and run a decent sized team. I’d also be looking at bringing someone on when you have significant marketing targets you need the business to hit to help you achieve your core goals.

How should you judge a CMO?

CMOs are one of the quickest roles to churn out as everyone wants to grow, and they want to do it tomorrow. I think a lot of this comes down to setting clear expectations right at the start. With early-stage businesses, a lot will be unknown and so while goals are important, the requirements of the organisation and the individuals within them to flex as the company likely will is also important.

I would personally judge a CMO by:

  • Leadership quality
  • Founder trust and relationship
  • Ability to quickly course correct if something isn’t working
  • Ability to create a balance of short and long term strategies and tactics to drive growth while future proofing the brand in the long run

What kind of budget should you discuss with your CMO?

Traditional rule of thumb in consumer marketing is 10% of funding should be spent on marketing. This should then come down as the company scales and as next rounds get bigger.

Do you have any questions you’d like to ask about marketing hiring and creating a marketing function after having recently raised? Feel to ask those questions in the comments section below!

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To use Recruiters or To go at it alone, that is the question!

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Working with External Recruiters and Firms

One of the biggest challenges founders are facing more and more is hiring fast and hiring well. To achieve this it isn’t uncommon to both bring a talent function in house, but also, in tandem, to work with external recruitment firms.

Working with these firms isn’t always straightforward however, as many promise you the world and fall short if they aren’t well versed in your industry and key people therein. Additionally, there are a variety of ways to work with recruitment firms and each has their own unique twist to it.

To help decipher this process, I’ve teamed up with our very own Head of Talent, Alex Lewis, to address some of the typical questions that surface when engaging with firms for the first time.

Getting Started:

Planning how best to start recruiting is a bit of a minefield. You have various options from search firms to contingent agency recruiters, to embedded and hiring your own internal recruiter. Each has their own pros and cons, but hopefully these FAQs will shed some light on your chosen path.

When to engage with a recruitment partner is a common question — personally, I’m of the view that initially, founders should do their absolute best to engage with candidates themselves, from getting roles advertised to headhunting through cold outreach and leveraging existing networks. For example, as Haroun from Dala, a Seedcamp company, was looking to hire, he did some cold outreach, and found some great candidates who did respond because (after asking them), they knew he was the decision maker rather than a recruiter who doesn’t know the business as well as the founder.

Once these outreach efforts are exhausted or you are under serious time pressure to scale, then it is best to begin an engagement with an external recruiter or firm.

Picking a Recruiter:

There are a few options you have to consider:

Executive Search Firms

Executive search firms focus on leadership hiring, primarily focusing on Executive (C-Suite), VP or Director level roles. This is a high-quality method of recruiting that consequently tends to have a significant price tag attached to it. Each firm’s methodology will vary, but it is a very detailed process that would tend to include global candidate market mapping, a selection of candidates presented to you for approach, and a rigorous vetting and preliminary interview/assessment prior to them being submitted into your company’s formal process.

They tend to perform advisory roles and will have substantial amounts of research available. Having a relationship with a search firm as a founder is very useful, but they should only be used when you have exhausted your personal network and efforts to fill a role.

Recruitment Agencies

Recruitment Agencies are a dime a dozen but good ones are invaluable. The general difference between a traditional search firm and a recruitment agency are the level of role they typically work. Some recruitment agencies have executive search capabilities but leadership hiring would typically not go higher than a director.

Recruitment agencies will tend to have a selection of consultants with very specific niches. They will have a database of candidates they can contact to fill your role and will do high-level headhunting. The candidates they submit to you will typically be across a few other “clients” and as they work on commission, unless there is a long-term partnership or relationship, they’ll be inclined to favour the client paying them the greatest fee — this will vary though; some agencies are more balanced than others.

Embedded Partners

Embedded talent acquisition/embedded recruitment is a relatively new but very popular model, developed as a more flexible and smaller scale version of an RPO, with a management consultancy approach. They would come in and act as your internal talent team, helping you scale at pace until a time that you build out your own internal function, or exist in support of your existing function at a time of significant scale. Outside of hiring, they would also be able to assist with things like optimising your employer brand and wider people ops initiatives, plus wider research to make you a more effective hiring machine/more attractive employer.

When you know what type of capability you require, track record is important to understand, for example if you’re hiring niché roles ensure the partner you are working with have experience in these roles and are able to prove they have done this through providing case studies, references or showing you candidates they have placed with other businesses, as long as there aren’t confidentiality issues.

