Hiring & Talent

Why the Chief of Staff is Important for a Startup Startup founders and practitioners are often debating the best actions to take and decisions to make in their early-stage companies. Determining the right hires has been a major part of this conversation. The hot topic on the table lately has been around hiring the role of Chief of Staff. There is a growing conversation about whether startup leaders and founders should hire a Chief of Staff (COS), and here at Visible, we believe it is one of the most important hires you can make. A Chief of Staff is essential for your startup because their role is designed to be an extension of the c-suite’s leadership and strategy. Their role allows companies to scale faster and more strategically. Between the Board of Directors, Executive Board, stakeholders, and employees, startups have a lot of moving parts, and a Chief of Staff can be the cog in the machine that makes all those pieces work smoothly together. A Chief of Staff is the right-hand person to an executive team member, typically the CEO or COO. The COS is tasked with managing the executive’s goals, priorities, internal and external operational tasks, and special strategic projects as needed. The typical responsibilities included in a Chief of Staff role may include: Managing Executive Goals and Priorities A Chief of Staff helps determine what optimized time really looks like. For CEOs and COOs, there is plenty of work that could easily fill the day. But what work is most important for business development and moving the business forward? A Chief of Staff helps direct the decision-making and serves as a sounding board for the CEO, owning the task of keeping the executive aligned to the goals he or she set forth to push the business forward. A COS considers these executive goals and even formalizes them in a framework such as the OKR (Objective Key Results) framework. With these executive OKRs formalized, a COS helps guide the CEO/COO’s priorities day over day. Related resource: Should I Consider a Part-time Executive for My Startup? Operational Tasks With specific areas of work, including board meetings and other critical decision-making sessions or meetings on the agenda, the Chief of Staff helps manage these priorities by handling operations tasks like agenda setting and distribution, communications with teams across the startup to gather insight and updates on various company-wide priorities and progression. Not only will a Chief of Staff work on internal operational tasks like meeting prep, gathering updates, and tracking company progress towards goals, but they also tend to handle external operational tasks as well. These external operational tasks might include sending investor updates to stakeholders, serving as the point of contact to the Board of Directors representing the CEO’s office, or even working on communications and PR. Special Strategic Projects Startups move fast, and different priorities and special obligations come up for leadership out of the blue. Additionally, as your startup goes through strategic growth periods like fundraising or even acquiring smaller startups down the line, the priorities of a CEO’s time will greatly change. These strategic times are the perfect way to utilize a COS. If fundraising is going to take up a significant chunk of a CEO’s time, a Chief of Staff can step in and manage aspects of that strategic task such as deck assembly, overview materials for the potential investors, and communication with parts of the business that need to deliver information for said fundraising presentation. Chief of Staffs are typically very versatile in their skill set, with communication, strategic thinking, and analytical skill sets. This background makes them the perfect person to take on roles that require strategic thought and concise summaries but are potentially too time-constraining for a CEO to dedicate all of their energy to. With their unique mix of hard and soft skills, executive insight, and strategic position in the company, a COS is a major value-add to any startup. Our team at Visible has identified seven primary ways that a Chief of Staff can strengthen your startup. When is it Time to Hire a Chief of Staff? Determining the right moment to bring a COS into your startup is crucial for maximizing their impact. By recognizing the following indicators and acting promptly, startups can leverage the unique skills and perspectives that a Chief of Staff brings to the table, ensuring sustained growth and success. Related resource: How to Hire Your First 10 Startup Employees Here are some key indicators that it might be the right time to hire a COS: Leadership Bandwidth is Strained As your startup grows, the demands on the leadership team increase exponentially. This strain manifests as longer work hours, difficulty in prioritizing tasks, and a constant feeling of being overwhelmed. Executives may find themselves bogged down with operational details rather than focusing on strategic initiatives. A Chief of Staff can help alleviate this burden by managing critical tasks, streamlining decision-making processes, and allowing leaders to focus on high-level strategic goals. They act as a force multiplier, extending the reach and effectiveness of the leadership team. A Need for Cross-Departmental Collaboration Effective cross-departmental collaboration is essential for startups to innovate and scale. However, as the organization grows, silos can form, and communication breakdowns can occur. This can lead to inefficiencies, duplicated efforts, and missed opportunities. A Chief of Staff ensures seamless collaboration by facilitating communication between departments, aligning goals, and overseeing cross-functional projects. They help to break down silos and ensure that all parts of the organization are working towards the same objectives. Related resource: How to Build Organizational Alignment Easily Mergers, Acquisitions, or Product Launches Significant events like mergers, acquisitions, or major product launches require focused attention and meticulous coordination. These initiatives bring unique challenges such as integrating new teams, managing extensive paperwork, and aligning strategies. A Chief of Staff can manage these complex processes, ensuring that all aspects are covered and that the executive team can concentrate on high-level strategic decisions. They provide the necessary oversight and coordination to make these critical events successful. Leadership Succession Planning Succession planning is vital for maintaining continuity and stability within the leadership team. It involves identifying and developing future leaders within the organization. However, amidst the daily hustle of running a startup, this can often be neglected. A Chief of Staff plays a crucial role in leadership succession planning by mentoring potential leaders, overseeing development programs, and ensuring there is a clear plan for leadership transitions. This not only secures the future of the company but also helps in retaining top talent by providing clear career progression paths. Typical Responsibilities for a Chief of Staff A Chief of Staff in a startup wears many hats, acting as a strategic partner to the CEO or COO. Their role involves a wide range of responsibilities that help streamline operations, drive strategic initiatives, and ensure that the leadership team can focus on high-priority tasks. Below are some of the key responsibilities that a Chief of Staff typically handles, each of which will be covered in more detail in their respective sections. Managing Executive Goals and Priorities A Chief of Staff helps determine what optimized time looks like for the executive team. For CEOs and COOs, there is plenty of work that could easily fill the day. But what work is most important for business development and moving the business forward? A Chief of Staff directs the decision-making process, ensuring that the executive's time is spent on tasks that are crucial for growth. They serve as a sounding board for the CEO, aligning the executive with the company’s strategic goals and formalizing them using frameworks such as OKRs (Objectives and Key Results). This helps guide the CEO/COO’s priorities day by day. Operational Leadership The Chief of Staff manages both internal and external operational tasks, ensuring smooth day-to-day operations. This includes setting agendas for board meetings, gathering updates from various teams, and tracking progress towards company goals. They handle communications across the startup to ensure everyone is aligned with the company’s priorities. Externally, they might send investor updates, serve as a point of contact for the Board of Directors, and manage public relations tasks. By overseeing these operational details, the Chief of Staff allows the executive team to focus on more strategic issues. Strategic Projects Startups often encounter special strategic projects that require focused attention. Whether it’s fundraising, a product launch, or an acquisition, a Chief of Staff manages these projects, ensuring they align with the company’s strategic goals. They take on roles that require strategic thinking and concise summaries, handling