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Human Capital

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When you’re first starting your company, your most important resource isn’t money. We know, that sounds insane. Cash flow, investments, and costs are some of the things entrepreneurs worry about the most in the beginning phases of their businesses. But you may be missing a key idea: the most important resource in your new company is your team. We’ll start right off with a Startup Secret: human capital is your most important capital.

Human Capital (1)

You may be surprised by this, but hear us out. There’s no right answer for how you build your founding team. But your founding team is largely what investors look at when they’re deciding whether or not to take the risk on a startup; the skills, unique experience, and teamwork in a group of people are what make a company likely to succeed.

There’s one question we get a lot here at Startup Secrets: is it worth starting your company if you have a great group of people, but don’t have your value proposition or idea together yet? We think the answer is yes, and precisely because human capital is going to be your most valuable resource. Read on to learn why we think human capital is so important, and head over to the forums if you have any questions.

Knowledge

Every night, the entire base of your company walks out the door. When your employees go home, you lose their knowledge, their relationships, their projects, and their skills until the next morning when they return. Many entrepreneurs don’t understand or value this notion: that your entire company lies in the hands of your people. Without them, your company would likely fall apart (unless you’re a one-person show, in which case, go you!).

Your human capital is important firstly because it’s really the core of your company. Their knowledge, skills, networks, connections, customers, and relationships are the foundation of your business, and those things are difficult to line up again if a person leaves your company. This is why maintaining a culture of loyalty and respect can be hugely important: because without retaining your people, you won’t retain your company.

As an extension of this, we suggest that you hire people who scare you with their competence. If knowledge is one of the factors essential to building your company, and that knowledge is in the hands of your employees, you want to find people who are knowledgeable and competent. If your hire knows more than you, is smarter than you, or has more skills than you, don’t be intimidated! Use that person and their knowledge as human capital, and push your company forward.

Culture, Vision, and Mission

Every person you hire becomes a thread in the fabric that makes up your company. Each individual will add to or subtract from the culture, which is why wrong hires can tear apart your team and cost you your company. Having a strong culture, and hiring people that fit into it, can build a strong company: another way in which your human capital is necessary.

Because your human capital is so necessary for building up your culture, and subsequently bringing your vision and mission to life, hiring becomes essential again. We’ve talked about how to interview and hire for cultural quotient, but we want to emphasize again: work with people who you adore being with. Work with people who challenge you, and make you grow. Don’t just hire people that will agree with you; instead, hire people that will push back against you for the betterment of your whole company.

It’s difficult to hire people without an established culture, vision, and mission. Without a positive culture, you can’t select the right team members and empower them to do the right thing. Without your team and culture, and the vision and mission to engage, focus, and unify everybody on getting the result you want, it’s impossible to execute on building anything.

Consider how you can multiply your human capital through culture and a clear vision and mission. With everyone going in the same direction and working together, you can increase that human capital and build a strong company.

Upgrading your Team

Now comes the scarier part: because human capital is so important, at some point you’re going to have to upgrade your team to match the pace at which you’re growing. We have lots of advice on qualities to look for and how to interview, but it’s important to know some broad strokes about hiring to add into your team. To start, here’s one of our favorite Startup Secrets: you are what you hire.

You Are What you Hire (1)

You’re going to need to start with a great nucleus of team members with your founding team. More often than not, you’re not going to have the money to hire on every team member that you’ll want to in the early stages. It’s important to start with a solid founding team that can be flexible and fill in roles where needed, as needs in startups are constantly changing. You’ll need to be careful about when you hire on new people, making sure you have the money and the space for growth in your company.

Because you often won’t have the money to build a whole team at the start, especially if you’re bootstrapping your business or using some other method of alternative funding, keep in mind your option pool. The best players often will want equity in your startup to make up for a smaller salary, so having equity options in a new, quickly-growing startup will often allow you to hire more easily at the start. This is something to keep in mind when negotiating new hires alongside possible investment.

If you’re hiring with very little in funding, you can still find great players! It’s no different from any investor: a team member is investing their time, which is their scarcest resource. They have to believe in the opportunity and believe in you. So, sell yourself to them! Don’t just sell the company. Try to find others that will vouch for you and the opportunity, such as colleagues and advisors that are specific to the market. And, like in sports, you may not get your first-round draft picks. You may not get the A-list in your founding team. But as you move forward in your business, you’ll be able to add experience and expertise beyond your current abilities as your needs grow.

One of the questions we are asked frequently here at Startup Secrets is whether or not you should hire known quantities, or people you know and have worked with in the past. Our answer is always yes, and no. Yes, you should, if it’s a proven team that fits well and builds on the culture you’d like to establish in your new startup. No, you shouldn’t, because every new situation is different and diversity of background can be great in creating a new business. This is entirely up to the founder: think hard and decide whether or not you’d like to lean on those people you already know, or build out a new team that could have other advantages in the long run.


In the end, all startups are really a people business. Their success relies on the human capital built into their founding teams and the culture and vision that comes from having a tight-knit group of people. At each step in your startup, particularly at the beginning, invest your time and money in your human capital. Our last parting piece of advice: if you still think you’re needed on your team, then your team isn’t strong enough. You want to be building a team that, in its own right, can stand alone and grow the kind of business that could become either a sustainable entity.

To learn more about building a strong team, check out the question: How do I hire great talent? And then head over to our forums to read about what other entrepreneurs think, and add your own questions and comments to the mix.

Keep track of your progress in Startup Secrets!

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