What to Expect in Terms of Costs:

This is a tricky one to answer, but with executive search firms, you can expect to pay 25–30% of base salary, or in some cases where the individual is extremely senior, part of the entire first year compensation.

With recruitment agencies anywhere from 15–25% of base salary is the industry norm but this is flexible and often dependent on the volume of hiring being done.

Embedded partners again range anywhere from £8k-£20k per month per consultant/partner, however some pricing structures differ depending on if they take a commission or discounts applied on the number of consultants deployed.

Do I need to pay a retainer or can I simply do it on success?

Search firms often will work on retainer, either as a ⅓ up front, ⅓ on delivery of a qualified shortlist and a ⅓ upon successful completion of the hire, or ⅓ upfront and ⅔ on completion, different firms will have different structures, but the above options are the most typical.

Agencies will take a retainer if it is a larger volume of hires to mitigate the risk of deploying multiple assets to fill the roles, but this also gives you assurance that the firm is deploying consultants to work these roles exclusively for you, so make sure this is in place if they elect to close on retainer.

Embedded partners don’t typically work for a retainer, they may require a security deposit on a minimum length of deployment or will have a “notice period” of x months to roll off to cover loss of earnings.

Can I pay with Equity?

Yes, some search firms, especially the larger firms, have recognised that earlier stage companies are unable to pay their fees, so offer equity exchange contracts for their services. Make sure you understand your cap table thoroughly and speak to your investors (if you have them) before going ahead with this. The percentages should be equivalent to advisory equity circa 0.125–0.5%.

How do I best manage the process once initiated?

This differs by type of firm but you can tailor it to your preference. Search firms will agree on clear deliverables in certain timelines and some even have their own platform where you can monitor progress. Agencies again vary, but you can request weekly updates on stats. With embedded partners, typically you’ll have a weekly meeting and quarterly check-ins.

What outcomes should I expect and by when (quality and speed)?

There are a lot of variables at play here e.g. complexity of role, type of arrangement — but there is an element of opportunity cost when using quality and speed as expectations of success. When you first start working with a new recruitment partner, expect there to be a bit of a bedding in period where they get to understand what you think good looks like, what you expect and get to know you as a founder and a business. After that, you can make sensible judgement, but to assess quality, request data. Number of candidates contacted, spoken to, submitted for first interview and then assess interview funnel efficiency through conversion rate like you would a sales funnel.

What if I need to fire the person they recommended

Terms for this will exist within your contract with your agreed supplier, most will have claw back clauses stating that once you have made the decision to hire the individual, the third parties responsibility has diminished, however often there are refunds available on a step decreased based on x number of weeks of employee service.

What if I need to fire the recruiter?

If there is no retainer in place, again check your contract, but just let them know they are not performing and wish to remove them from the search. Make sure you give good feedback as to why. If there is a retainer in place, you may still owe a % of total fee.

Can I have two recruiters searching for the same candidate or is it a waste of time?

The short answer is yes; however, this doesn’t count for exclusivity arrangements or a retainer, as a retainer usually implies exclusivity. On standard contingency search, it makes sense to employ multiple agencies to represent your roles, especially if there is considerable headcount. If you are concerned about candidate representation, a first come first served rule usually applies, with written confirmation required from the candidate for representation as proof, which can be requested by you if conflict arises.

Hopefully these questions help you get started with the basics of recruitment and shed some light on the whole process!

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6 Points to Consider when Hiring Someone more Experienced than you

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As a founder, there will come a time when you’ll have to hire someone more senior/experienced than you, whether it be simply a function of age, or experience, it is important to keep in mind that setting up your new colleague for success is critical for you to also get the most out of the relationship and also learn from their experience.

Whilst I’m sure the list below could be much longer, below are five different points that are worth considering when bringing on someone more experienced.