aspects such as preparing decks for investors, assembling materials for presentations, and coordinating communication across the company. This enables the CEO to concentrate on core business functions without getting bogged down by the intricacies of these special projects. Important Skills for a Chief of Staff to Have When making the strategic hire of a Chief of Staff, startup founders need to look for specific skills that will ensure the candidate can effectively support the leadership team and drive the company forward. These skills serve as crucial filters and green flags in the interview process, guiding founders on how to frame their questions and identify the best candidate for their organization. Strategic Thinking Strategic thinking is vital for navigating the complexities of a growing startup. A Chief of Staff must be able to anticipate future challenges, identify opportunities, and develop long-term plans that align with the company's vision. By outsourcing strategic thinking to a Chief of Staff, the executive team can ensure that someone is always focused on the bigger picture, allowing them to concentrate on immediate operational needs. This skill is essential for maintaining a clear direction and ensuring the startup's long-term success. Project Management Effective project management is crucial for keeping various initiatives on track and within budget. A Chief of Staff must be adept at coordinating multiple projects, setting deadlines, and ensuring that resources are allocated efficiently. In a growing startup, where rapid execution is key, outsourcing project management to a Chief of Staff ensures that projects are completed on time and meet the company's strategic objectives. This allows the executive team to focus on higher-level strategic decisions without getting bogged down in the details of project execution. Analytical Skills Analytical skills enable a Chief of Staff to interpret data, identify trends, and make informed decisions. In a data-driven startup environment, these skills are critical for providing valuable insights that inform strategic direction and operational improvements. By outsourcing analytical tasks to a Chief of Staff, the executive team can ensure that decisions are based on solid data and analysis, reducing the risk of errors and improving overall efficiency. Communication Skills Strong communication skills are necessary for a Chief of Staff to act as a liaison between the executive team and other departments. They must be able to convey complex ideas clearly, facilitate effective meetings, and ensure that all stakeholders are on the same page. Good communication helps maintain transparency, fosters a collaborative work environment, and ensures that everyone in the organization is aligned with the company's goals. By outsourcing communication management to a Chief of Staff, the executive team can ensure that information flows smoothly and efficiently throughout the organization. Ways a Chief of Staff Can Strengthen Your Startup A Chief of Staff can significantly enhance the effectiveness and efficiency of a startup. By taking on critical tasks and responsibilities, they enable the executive team to focus on strategic goals and high-priority items. Here are some of the ways a Chief of Staff can strengthen your startup: Focus on Priority Items The day-to-day life of a CEO or COO can be extremely hectic, with numerous decisions and tasks competing for their attention. A Chief of Staff helps manage these priorities by filtering out less critical tasks and directing the executive’s time towards the most strategic decisions that align with the company's OKRs (Objectives and Key Results). This ensures that the leadership focuses on what truly drives the business forward while the Chief of Staff handles smaller issues and routine decision-making. Facilitate Smooth Information Sharing Effective communication is crucial for the smooth operation of a startup. A Chief of Staff acts as a central point for gathering and disseminating information across the organization. They collect updates from various departments, distill the most important points, and present a contextualized executive summary to the CEO. This process ensures that the CEO receives all the necessary information without being overwhelmed by details, and that communication flows smoothly from the CEO to the rest of the company. Inform Strategy and Decision-Making A Chief of Staff serves as a valuable resource for keeping the executive team connected to the various happenings across departments. By providing an executive summary of company-wide updates, a Chief of Staff helps the leadership team make informed strategic decisions more quickly. They ensure that all relevant information is considered, facilitating better and faster decision-making processes. Maximize Time While You Scale As a startup scales, the demands on the executive team’s time increase. A Chief of Staff helps maximize this time by prioritizing tasks and focusing on critical projects. They handle routine and operational tasks, allowing the CEO to dedicate more time to deep-think projects and strategic initiatives. This ensures that the leadership’s time is used efficiently, even as the company grows and evolves. Tackle Special Projects Special projects, such as fundraising rounds, product launches, or industry presentations, require focused attention and dedicated resources. A Chief of Staff is perfectly positioned to spearhead these projects, managing aspects such as preparing investor decks, assembling materials for presentations, and coordinating communication across the company. This allows the CEO to stay focused on daily priorities while still ensuring that special projects are executed effectively. Provide Oversight and Perspective Startups can often become echo chambers where new perspectives are hard to come by. A Chief of Staff, especially one with experience from other startups, brings a fresh viewpoint to the c-suite. They provide oversight and serve as a sounding board for new ideas and strategies, helping to ensure that the company stays innovative and adaptable. Push the Business Forward Ultimately, a Chief of Staff is a strategic player in moving the business forward. They streamline operations, manage strategic projects, and ensure effective communication, all of which contribute to the company’s growth. By freeing up the executive team to focus on high-level strategic goals, a Chief of Staff helps take a startup from good to great and potentially to unicorn status. Chief of Staff vs Executive Assistant Understanding the difference between a COS and an Executive Assistant (EA) is crucial for startup founders to ensure they make the right hire at the right time. While both roles support the executive team, they do so in different ways and with distinct focuses. Chief of Staff A Chief of Staff is a strategic partner to the executive team, particularly the CEO or COO. Their responsibilities are broad and focus on aligning the company’s strategic goals with daily operations. Here are some key aspects of the COS role: Strategic Focus: The COS works on high-level strategic initiatives, ensuring that the executive team’s vision and goals are implemented across the organization. Project Management: They handle complex projects that span multiple departments, such as mergers, acquisitions, product launches, and fundraising efforts. Decision-Making Support: The COS provides critical insights and data analysis to support executive decision-making, helping to inform strategy and operational improvements. Cross-Departmental Collaboration: They facilitate communication and collaboration between different departments to ensure everyone is aligned and working towards common goals. Leadership Development: The COS often plays a role in leadership succession planning and mentoring potential future leaders within the organization. Executive Assistant An Executive Assistant, on the other hand, focuses on optimizing the executive’s daily schedule and administrative tasks. Here are some key aspects of the EA role: Administrative Focus: The EA manages the executive’s calendar, schedules meetings, handles correspondence, and organizes travel arrangements. Time Management: They ensure that the executive’s time is used efficiently by prioritizing meetings and tasks, allowing the executive to focus on their most important responsibilities. Task Coordination: The EA handles a variety of administrative tasks that help keep the executive’s day running smoothly, from booking appointments to preparing documents. Support Role: They provide general support to the executive, ensuring that they have everything they need to perform their duties effectively. Routine Operations: The EA is instrumental in managing routine operational tasks, allowing the executive to concentrate on more strategic issues. Key Differences Scope of Responsibilities: The COS has a broader, more strategic scope, focusing on aligning and implementing the company’s long-term goals. The EA’s scope is narrower, concentrating on the day-to-day administrative support of the executive. Strategic vs. Administrative: The COS is involved in strategic decision-making and