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New start-up hiring strategy: Making an offer you just can't refuse

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“You guys are a little too early for us. But apart from the money, how can I help you,” one of India’s top venture capitalists asked an entrepreneur in an impromptu investment pitch on the sidelines of a tech summit in Bengaluru recently. 

“We’re looking for a technologist. If he’s really good, we wouldn’t mind making him a partner in the business,” the entrepreneur responded. The VC immediately shared numbers of his associates and even typed out a mail introducing the founder to the head of human resources at his fund.

“They’ll help you find the person you need. You might consider raising some seed capital and then come back to us in a few months. But I want to keep hearing from you,” the VC finally told the entrepreneur.

It isn't just access to funding that haunts start-up founders today -- putting the right team in place to execute their vision is something they spend significant amount of their time on. And this is one reason why they try to tap into all sorts of unconventional methods to rope in top talent, including referrals, hackathons, job boards or social media posts. While a lot of these hiring methods are not scalable, they help them find candidates who are a better fit for the kind of positions start-ups are looking to fill.  

According to Vivek Prakash, co-founder and CTO of HackerEarth, one of the leading hackathon platforms in India, hackathons have emerged as one of the key mechanisms for start-up hiring. For an early-to-mid-stage start-up, a hackathon can yield 20 solid candidate leads, of which five get hired on average. “This year alone, we’ve conducted close to 150 hiring challenges, of which 70 per cent were done for start-up companies and emerging businesses. More than 500 offers have been made by start-ups using HackerEarth this year,” added Prakash. 

GitHub, the code-hosting platform that was acquired by Microsoft for $7.5 billion earlier this year, is another great way for start-ups to identify key technology talent. With a huge base of Indian developers on GitHub, start-ups often scour the platform to find people with the right technical know-how based on the projects they’re working on. A lot of developers also make their contact details public on their profiles, making it easier to trace them.

Kiran Jonnalagadda, founder and CTO of HasGeek, a platform that facilitates discussions between developers and technologists and helps them collaborate and co-create, says job boards are continuing to drive start-up hiring but have remained a niche. He, however, adds that when it comes to finding CXO level technical talent, referrals are still the way to go in the start-up space. But when start-ups scale and begin looking at mass hiring, they inadvertently turn to more traditional methods such as using job websites or postings on LinkedIn.

“If Freshworks is hiring 1,000 people, then it definitely won't rely on referral hiring. It will most likely scrape through a resume database and make a pitch to them. This is because referral hiring doesn’t scale fast enough,” says Jonnalagadda.

But there’s also an elephant in the room when it comes to start-up hiring, as candidates no longer see these firms as they did two or three years ago. Earlier, candidates would readily accept job offers from start-ups as some of these well-funded companies were able to match or even better the salaries offered by large corporates. This isn't the case anymore.

“Today, the situation is markedly different, as start-ups realise that they cannot afford hiring mistakes. And so they are a lot more mindful now, while hiring leaders. Professionals from the corporate sector are also asking the right questions about opportunities at these start-ups, including about the culture, the leadership team, and whether the investors have the vision and patience required for the business to succeed,” says Guruprasad C K, executive search consultant at Spencer Stuart.

As a result, start-ups look for people who've successfully transitioned from large corporates into new ventures and know what it means to work and what it takes to succeed here. This is a very effective risk mitigation strategy being adopted by start-ups, he added. ESOPs, however, still remain a great way to attract top management among start-ups, which are now positioning themselves as change-makers rather than just another company trying to breach the Unicorn barrier with an unconventional idea. There are several success stories of people making money through ESOPs in start-ups today and this is becoming a key attraction point.

“ESOP-related CTC structures give CXO-level candidates an entrepreneurial excitement to impact the company’s growth more directly,” said Sanam Rawal, lead talent advisor at Constellation Blu Management Services, which has been recruiting talent for Blume Ventures’ portfolio companies. During the past three years, it has executed over 25 CXO-level recruitments in companies such as Instamojo, Exilor and Locus. 

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