In the following exchange, Recast’s co-founder and CEO, Michael Kaminsky (@michael_kaminsky), details why and how they’ve upended an unexamined feature of early-stage hiring, the resulting trade-offs they’ve had to embrace, and their larger philosophy of building sustainably.
When it comes to hiring senior people early, it wasn’t the case that we hired junior people and that didn’t work out. Fortunately, we didn’t have to learn this the really hard way.
This impetus instead came from a few things that we were trying to solve for when we started the company:
- having a fully (without a central office) remote team from day one,
- trying to build an operating culture that was very autonomous,
- and minimizing the management burden for us co-founders and the company overall.
The implication for meeting those ends is that you want a workplace where every individual is incredibly autonomous and can work independently on hard problems.
Experienced people fit that description perfectly. They don’t need a lot of oversight and management. They can generally be pointed in roughly the right direction on a problem and they can then go, define it, and execute it themselves.
Of course, these hires are going to be more expensive.
Tenured engineers are really expensive. So there are real trade-offs here and this isn’t necessarily a super easy decision. Because we hired senior engineers our labor costs are relatively high and it also means that we don’t have a large pool of junior talent that we can train and promote from within.
But it has amazing, ongoing benefits. A big one being not needing a management layer. You can scale the early team without introducing these additional layers of complexity.
We actually just made our first junior hire 3 years into building the company.
And we only felt comfortable doing that as we already have a team of 20+ people who’re right there to give this person guidance and support at the level that she needs it.
It’s worth noting that we have historically been flat but we will start adding more structure/management this year (e.g. we just hired a VP of engineering).
The idea here is not that you need to be flat forever but when the company is small and still looking for product-market fit. It can be really efficient to have a team of senior folks without needing to pay the overhead of a management layer.
As first-time founders, is it hard to evaluate senior hires?
In some sense, it’s easier.
Because you can judge them based on the work they’ve done in the past. Whereas with more junior folks, who don’t have much of a resume, one can only assess and hire based on potential.
And hiring for potential is really difficult because you’d only have a couple of hours in an interview with each candidate. Max. You’d have to make an assessment of their future output by observing just a small, early part of their trajectory.
Which could be an exponential curve or a flat one. You just don’t have enough data.
On the other hand, to give you an example, one of our first engineers had been working in tech for 30 years! :)) Going in, we knew exactly what this person had consistently executed on over that time period.
Additionally, we also brought in a bunch of people as contractors prior to having them join us full time once they had proven themselves out.
We were able to judge their communication style, their efficiency, and just their raw output all before making a full time commitment. Experienced folks are well set up for this approach as well since they’re further along in their careers and can take a bit more risk when it comes to finding their next role.
Getting junior hires on a contractual basis is more difficult. Because you’d need a lot of management to get them pointed at the right problem, to constantly offer them feedback on the work itself and then how it ought to be done/handled/collaborated on. Additionally, junior folks often want (and need) the stability that comes with full-time employment.
The other side of this question is why would someone with deep experience want to join a startup that early?
The thing that, I think, we sell as an employer is that you can come in and work on hard, really interesting problems with other great talent. We’ve seen that resonate a lot with engineers in particular.
Once you have that early critical mass of this senior talent, you can attract others like them. They’d say, “I’m going to work at the highest level with teammates at the top of their fields, that’s exciting vs working with a bunch of 23-year-olds which isn’t that appealing.”
How have we addressed the challenges around cost structures?
Well, a thing that’s special about Recast is that we have a lot of revenue for the stage we’re at. We’ve always focused on building a sustainable business from day one.
From the very beginning, we’ve prioritized getting substantial amounts of revenue into the business and have only grown the business that way.
We were at hundreds of thousands of dollars in annual recurring revenue when we raised our pre-seed round. And at millions of dollars when we got the subsequent seed. That sort of early cashflow has afforded us the flexibility to hire as we’ve wanted.
Again, it’s just a different philosophy for approaching company building from what a lot of early stage founders were attempting to do in the ZIRP era. And like any other choice, it has trade-offs. It’s harder to do.
It has been more stressful for my co-founder and I. Largely because of having less money in the bank — as opposed to some venture-backed founders with $10M in the bank we’ve had to fight and claw our way to keep burn rate low.
But funding a business with the revenue from customers, opens up a lot of exciting opportunities (more on this later) and it also keeps us pointed in the right direction.
In the early days, it was validating to learn that we were after a problem that felt very real to lots of people and that it was something they were actually willing to pay for.
The danger of delaying revenue in search of a fit is that you could be building a product that people would never pay for or wouldn’t be willing to pay for at the rates that can support a sustainable, viable business.
For us, though, we wanted to know very early on whether we were operating in a space where customers were willing to write large checks for products.
That has been the guiding light for us as a business. Where’s the value being sought? What are people actually paying for? How much can they budget for a solution like this? Those are the questions we’ve been chasing.
And we didn’t have product-market fit on day one.
We worked with folks who only wanted to pay a much smaller amount than what would have worked for a sustainable business. Then we worked with others who paid more for different feature sets, which shaped the product in that specific direction.
Even today, we are still experimenting with different verticals and segments.
Some of them will work out and become great customers. Some of them won’t. Some of them are not going to be able to use the product well and are going to churn. That’s fine. That’s just the stage of our business.
To sum up, my co-founder and I are both fairly conservative. We’re aggressive with some things but definitely conservative financially. We have always wanted to control our own destiny as a business.
If you’re going out to fundraise and you need the money, you’re not going to get a good deal. Because investors can sense your needs and they will price the deal lower. If you can raise successfully at all, you end up selling a ton of your company.
So we’ve always tried to approach fundraising meetings from a position of power; ‘look, we can take some money right now, there are things that we can do with it, but we don’t need it and we can continue on without you.’
That ability to chart profitability on our own, gives us great negotiating leverage when working with investors or considering any sort of financing.
Also, early stages tend to be scary and uncertain, so knowing that — ‘Hey, here’s how much runway we have, we can extend it. We just have to make slightly different choices in our capital allocation, how much do we invest today vs the future.’ — sustains the team’s morale.
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