  1. Clearly define their roles and responsibilities — One of the biggest causes of friction with you and with others in the organisation will come from role ambiguity. Someone in the organisation is likely already taking leadership roles in what the new hire is going to be doing, so making sure there is a clear handoff is important to not have the new hire feel like they are arguing and/or competing with existing team members on final decisions.
  2. Set clear Goals/KPIs and remove KPI ambiguity where it infringes on their performance or the performance of others where they have no authority — Following from the above point, it is equally frustrating for a new hire if they are tasked with items or are given KPIs that rely on others, but don’t have the requisite authority to action things or are in conflict with the KPIs of others.
  3. Identify and break down cliques aligned to founders so they don’t have to fight them — As organisations develop, people who have worked together for a long time can develop cliques. This makes it harder for new people to join and become part of the culture. This is likely one of the hardest things to figure out because you should also not ‘break’ the values your company operates with, but you should also try and break down any cliques that prevent people from joining in. For example, if you hire someone who is not athletically minded, and your existing team has a tradition of going rock climbing after work, then you have created a culture that omits that new hire and they will always feel ‘left out’. Just keep track of that and break things down where you can. You should feel like your culture evolves vs. ‘breaks’ as you add new and more diverse team members.
  4. Clarify and align on company culture so no issues that stem from wrong tone with customers and suppliers and employees — Sometimes people with experience in other organisations can become ‘institutionalised’ with the way they worked in their previous organisations. This is partially why you might be hiring them, for example, to gain wisdom from how they did things, but with that can also come bad-habits, and you just need to make sure those don’t create friction, particularly when it comes to customer-facing functions. The last thing you want is creating division between you and your customers because a new hire treats them differently than you did.
  5. Catch up early and often and break down walls that you identify that prevent them from achieving what you set them out to do — Because someone is more experienced than you, doesn’t mean that they will get things right all the time. In other words, don’t just leave them to ‘crack on’ because they might know what they are doing. Make sure you (and they) have the bandwidth to try what they need to try (and possibly fail), and as long as that comms bandwidth is there, you’ll be able to make time for the appropriate feedback loop. Lastly, keep in mind that they, knowing that they were hired for their seniority, may also feel a sense of pride/duty to ‘pretend’ to know what to do because they were hired to do something. Break those barriers down with continued communication so that you can check assumptions.
  6. Be careful with titles. It might be tempting to automatically give someone more experienced an inflated title, but keep in mind that might complicate bringing on someone else above them if necessary in the future and/or might give the more experienced person the temptation to intrude into other areas outside of their remit which can further aggravate how other team members feel about role clarity.

None of the above points are rocket science, and yet they are so easy to get wrong and hard to fix retroactively. In the end, sometimes things just don’t work out and you need to let someone go, but at least if you consider the above six points and feel like you’ve done them well, you can rest assured that it might have been the candidate and not you if it ultimately doesn’t work out… but hopefully it does!

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Your Cap Table is your life!

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Ok, probably dramatising it a bit here, but now that I have your attention…

Cap Tables are more important than sometimes people give them credit for. They are the ledger of value in the company you’ve built, but they are often neglected and updated last minute or relegated to a lawyer to draft and thus hard to conceptualise and realise the impact decisions such as SAFE’s can have on your ownership long term.

To help you out with not only creating your own cap table, but also modelling out future events, check out the 3-part video series Felix Martinez and I put together to illustrate the most typical fundraising examples. Hope you enjoy them!

Episode 1 — Creating A Cap Table for an Angel Round.

Episode 2 — How to Model a Pre-Seed round with Options.

Episode 3 — How to model a Seed round with SAFEs/ASAs/and Convertible Notes.

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Do I need a Product Manager? (and when)

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This blog post was written in collaboration between Devin Hunt, David Mytton, and the fearless editing of Nelson Casata

I recently caught up with a long time friend, co-founder of Lyst, and Venture Partner at Seedcamp Devin Hunt about his view on the role of Product Manager. What followed was a fun deep dive into the evolving nature of the role, but also an exploration into its relative infancy in terms of what best practices are, and why this makes it challenging for founders looking to hire a PM to know what to look for. This blog post is a summarised and synthesised version of our chat, but hopefully it helps you answer the following questions:

  • What is a product manager?
  • Where can I meet one?
  • When should I hire one?

First, let’s start by defining the role of a Product Manager (PM). A PM is more than just one thing, it’s a role that encompasses several disciplines. To make it simple, I’ve broken out those disciplines into four categories: Product Leadership, Management, Design, and Sales.

Leadership, in the context of being a Product Manager, means making the critical decisions based on your team’s research and the product vision set out by the founder. In our chat, Devin shared that there are two unique streams in building product: developing the product vision, and executing on it, which he calls product operations. Whereas a founder might be hyper critical in setting product vision (at least until they trust the PM), the product operations (think customer development, iterating on ideas, tech requests, etc) still require decision-making leadership.

Typically, the blend of leading product operations and marrying that up with the product vision of the founder is what defines the key leadership attributes of a PM, especially in younger startups.

In effect, the PM will become an arbiter between product vision and product operations. They will have to understand customer development and initially do it jointly with the founders, but later manage what success looks like.