high-level project management, while the EA handles administrative and logistical tasks. Cross-Departmental Impact: The COS often works across departments to facilitate collaboration and ensure alignment with company goals. The EA typically works closely with the executive and less so with other departments. Long-Term vs. Short-Term Focus: The COS is focused on long-term strategic initiatives and projects that drive the company forward. The EA is focused on the immediate, short-term needs of the executive. Making the Right Choice For startup founders, deciding between hiring a Chief of Staff and an Executive Assistant depends on the company’s current needs and stage of growth: If the company needs high-level strategic support, project management for complex initiatives, and cross-departmental coordination, hiring a Chief of Staff is the right choice. If the primary need is managing the executive’s schedule, handling administrative tasks, and ensuring day-to-day operations run smoothly, then an Executive Assistant is the appropriate hire. Equipping a Chief of Staff for Success at a Startup To ensure a COS is successful at your startup, it's crucial to clearly define their role and responsibilities from the outset. This includes creating a detailed job description that outlines specific tasks and expectations. Additionally, providing a comprehensive onboarding process with clear goals and KPIs will help the COS integrate smoothly and start contributing effectively. Regular check-ins and feedback sessions will also ensure they are aligned with the company’s strategic goals and can adjust to any evolving needs. Equipping your COS with the right tools and resources, fostering open communication, and maintaining a supportive environment will enable them to execute their duties effectively. This preparation ensures that the COS can focus on driving strategic initiatives and managing critical projects, ultimately contributing to the startup’s growth and success. How Visible Can Help Visible offers a range of tools and resources designed to support Chief of Staffs in their roles, making it easier to streamline executive and investor communications. With features that facilitate data tracking, reporting, and stakeholder updates, Visible ensures that your Chief of Staff can efficiently manage information flow and keep everyone aligned with the company’s strategic objectives. By leveraging Visible's platform, startups can enhance their operational efficiency, improve decision-making processes, and ultimately drive growth. For more information about how Visible helps Chiefs of Staff streamline their executive and investor communications, learn more here.

Managing company equity is a crucial part of a founder’s job duty. In the early days of building a business, chances are there will be countless advisors, investors, peers, etc. that help a business. However, most early stage businesses do not have the cashflow to compensate every advisor along the way. Founders need to get crafty with how they compensate their earliest advisors and experts — enter: advisory shares. We always recommend consulting a lawyer before taking further action on advisory shares. Learn more about advisory shares and how you can leverage them for your business below: What Are Advisory Shares? As put by the team at Investopedia, “One common class of stock is advisory shares. Also known as advisor shares, this type of stock is given to business advisors in exchange for their insight and expertise. Often, the advisors who receive this type of stock options reward are company founders or high-level executives. Advisor shares typically vest monthly over a 1-2 year period on a schedule with no cliff and 100% single-trigger acceleration.” Advisor Shares vs. Regular Shares (or Equity) Advisor shares come in different shapes and sizes. There is not a technical definition of advisor shares but is rather any form of equity in a business. Learn more about the characteristics of advisory shares below: Characteristics of Advisory Shares As mentioned above, advisor shares typically vest monthly over a 1-2 year period with no cliff. Advisory shares are typically granted as stock options but not every company grants their shares in the same way. This generally comes in the form of Non-Qualified Stock Options (NSOs). Related Read: The Main Difference Between ISOs and NSOs How Do Advisory Shares Work? While advisory shares can take on different forms, they typically can be boiled down to a few similarities. Of course, these can change depending on your business. Exchanged for advice or expertise Typically offered as NSO stock options Follow a shorter vesting schedule Learn more about how advisory shares typically work below: Implement a Startup Advisor Agreement As put by the team at HubSpot, “A startup advisor agreement is a contract between a startup and its advisor. This agreement outlines the terms of the relationship, including the responsibilities of each party and the compensation the advisor will receive.” There are countless advisor agreement templates online to get you started. The Founder Institute offers a free template called the FAST Agreement. Determine the Vesting Schedule As advisor shares are for advisors that offered their expertise, they are typically granted on a shorter vesting schedule because their value is given over a shorter amount of time. This is typically a 1 or 2 year vesting schedule (as opposed to the 4 year vesting schedule traditionally used for startup employees). Benefits of Advisory Shares Advisory shares come with their own set of pros and cons. Properly maintaining and distributing equity is a critical role of a startup founder so understand the benefits, and drawbacks, of offering advisory shares is a must. Related Resource: 7 Essential Business Startup Resources Learn more about the benefits of offering startup advisory shares below: Access to Real Experts When setting out to build a business, chances are most founders lack expertise in certain areas when it comes to building a business or in their market. However, most early-stage companies are typically strapped for cash and are unable to afford the defacto experts in the space. With advisor shares, startup founders can attract real experts to get guidance and strategic support in the early days in return for shares in the business. Related Resource: Seed Funding for Startups 101: A Complete Guide Better Network Credibility If hiring the right advisor, chances are they will be able to help beyond strategic advice or their expertise. They will be able to expose your business to their network and will be able to make introductions to new business opportunities, partnerships, investors, and potential hires. Cost-Effective Compensation As we previously mentioned, most businesses that benefit most from advisors are unable to offer them a salary or cash compensation. With advisor shares, startup founders are able to offer shares as compensation and conserve thei cash to help with scaling their business and headcount. Drawbacks of Advisory Shares Of course, offering advisor shares is not for everyone. While there are benefits to offering advisor shares, there are certainly drawbacks as well. Weighing the pros and cons and determining what is right for your business is ultimately up to you. We always recommend consulting with a lawyer or counsel when determining how to compensate advisors. Diluted Ownership The biggest drawback for most founders will be the diluted ownership. By offering shares to advisors, you will be diluting the ownership of yourself and existing shareholders. As advisors are fully vested in 1-2 years, they will potentially not be invested in future success as other stakeholders and could be costly when taking into account the diluted ownership. Potential Conflicts of Interest Advisors might not have the same motivators and incentives as your employees and other shareholders. As their ownership is generally a smaller % and their shares vest early, they are potentially not as incentivized for the growth of your company as employees and larger % owners will be. Getting in front of these conversations and making sure you have a good read on any potential advisors before bringing them onboard is a good first step to mitigate potential conflicts. Extra Stakeholder to Manage Chances are most advisors are helping other companies as well. This means that their attention is divided and you will need to ensure you are getting enough value to warrant dilution. This also means that you are responsible for managing a relationship and communication with another stakeholder in your business — what can be burdensome on some founders. The 2 Variations of Advisory Shares Advisory shares are generally offered in 2 variations — restricted stock awards and stock options. Learn more about each option and what they mean below: Restricted Stock Awards As put by the team at Investopedia, “A restricted stock award is similar to an RSU in a number of ways, except for the fact that the award also comes with voting rights. This is because the employee owns the stock immediately once it is awarded. Generally, an RSU represents stock, but in some cases, an employee