A startup's first hire: whom to hire, when, and what it really costs

The first employee is the most expensive decision of an early startup. Expensive not because of the salary, but because a mistake shows late: the person starts in a month, ramps up for another month, and only by the third does it become clear whether it was the right person and the right role.

When to hire

Hire when there's work you're already doing yourself that keeps you from doing the main thing. Not “we'll need a salesperson someday”, but “for the third week I'm answering customers instead of fixing the product”.

Bad reasons to hire:

Money came in. A round isn't a reason to double the team. Every person shortens your runway at once, and the payoff comes later.
Everyone does it. “Startups our size already have a marketer” isn't a reason.
Fear of falling behind. A panic hire usually ends with a firing six months later.

Whom to hire first

It depends on where your bottleneck is right now.

The product doesn't keep customers yet — you need an engineer. A salesperson would be pouring people into a leaky bucket. More in Customer churn.
The product keeps them, but there are few customers — sales. If people who reach the product stay, but few new ones arrive, the bottleneck is inflow.
There are customers, but everything's on fire — support. When engineers answer emails instead of writing code, the product stops growing, and you don't see it right away.

What a person really costs

The salary is only the visible part.

Search. From the job post to the first working day takes three weeks to two months.
Ramp-up. For the first weeks a newcomer works at a quarter of their strength: learning the code, the customers, the rules. And taking time from those who onboard them.
Time to payoff. The salary starts on day one, full output comes in a month or two. During those months your runway shrinks faster than results grow.
Retention. A good person will be poached. Every few months the question of a raise comes up — or of equity in the company.

Hence the rule: hire earlier than it's burning, but later than you'd like. If you needed the hire yesterday, you're already two months late, and your cash plan has to account for it. How that plan is made — in Runway: how long your money will last.

The team feels the cash

People see what's happening with the money even if you keep quiet. When there's a month or two to zero, morale drops, the strong ones start answering recruiters, and the ones who leave are usually the ones you'd least want to lose. Overload works the same way: a person who's done two people's work for three months one day just doesn't show up on Monday.

How it works in Runway 200

In the game you hire engineers, designers, salespeople and support. A candidate starts three to eight weeks after the decision, and the better known you are in the market, the stronger the candidates. The salary starts being charged from the first working day, and the person reaches full strength in a month to a month and a half.

Everyone has a mood. It drops from overload, from outages, and when there's less than eight weeks of money left, and it rises while the company grows. The lower the mood, the worse the person works and the more likely they are to leave. Salaries are indexed once a quarter.

One day your engineer will get an offer from a big company: sixty percent more money. The choice is to raise their salary by half for good, give them 1.2% of the company, or let them go and see how the others take it. There's no ready right answer: it all depends on how much money you have and how much equity is already gone. About equity — in Founder dilution.

Try it yourself: the first ten weeks are free, no sign-up. See whom you hire first — and with how much cash.