Which brings us to *Management.* Within management, a good PM is able to manage the team that delivers and maintains the product. This ranges from managing the priority stacks from both the engineering and design teams, the customer service requests, and the like. In effect, this is where the core of the confusion sometimes happens around Product Managers being perceived as Project Managers. Clearly there is some overlap, but there is more to the role of a Product Manager, than simple Project Management.

Next, comes *Design*. Whilst some of the best designers in the world don’t have a formal education in design, it helps to have an eye for what is ‘quality’, particularly quality for your customer. The PM needs to know how to calibrate the trade-off between quality of the product shipped vs. the’ speed’ of shipping. The PM needs to be able to understand what good delivery and a good user interface looks like, but doesn’t need to be the one doing it. It’s not uncommon for a PM to start recruiting a design team to support in making those design decisions, and scale those design teams as further funding rounds come. Andy Budd will be publishing a series of deep dives on around design with us at Seedcamp over the next few weeks — stay tuned.

Finally, I added *Sales* as the last ‘wish list’ attribute. Ultimately as much as the title of the book by Daniel Pink is around ‘to sell is human’, I’d argue that to build a product is to build a product around human interactions. I wrote a piece a while ago on the relationship process and product cycle and feel that a PM benefits from understanding what customers need and want and a background in some form of sales can be handy. David Mytton, who we’ve been lucky to have as an EiR with us at Seedcamp for a few years, adds that the commercial element of a PM is largely overlooked: the full go-to-market strategy needs to go alongside product functionalities.

Now… How to find a PM? Well, one of the interesting observations Devin shared with me is that in a human resource constrained ecosystem (think Silicon Valley where lots of the PMs are hired by big tech firms), there have been many lateral hires that have ended up being good product managers with the right level of encouragement. As I explored with Devin what were the key attributes that stood out for a good PM, responsibility, trust, ability to manage and communicate, and organisation stood out as strengths over intrinsic ‘design’ skills or engineering skills, for example. As such, as you reflect on people in your network that could be PMs, don’t overlook ex-sales, ex-engineers, or ex-lawyers if they understand your segment & customer. They could very well be trained to be great PMs for your business.

To conclude, when is the best time to bring in a PM? As soon as you can afford to if you are a commercially minded CEO, and if you’re a technically minded CEO, likely still as soon as you can afford, although you can potentially get away with it for much longer provided you evaluate your role as not preventing you from leading the wider organization effectively.

In the words of David Mytton: The best founder teams have two people, one commercial and one technical. They’re the skills of a PM in two people. I think startups tend to grow the engineering teams out of line with the commercial, though they should be growing together. The PM sits across both. There’s a lot of logistics in customer development in the early days, so seed stage is probably around the right time to gear up those efforts.

On this subject, Alex from Forward Partners wrote in a recent blog post of this very point which I agree with. Read his blog post, it’s quite good.

“Typically a startup’s founder will fill the role of the Product Manager for the first 12 months. This is essential as every good founder should have an intimate knowledge of both their business goals and their customers. However as the founder takes on a more focused role as CEO of the company, she will have less time to manage the product and will instead start prioritising the strategic direction of the business. Constrained by budget and often encouraged to focus on hiring support around technology or growth, she will make do until the startup is at a large enough size that she is able to afford dedicated help with her product. Yet this can often be too late. By the time that your business has secured seed-stage or later funding the foundations of good product thinking (also referred to as having a good “Product Muscle”) should be well and truly in place. This should coincide with the first 12 to 18 months of your product’s lifecycle. Being able to present a deep and meaningful understanding of your customer to investors, along with a story of increased revenue due in large part to adapting the product to better serve your customer base, will go a long way in securing future investment. With this in mind, we believe that a Head of Product should be amongst the first key hires that you make during your first 12 months.”

I’ve put together a list of resources below, in various blog posts, books, podcasts and tools to dive in on further on the topic:

Blogposts:

https://a16z.com/2012/06/15/good-product-managerbad-product-manager/

https://davidmytton.blog/product-managers-are-not-responsible-for-how/

https://www.mindtheproduct.com/

https://blackboxofpm.com/

Books:
Crossing the chasm

Inspired: How to Create Tech Products Customers Love

The Lean Product Playbook: How to Innovate with Minimum Viable Products and Rapid Customer Feedback

Product Roadmaps Relaunched: How to Set Direction While Embracing Uncertainty

Podcasts:

The product podcast (Spotify)
Build with Maggie Crowley (Spotify)

The Saeed Khan Hypothesis: Understanding the State of Your Product, Your Processes, and Your People Sets the Foundation for High-Growth Products (Spotify)

Seedcamp Product Summit:

https://seedcamp.com/product-summit-2021/

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