can elect to receive the cash value of the RSU in lieu of a stock award. This is not the case for restricted stock awards, which cannot be redeemed for cash.” Stock Options As we mentioned, NSOs (Non-Qualified Stock Options) are commonly used for advisor shares. As put by the team at Investopedia, “A non-qualified stock option (NSO) is a type of employee stock option wherein you pay ordinary income tax on the difference between the grant price and the price at which you exercise the option… Non-qualified stock options require payment of income tax of the grant price minus the price of the exercised option.” Who Gets to Issue Advisory Shares? Issuing advisory shares is typically reserved for the founder or CEO of a company. Having a decision-making process and gameplan when issuing advisory shares is important. This might mean offering no shares at all, having an allocated amount of advisor shares from the get go, or something inbetween. Making sure your board of directors and other key stakeholders are on board is crucial to make sure that interest and strategy stays aligned for all stakeholders. How Many Shares Should You Give a Startup Advisor? Managing the balance between sufficient incentives and managing equity dilution is crucial for any business. Determining the number of shares to offer an advisor is subjective to the founder and advisor. When determining the number, a couple of things to keep in mind include: Advisor’s experience Time commitment Expected contribution As put by the team at Silicon Valley Bank, “An advisor may receive between 0.25% and 1% of shares, depending on the stage of the startup and the nature of the advice provided. There are ways to structure such compensation that ensures founders get value for those shares and still retain the flexibility to replace advisors, all without losing equity.” Let Visible Help You Streamline the Investment Management Process Use Visible to manage every part of your fundraising funnel with investor updates, fundraising pipelines, pitch deck sharing, and data rooms. Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days. Related resource: Navigating the World of QSBS: Tax Benefits and Eligibility Criteria Explained

Founders are tasked with hundreds of responsibilities when starting a business. On top of hiring, financing, and building their product, early-stage founders are generally responsible for developing initial strategies — this includes the earliest sales and market strategies. In this article, we will look to help you craft a successful SaaS sales strategy. We’ll highlight the elements you will want to think of when you start to build your sales motion. This will help your team to understand how to measure the number of potential customers in your pipeline and the growth potential you might see in your revenue numbers. How are SaaS sales different from other types of sales? Like any sales strategy, it is important to start with the basics when looking at a SaaS sales strategy. At the top of your funnel, you have marketing leads that likely find your brand via content, word of mouth, paid ads, your own product, etc. From here, leads are moved through the funnel. In the middle, SaaS companies can leverage email campaigns, events, product demos, etc. to move leads to the bottom of their funnel. However, as the SaaS buying experience takes place fully online — sales and marketing organizations can be creative with their approach. The online experience allows companies to track more robust data than ever before. Additionally, SaaS products have turned into their own growth levers as well — the ability to manipulate pricing and plans has led to the ability for companies to leverage their own product for growth. Related Resource: How SaaS Companies Can Best Leverage a Product-led Growth Strategy The online presence and emergence of product-led growth have led to new sales strategies unique to SaaS companies. Learn more below: 3 Popular SaaS sales models There are countless ways to structure your Saas sales strategy. For the sake of this post, we’ll focus on 3 of the most popular strategies. Learn more about the self-service model, transactional model, and enterprise sales model below: Related Resource: The SaaS Business Model: How and Why it Works Self-service model The self-service model allows prospects to become customers without communicating with your team. As put by the team at ProductLed, “A SaaS self-serve model is exactly what it sounds like. Rather than rely on a dedicated Sales team to prospect, educate, and close sales, you design a system that allows customers to serve themselves. The quality of the product itself does all the selling.” This strategy is typically best for a strong and simple product that typically has a lower contract size. Transactional sales model The transactional model allows you to create income-generating actions where prospects have to become a customer at that point in time. This requires transactional sales models to have high-volume sales that can be supported by a strong sales and customer support team. Enterprise sales model The enterprise model is a strategy to sell more robust software packages to corporations – you will need baked-in features in a prepackaged manner to sell to a fellow business. Enterprise sales is the model that shares the most similarities with a traditional B2B sales funnel. Inbound vs outbound sales In a Saas sales funnel, you are constantly looking to consistently fill your sales funnel with fresh prospects. Once you have prospects you will look to find which prospects are worthy of being qualified and have a high likelihood of converting so you can spend your time communicating with those high-quality prospects. There are two popular strategies for creating fresh prospects that would be defined as inbound and outbound sales strategies. Inbound sales is when you invest in marketing to create prospects reaching out to you – fresh prospects reaching out to your business to ask about your software product. As put by the team at HubSpot: “Inbound sales organizations use a sales process that is personalized, helpful, and directly focused on prospects’ pain points throughout their buyer’s journey. During inbound sales, buyers move through three key phases: awareness, consideration, and decision (which we’ll discuss further below). While buyers go through these three phases, sales teams go through four different actions that will help them support qualified leads into becoming opportunities and eventually customers: identify, connect, explore, and advise.” An inbound strategy typically works best for SaaS companies that need a greater volume of customers and can nurture them and move them through their funnel at scale (e.g. self-service model) Outbound sales on the other hand are having members of your organization reach out to potential prospects to see if they would be interested in using your service. Outbound sales require highly targeted and proactive pushing of your messaging to customers. Generally, outbound sales require dedicated team members to manually prospect and reach out to potential customers. This means that outbound sales organizations do not naturally scale as well as an inbound sales organizations and will likely require a higher contract value. An enterprise model would rely heavily on Outbound sales, while a self-service business model will rely heavily on Inbound sales. The SaaS Sales Process The best Saas sales strategy will be a hybrid of inbound and outbound sales, but all of them should include a sales funnel. This funnel should have stages that help to qualify your prospects. These stages should be: Step 1: Lead generation This activity is often times a marketing activity that gives you contact or business information to explore the fit further Step 2: Prospecting This is where you develop the bio of who is the contact you are reaching out to within the organization. It is always helpful to prospect for someone who can make a buying decision Step 3: Qualifying In this step, you need to understand whether the prospect has the resources to pay for your product and the problem that your product can solve. This step is often the time for you to ask questions of your prospects Step 4: Demos and presenting This is when you will share the features and capabilities of your product with the qualified prospect. You want to show them the different features and where they can get the most value. Step 5: Closing the deal After your demo or a presenting call, the prospect should be pushed to a point where they need to make a decision on whether to buy your product. Step 6: Nurturing Once someone becomes a customer, you need to make sure to nurture them and grow your product offering with their business. This is the most difficult stage. Make sure to share your new product releases, stay in tune with how they are using your product, and build relationships with your customers. Cultivating a robust sales team To create a sustaining sales team, it is important to hire talented and tenacious people to own your sales funnel. They will need to track conversion numbers, stay organized with their outreach to prospects, and grow your funnel over time. There are three key roles within a Saas sales funnel. Those positions within your organization are: Sales development representatives (also known as business development representatives) These members of your team own lead generation, prospecting, and qualifying potential customers on your sales team. They get paid 40-60k/year depending on geographical location and experience. They should be tasked with outreach and drumming up new business. Account executives Account executives should focus on giving product demos, closing deals, and nurturing existing customers. They should be a bit more buttoned up in their approach and have a commission incentive associated with the # of accounts they manage. Sales managers/VPs Sales managers and Vice presidents of sales should take ownership of the data within your sales pipelines. Numbers like # of new leads, # of new qualified leads, # of new customers, # of churned customers, amount of new revenue, and lead to customer conversion %. Growing these sales numbers each quarter. Measuring these numbers weekly, monthly, and quarterly. Making them visible to the rest of the company regularly. 