How to build a world-class team without funding

Gaurav Jain is a Principal at Founder Collective, an early stage VC firm based in Cambridge and NYC that has made investments in 150 companies including Uber, Buzzfeed, and Makerbot. He cofounded Polar and was an early Product Manager for Android. Follow him @gjain.

Startup founders are resource-constrained at every stage of their company, but nothing stings more than the inability to add amazing talent to your team at critical points. The difference between a successful startup and a sad failure is often a VP of engineering who can help raw, young talent scale. Or a genius designer who can transform the way your product looks and feels. Or an advisor with deep relationships in your market.

Unfortunately, this caliber of team is tough to acquire. Employees are well compensated at big companies and are beneficiaries of perks that make Disney World look dull. They have wide latitude to pursue projects of interest, and the best of them have multimillion-dollar retention packages.

Likewise, influential advisors are in demand, have their pick of projects, and can’t be moved with the usual levers.

Meanwhile, you’re offering an Ikea desk and a promise.

Still, recruiting top-caliber employees is possible, even before the first dollar of VC hits your bank account. If your target isn’t used to the world of startups, starting them as an advisor is often a way to test the waters. They often dream of the autonomy, fame, and riches the best startups can provide but aren’t quite ready to trade in their cush gig for a startup, even with seed funding.

The first step is understanding who you’re trying to add to the team and why. There are three main types of advisor you can add:

1. Legacy builders with star power: This is a well known person in the field that lends credibility to your business. They might have been on magazine covers or shepherded a company through an IPO. Except in rare cases like John Carmack joining Oculus, this person will not likely join your team in a full-time capacity. You’re recruiting this person to lend credibility or perhaps serve as an independent board member.

This is the hardest type of advisor to recruit, but I have seen many entrepreneurs (even first-timers) do it successfully. The key here is to build trust and excitement with the advisor.

Understand their motivations. Money is not likely to be a strong incentive (though they will likely expect advisory shares). Are they are looking to nurture the next generation of leaders and leave a legacy? Keep relevant by associating with a hot company in their field?

Once you understand that dynamic, prepare a pitch that demonstrates how your company fits that narrative. Are you working on interesting technical challenges that pique their technical curiosity? Are you a newsworthy company that will add to their personal brand as a kingmaker? If so, find someone to make an intro and be prepared to make your case.

Given the busy schedule common to this kind of advisor, it’s important that you set expectations upfront. At the very least, you will want to do a quarterly call so the advisor is up-to-date on the business and is not caught blindsided when someone asks them about your company.

Be realistic with your asks. Do you want intros to customers? Availability for diligence calls with potential investors, recruits, etc.? This type of advisor will be well networked, but you’ll need to be judicious about how you tap that network until you start achieving some success on your own.

2. Roll-up-the-sleeves Do’ers: This is someone who will get involved with tactical projects and drive tangible value for the company. You probably won’t be able to hire this person — they’ll be too expensive or not sufficiently challenged by the workload — but make sure the rules of engagement are upfront and clear. Just because you are compensating with equity should not lower the standards of what you expect from them.

I have seen many advisor relationships fall short, so consider giving them a project or two before you formalize the arrangement, and stop vesting the equity if they are not driving the kind of value you expected. Equity is just as sacred as cash, don’t take it lightly.

3. Try-before-you-buy’ers: All of your senior hires should start here. I know entrepreneurs go through an elaborate recruiting process before bringing on senior people — lots of interviews, dinners, references, etc. But just because the person has done well at other companies and is fun to be around doesn’t mean they’ll be a great fit for your company. There is only one way to find out — get them involved in the business.

If your advisor falls into this third category and you’re looking to hire them, ask them to invest their vacation days with your company.

For instance, a B2B company we funded had identified a world-class VP of sales. He had strong relationships with all the key buyers in their space. He seemed like a slam dunk on paper, but the CEO wanted to make sure there was a culture fit since he was coming from a very large company. So he asked this candidate to go with him on some sales calls. This forced the advisor to use PTO days at his current employer. He went to the meetings and sold the vision to customers. He became invested. Most importantly, he had to forgo a trip to Hawaii with his family, demonstrating real commitment.

Not only did this make the decision a lot easier for everyone involved, but it also demonstrated the passion and intent of the potential recruit.

Talk Through the Term Sheets in Advance

Often startups will have an informal agreement with advisors. As a VC we’re skeptical of these arrangements. We’ve seen too many companies burned by such deals. This is a morale killer at the company and can do serious damage to your reputation with investors.

Any time you’re starting a relationship with an advisor, work out a formal offer letter and have the advisor sign it. Avoid generalities and spell out everything: what you expect from them, compensation, what percentage of equity they’ll receive, and the vesting schedule.

For people you intend to eventually hire, get into the nitty-gritty. Bonus potential. PTO days. Reporting structure. Hiring plans (some execs are loathe to leave their admins behind). Make the process real for the would-be employee.

This contact with reality may freak out some potential hires. That’s good. It’s far better to weed out the people who can’t work in a startup sooner rather than later. There is always the possibility that the potential hire will renege, but at least they won’t be able to BS you that there was a misunderstanding about compensation or strategy.

Building a world-class company takes rockstar talent, and top talent is not cheap. But savvy entrepreneurs don’t wait for funding to start engaging their future team members in a meaningful way.