8 Key Elements of a successful SaaS sales strategy One of the most important elements of building a successful business is having a like-minded team around you to support and work with you. Make sure to align with all your team members and hire people with good work ethics and similar values of your company. A good sales team should be competitive, goal-oriented, and metric-driven. The sales managers and VPs will be really crucial in shaping the team dynamics and culture of your business. Hire great people and the numbers will take care of themselves! We’ve identified 8 elements of a successful sales strategy that every Saas sales strategy should include 1. Solidify your value proposition It is so important to understand thoroughly and communicate your product’s core value proposition. If someone decides to buy your product, they should know how to use the product and how to get the most out of it. 2. Superb communication with prospects Communication is of the utmost importance. Make sure your prospects understand your product and how it will help their business. Inform them of new product updates 3. Strategic trial periods An effective strategy is to give potential customers a free trial of your product to understand your value proposition. You want to make sure not to make this trial period too short or too long. Make it strategic so the prospect will understand the value prop but also be encouraged to make a buying decision. 4. Track the right SaaS metrics Tracking your core metrics is vital to success. See a few of those below: Customer Acquisition Cost – the amount of money it takes to acquire a new customer Customer Lifetime Value – the amount of value a customer provides your company over the course of their relationship with you as a customer. Lead velocity rate – the growth percentage of qualified leads month over month. This will help you understand how quickly you are qualifying your leads Related Resources: Our Ultimate Guide to SaaS Metrics & How To Calculate and Interpret Your SaaS Magic Number 5. Develop a sales playbook Every successful sales management team should develop a playbook on how to deploy their resources and where each team member should spend their time. Playbooks are often thought of in sports terms, but they also work wonders in the business world. They will help you do things efficiently and effectively. 6. Set effective sales goals How many new customers does your business hope to bring in next month? This is an important question and one your whole sales team should understand and work towards! 7. Utilize the right tools to enhance the process Your team should have all the resources at their disposal to communicate effectively and track their metrics. As you build out your strategy and team, be sure to give them all possible resources at their disposal. There are tons of great tools out there for teams to make the most out of their time and have direct methods of communication with customers and one another. 8. Establish an effective customer support program A huge part of an effective sales strategy is welcoming potential customers and making sure your existing customers are not forgotten about. When customers reach out, it is important to talk and listen to their issues. Understand what they are needing so your product can continue to evolve. Make sure anyone getting introduced to your product will also have the information they need to use your product successfully. It might be helpful to include this member of your team in your sales meetings and keep them informed as to messaging and efforts for growth! Generate support for your startup with Visible Developing a successful SaaS sales strategy is not an easy task. It will take a hybrid approach of many of the elements listed in this article and will need attentive members of your team to nurture it and test new things. We created Visible to help founders have a better chance for success. Stay in the loop with the best resources to build and scale your startup with our newsletter, the Visible Weekly — subscribe here. Related resource: Lead Velocity Rate: A Key Metric in the Startup Landscape

In a startup, there are a million things going on at all times. The last thing on a founder’s mind is most likely not balancing the books and managing the daily ins and outs of company finance – other than ensuring there is a cash runway to work with. But as your business grows, it’s critical to have a grasp on all elements of your company’s books to ensure your company can grow and scale in an effective way and avoid costly financial errors down the line. Why Does Accounting Matter to Startups? In a startup, typically cash is always tight and you’re operating on a short runway. This makes accounting even more critical for your business. Measuring, processing, and communicating the source and destination of every dollar is crucial to ensure smart business decisions can be made. After your startup raises a round of funding and takes on outside investors, accurate accounting is, even more, a crucial element to have under control in your startup. With outside eyes monitoring every way, you’re spending their investment, ensuring you have a tight grip on and understanding of your company’s accounting will make or break your business. Related Resource: Building A Startup Financial Model That Works What is Your Business Structure? What is Your Business Structure? Depending on how your organization is formally classified, the accounting required will be slightly different. All formal, for-profit businesses are classified as 1 of 5 different business entity types. The 5 different business entities are: Business Entities Types Sole Proprietorship is an enterprise that is owned and run by a single person. Specifically, there is no legal distinction between the owner of the business and the business entity. A sole proprietorship does not always work alone as it is possible for the sole proprietorship to employ other people. Sole proprietorships are also known as sole tradership, individual entrepreneurship, or simply as a proprietorship. Partnership – When two or more individuals operate a business based on an oral or written agreement, that is legally considered a partnership. An agreement on the protocols and terms of the partnership is not required to consider a business entity to be considered a formal partnership, it’s best practice for one to be in place. Similar to a sole proprietorship, a partnership entity business has no legal distinction between the owners of said business. C Corporation – in the United States, under federal income tax law, a C Corporation is any business entity or enterprise corporation that is taxed separately from its owners. Unless the corporate elects otherwise, most for-profit corporate businesses in the United States are automatically considered a C Corporation. S Corporation – An S Corporation is a privately held company that makes the decision to be taxed under the Subchapter S of Chapter 1 of the Internal Revenue Code, or IRS, federal income tax law. By making a valid election, the S-corporation’s income and losses are divided among and passed through its shareholders. The individual shareholders must then report the income or loss on their own individual income tax returns. Limited Liability Company (LLC) – An LLC is a business that’s structure is allowed and dictated by individual state statutes. Each state can adjust and use different regulations to structure an LLC so it’s critical for business entities to check what different regulations are allowed for an LLC state to state. Owners of an LLC are referred to as members and typically, most states do not restrict ownership. So members could be individual owners, corporations, other LLCs, or in some cases even foreign entities. Most states also do not have a maximum number of members restriction in place on LLCs and most also permit “single-member” or sole owner LLCs. The main restriction on LLCs comes into play when considering the types of private businesses that do not qualify to be LLCs such as banks and insurance companies. Understanding the Two Methods of Accounting Now that the 5 primary business entities have been defined, the two methods of accounting need to be understood. Depending on the type of business entity, a different method may be used. Accrual Basis Accounting This specific accounting method allows a company to record its revenue before receiving the physical payment for the product or service that has been sold. Public companies are required to use accrual basis accounting. Most companies making above $5M a year in revenue use accrual basis accounting. This is typically the preferred method of accounting for private companies as it is generally more reflective of a company’s actual revenue. Cash Basis Accounting On the opposite end of the spectrum to accrual basis accounting, cash basis accounting only records the revenue in a company’s book of business when the cash transaction has physically occurred for the product or services sold. C Corporations and Partnerships are not allowed to use cash basis accounting unless they total under 5M a year in revenue for 3 tax years in a row. Related resource: What is a Schedule K-1: A Comprehensive Guide What Types of Financial Records Should Your Startup Keep? Once you’ve determined the type of accounting most appropriate for your startup, it’s critical to have a clear understanding of the broad types of financial materials you should be keeping track of and recording for said accounting practice. A good rule of thumb is to keep everything related to the financial arm of your business, and when possible, make multiple copies as backups for key financial items and hold onto these items for at least 3 to 7 years after their existing date. An overview of the items that your startup should be holding onto and keeping in their financial records includes: Receipts from business expenses Bank statements Bills Tax Forms for both your business and employees Contracts that outline the services or products you are selling Contracts with vendors you are purchasing services from Receipts from any tax-deductible donations or contributions made by your business entity Overall, it’s critical to establish a system early on for maintaining detailed records of every documented transaction or financial movement that occurs within or in relation to your business. Related Resource: How to Calculate Runway & Burn Rate The Relationship Between Recordkeeping and Accounting A big part of the practice of measuring, processing, and communicating about financial information, aka accounting, is the process of recordkeeping. Recordkeeping is the process of keeping track of the history of an organization’s activities, or in some cases a person’s activities, by creating and storing these as consistent formal records. What is Record-Keeping or Bookkeeping? Recordkeeping relates to accounting as a form of recordkeeping specifically for financial activities. A clear recordkeeping process is the backbone and foundation of a good accounting process. Without it, accurate processing and measurement simply cannot occur. Knowing recordkeeping, or bookkeeping as it’s sometimes known, is the backbone of the accounting process, it’s important to establish weekly and monthly recordkeeping tasks to ensure your process is rock solid from the early days of your business. We’ve got some recommendations to get you started. Recommended Weekly Recordkeeping Tasks 1. Record all transactions into your books Decide on a single source of truth to maintain ongoing documentation of your financial records. This single source of truth is often referred to as a “book”. We recommend a digital source of truth as well as a written source of truth or physical copies of each record as a backup barring any issue with the digital book. Set time for yourself every week at the same time to record all financial transactions from that week in your book and ensure the records are saved, backed up, and filed in an organized manner. Doing this on a weekly basis will prevent missed recordings of financial records as they get backed up week over week. 2. Segment Your Transactions In addition to recording each transaction in your books on a weekly basis, take it a step further and segment your transactions into categories. This will provide an additional layer of organization and allow for extra audit and thoroughness on how your finances are flowing into and out of your business. Segments could include items like revenue, bills paid, taxes, etc. 3. Digitize Your Receipts It can’t be emphasized enough – keep a digital record of your receipts. Just as we recommend keeping a physical copy of your books and digital transactions as backup, the same is true for physical receipts – digitize everything and make it a consistent practice to back up each digital record. The more risk you can mitigate in losing financial records, the more accurate your accounting will be in the long run. Recommended Monthly Recordkeeping Tasks 1. Consolidate your bank accounts On a monthly basis, you should be taking a deeper look at your financial records. A big task to accomplish on a monthly basis is consolidation. Take a look at all accounts open and related to your business entity and consolidate said accounts into as few accounts as possible. This will ensure that no accounts get forgotten over time leading to missed transactions or balances in the accounting records. A monthly practice of consolidation is a foundational recordkeeping habit for your business. 2. Pay your bills (on time) It’s a slippery slope when your business gets behind on its bills. Set monthly reminders for all recurring bills and pay them on time. It’s critical to keep an accurate record of all financial transactions and missed or late bills can throw off the overall financial accuracy of your accounting. Additionally, late bills often are additional fees, which for a startup strapped for cash, can be detrimental to your business. 3. Keep Good Records Be as picky as possible. On a monthly basis, go through your records and clean up any sloppy entries. Reevaluate your system often to make sure the information your tracking is as accurate and efficient as possible. Good records are the foundation of your accounting process and ultimately the financial accuracy of your business. Related Resource: 4 Types of Financial Statements Founders Need to Understand The Benefits of a Good Accounting System After you’ve established strong weekly, and monthly record-keeping tasks as the foundation of your accounting system, your measurement, and communication of the financial state of your business via accounting is underway. The benefits of a good accounting system have many ripple effects throughout your business. Smoother Management of the Business Most business decisions are made based on the financial state of the business. A good accounting system will ensure that the decisions being made are based on a clear and accurate process leading to an overall much smoother management of the business as a whole. Reduced Time and Costs of Audits Time is money in business and lost time going back through financial records that are not maintained correctly. Huge errors in your accounting system can even lead to fines from the IRS or expensive consultancy fees needed to bring in external auditors to fix said errors. Establishing a strong accounting system early in your business can prevent this. Your Investors will Thank You Investors are trusting you with their capital. If you have a smooth system in place to record, measure, and communicate all financial details aka an accounting system, you will always be prepared to answer and address all oversight and detailed questions from your investors. If they have a constant, clear picture of the status of their investment, they will be satisfied and can spend their time helping the business grow. Should You Do Accounting In-House or Outsource? Finally, you may be wondering if your accounting process should be something managed within your business or outsourced to a professional accounting firm. While your total revenue is under 100k, or even 500k, you can most likely manage that as a founder or with a singular financial hire in-house. As you start to climb in revenue and take on external investments, consider the cost of an in-house financial team; Under 5M dollars, it may make more sense to outsource to an accounting firm and spare the headcount. However, if you have any special tax circumstances, it may make sense to invest in an in-house team if the cost of external services billed hourly ends up being more than the cost of headcount in-house. In-house accounting can also be beneficial because it ensures you have dedicated staff only working on your books, as opposed to an outside source managing multiple clients. Related Resource: How to Choose the Right Law Firm for Your Startup Related Resource: 7 Essential Business Startup Resources Sign up For Visible Today - Your Startup Hub Accounting is a critical practice all startups should establish early on in their business. When measuring and reporting out metrics to your stakeholders, consider Visible as a central reporting point of your startup hub. Create an account and get started now.

About Malcolm Malcolm Burenstam Linder is the CEO and Co-founder of Alva Labs. The team at Alva Labs is creating a more fair and data-driven recruitment process. Malcolm joins us to break down his story and journey as a founder. Episode Takeaways A few key topics we hit on: About Alva Labs and Malcolm How Alva found their first customers Using personal networks to find their first customers Why founders need to be extremely diligent about their first hires Why seeing a professional coach has been a gamechanger for him Why everyone should look beyond a resume when hiring Watch the Episode Give episode 4 a listen below (or give it a listen on Spotify, Apple Podcasts, or wherever you normally consume podcasts): Related resource: Why the Chief of Staff is Important for a Startup

6 strategies to hiring for startups Hiring your first employees not only sets the tone for your company culture but also has a direct impact on business success and outcomes, which is why having a world class hiring strategy for early-stage startups is crucial. Below we’ll cover the following topics to help you hire and attract top talent: How to set a strategy to attract top talent What to key traits you should look for in your first hires Identifying whether a candidate has the right hard and soft skills Leveraging onboarding to not only ramp but retain talent Additional resources to help with your recruiting efforts Check out how Malcolm Burenstam Linder, CEO and Co-Founder of Alva Labs, suggests that founders approach hiring their first employees below: Attract Top Talent Through Storytelling This should start at the candidate’s first touchpoint with your company, such as the careers page and job description. Crafting a story around why anyone should want to join your company should go beyond just the mission and vision, to feel more personal than what you might share with your customers or stakeholders. In the interview you can go even deeper and share why you specifically joined or started the company. Try to speak to the points which you think would personally resonate most with the candidate you’re interviewing. Many startups are unable to be competitive in salary compared to other major players, but the key is to find the unique things within your company that you can leverage such as an inspiring mission or being a part of something bound to have success. This can be even more exciting and convincing than a larger paycheck. Other things to highlight as one of the perks of joining early could be job advancement and stock options. “Selling the vision. Selling the idea that their stock would be worth so much. Selling myself as an amazing leader that they definitely wanted to work with. Just being authentic. Helping them understand why I was doing what I was doing. Why I was passionate about it and why I would be a good human being for them to work with and call their colleague.” Source Plan For and Attract Diverse Candidates Having diversity within your team is only possible if you’re presenting your company in a way that attracts a wide range of profiles. Creating a diverse funnel requires you to craft your job descriptions and careers page in a way where the message, language, and images you choose speaks to a broader spectrum of candidates. Think through and analyze how your employees are being represented on your website, as well as if your perks and benefits are inclusive to the needs of all potential candidates regarding gender, sexual orientation, race, social class and background. Hiring From Your Network Social media (such as twitter and LinkedIn) is one way to leverage your personal network for trusted referrals. This can be a great resource when it comes to recruiting- especially when you have limited resources such as access to an inhouse or external recruiter. Often some of the best candidates are referrals, since you have more insight to how they work and there is already a certain level of trust and comfort established. Something to be aware of when sourcing this way is that you continue to keep diversity top of mind. Hiring For a Fluid Organizational Structure and Changing Roles Your company and organizational structure will likely be continuously changing, which is why it’s often advisable to only hire for the next 6-12 months rather than having a long term solution mindset. Future proof roles by filling them with people who will be able to handle your current needs but are also able and willing to be flexible with new tasks and responsibilities, as the needs of the company change. This will make pivots and experimenting with new ideas and projects easier. It is important to communicate this in the interview process to make sure that the candidate is prepared and hopefully excited by potential change. For those who haven’t worked in early-stage startups before, it’s good for them to know that this is normal for companies who grow quickly and is a sign of success, which provides a lot of opportunities for them to grow within and advance professionally. Contract to Hire vs Project to Hire or Part-time Hiring employees full time doesn’t need to be your only option, especially early on when your resources can be limited. Other options include Project to Hire and Part- Time employees. If you only have a few one-off projects that you don’t want to add to the workload of your existing employees or hire full-time for, consider contracting other experts in the space. Even though this option might seem more costly than completing these tasks internally- it could actually save you in the long run and lead to better outcomes. For example if someone on your team had to learn a new process or skill set to complete this task, it would cost you more in the additional time it would take for them than someone with previous know how. Good resources for hiring contracted professionals are through websites such as Upwork and fiverr. Interviewing Having a formal interview process will not only benefit you but is important for your candidates as well. Start by writing clear, transparent, personable, and honest job descriptions. Know what you’re looking for- What are the must haves, important/ nice to haves, and bonus points. Don’t go at it alone- Try to involve more team members, especially the ones who will be working directly with the applicant. 7 things to look for in your first hire High Pain Tolerance and Grit Working in a startup means there’s a lot of experimentation that includes failing, breaking things, and shots in the dark that need to happen until you can find solutions that work. This requires being risk averse and not fearing failure, but rather welcoming it (when needed) and seeing it as an opportunity that will lead you to succeed and solve problems. When failure occurs your ideal candidate would quickly recover from these situations, get back up, course correct, and keep running with their new learnings top of mind. Look for someone who also wants to embrace or likes the start up company culture, which can have a lot of ups and downs. They should also be comfortable without having clear rules or ways of doing things and are ok to have the power to create these for the company as they go. Cultural Fit When deciding between candidates think- who would I rather be stuck in the car with? Your first hires are the ones you will likely be working with most closely and want to be onboard for a while. This means how well you get along with them vs how competent they are should be equally important. Attitude Having a positive attitude is everything. A negative person on board can bring an entire team down and is something you don’t want your customers to associate your company with. Positivity is something that people inherently have or not. It’s not anything you can force upon, so it’s a perk to have someone whose common nature is to see situations in an optimistic light. This is also an important attribute for creative problem solving. Entrepreneurial Mindset Having employees that want/ are capable of growing your company and scaling internal processes can provide value in the short and long term. Candidates with this mindset will often take more ownership of their projects and have an intrinsic drive to see the company succeed. To help them maximize their potential it’s important for the executive team to give trust and the freedom to drive their set initiatives forward. Generalists & Potential > Skill Set Having generalists on your team is crucial since working in a startup often means there’s a lot of work to be done with not much resources. So it’s advantageous to have people who are not only comfortable with but excited by the idea of wearing multiple hats. As well, finding someone who has the desire to learn and confidence to execute is more important than having prior knowledge and experience in a given area. In a company of 10 people, each will have to take on projects outside of their realm of expertise. Look for candidates who are looking to learn from others and are capable of finding the needed resources to do this- internally and externally. Hiring Candidates with Leadership Potential Often your first hires will end up being your longest employees and will likely have the most knowledge about your product/ company. This makes them a natural fit to develop into a team lead in their division, or even a possible cofounder, as the company grows. Look for attributes which would lend to good leadership such as a high EQ/ empathy, communication skills, decisiveness, and creativity. Another thing to look out for is the ability for the candidate to scale the company to where you want to be in the future. Open to Feedback and Self Improvement Situations and how we interact with one another can only improve when we are upfront with our expectations and clearly communicate this. Look for candidates who not only embrace feedback but want it. If people are defensive or have a hard time communicating what needs to be changed or done, it’s harder to move towards positive outcomes. Encourage a company culture which values clear, transparent, and empathetic communication. Suggest your employees to read Radical Candor to help with this. How to hire your first 10 startup employees Various roles require different skill sets and personality traits to help the candidate succeed. For instance someone working for a startup in a customer facing position will often encounter people telling them no, not respond to their emails, or have to endure negative product feedback. So you’ll want someone who is able to put out fires and keep pushing forward with the same motivation they had before their first no. Look out for those who can own their mistakes as well as know when and how to apologize. These traits can help customers empathize and move forward from a given problem. A great way to test for how well a candidate in a given role might approach a problem or topic is through Work Product Interviews. By choosing a current project you’re able to see how each candidate would approach it and give you additional brainpower to work through it. When choosing this approach it’s advisable to pay candidates for their time. If you’re not willing to pay it is best to choose a project that will not be used as a best practice. Related resource: 9 Signs It’s Time To Hire in a Startup Leadership When hiring the earliest leaders for your startup it is vital to be diligent during the interview process. These early leaders will set the tone for the culture and future hires at your organization. On top of being a culture fit, you will want to ensure they are capable of scaling their business unit and being a sounding board for making strategic decisions. Product Generally speaking the founder or CEO acts as the “product person” initially at a startup. As the company and product begin to mature, it is time to bring on product leaders and individuals to help take the product to next level. As with any of your first 10 hires you will want to make sure a product leader can work autonomously. As your time turns to supporting other parts of the organization, being able to have a product leader to lean on is essential. Sales, Customer Success, and Marketing Hiring for the business units begins to pickup after making your core hires. To learn more about hiring for customer success team members, check out our guide here. To learn more about making your first sales hires, check out this post. Onboarding Tips to Ensure They Stay A factor to consider if people aren’t succeeding in their role is a lack of active feedback and/ or clear expectations. They might not realize that the work they are producing isn’t meeting your standards if there is no clear and structured communication as well as KPI’s or goals set forth. Make sure to include opportunities for active and regular feedback loops during their onboarding in the first few months. This will help shape the work they produce, how well they adjust to organizational needs, and give them assurance of where they stand. If you need to let someone go or if an employee isn’t satisfied- it shouldn’t come as a surprise to anyone. Having a Well Defined Training Plan During Onboarding Setting clear expectations for the role- What are their responsibilities and what might you expect them to achieve and execute on. Goal setting- Setting weekly goals for the first 3 weeks and then monthly for the first 3 months is a good way to start. Giving ownership- Allowing someone to feel they have ownership gives them the motivation to take on responsibility and demonstrates trust. The Buddy System Being a new employee within a company, no matter how small it is, can feel daunting and sometimes isolating. Pairing new hires with an existing team member creates new social connections amongst your employees. This also helps with cross functional team work as well as employee happiness. New hires should feel they can not only turn to their buddy for questions but is also someone they can have a (virtual) lunch or coffee with. This is also an opportunity for them to be filled in on company culture and other things that might not have been covered in the initial onboarding. Startup Hiring Resources Background checks The things you might want to check for could vary on the role and the company. Besides calling, emailing or checking LinkedIn references, you could also use online background checks such as ClearChecks.com Sourcing Services vs. Recruiters Without having someone dedicated to HR it can be difficult to source talent which is why using websites that give you access to a curated pool of talent can be a good option. Owning recruiting for your 25+ hires, although difficult, is actually important as it allows you to shape your company culture which is created through the personality traits and profiles of your first employees. Possible websites to source tech talent in which you can apply to candidates directly are Hired.com, Talent.io, or Honeypot.io. Recruiting Software Breezy.hr is a great example of an end-to-end recruiting software that can help to manage things like sourcing, candidate pipeline, streamlining communication and interview scheduling. At the end of the day startups are in a constant competition for top talent. By having a system in place to source, interview, hire, onboard, and retain employees your odds of success as a company will be higher. To learn more about hiring for your startup, check out our related posts here. Related resources: The Top 9 Social Media Startups Why the Chief of Staff is Important for a Startup

Startups are in a constant competition for two resources — capital and talent. Building a system to properly scale your business while maintaining your company culture is vital to a startup’s success. We figured there would be no better person to join us for a webinar to chat all things hiring and scaling than Julia Kauffman. Julia started her career in enterprise and eventually made the transition to High Alpha and is currently the VP of People & Admin at Mandolin. If there is one person who knows what it takes to properly scale the headcount at an early-stage startup, it’s Julia. Check out the recording and our favorite takeaways below: A couple of quick highlights from the webinar: Contract for Hire When hiring at the early stage it is crucial that you make hires that are “athletes” and can flex to any role while fitting in with your team and culture. Julia personally uses a contract with potential employees. This means that she offers short term contract (usually 30 days) to see how a potential employees fits with the team and culture then goes on to make a full time offer. Ongoing Development When scaling headcount it is important to have a standard onboarding process for new employees. Julia likes to use ongoing training and development to help employees find success. One of the things Julia recommends is a regular competitive analysis. In short, the team takes a lot at their competition so they have a solid understand of the business and the market. This can be done at the individual or team level. Julia also likes to leverage 1 on 1s to help with ongoing development. On a weekly basis Julia sits down and talks for 30 minutes with employees to talk about anything they’d like. This can be work, blockers, projects, anything they’d like, etc. On a quarterly basis Julia blocks an hour with employees to talk about personal development and their job so they know they have time to talk about it and their personal development. Mission, Vision, and Values Maintaining your startup culture as you scale can be difficult. Having your mission, vision, and values in place is essential as you hire and bring on new employees. When asked how companies should define their initial values, Julia recommends surveying everyone in the organization on what their values are, then you can pass those on to the leadership team to pick the ones that will be used at the core of decision making for the company. Sourcing Candidates Outside of job boards there are some interesting ways to source new candidates. Julia suggests checking out communities and different groups. Get in the habit of networking and engaging with different communities to source candidates from new and qualified places. Another source can be partners and organizations you are already working with. If done right and respectfully, this can tap into an entirely new network and candidate pool. Talking Equity Equity can be an integral part of attracting and retaining top talent. However, there can be confusion and questions surrounding equity. There are differing views on how to handle discussing and sharing cap table information. Julia believes that you need to (1) explain how and why you give out equity and (2) show employees everything and talk through the details. While it can be difficult to be transparent, most employees will understand and want to work through the details. To stay up-to-date with our future webinars and Founders Forward podcast, sign up for our newsletter below:

In 2020 we launched the Founders Forward Podcast. The goal of the podcast is to enable founders to learn from their peers and leaders that have been there before. Over the last 7 weeks our CEO, Mike Preuss, has interviewed a different founder or startup leader every week. Related Resource: 11 Venture Capital Podcasts You Need to Check Out Here are some of our favorite quotes and takeaways from the first 7 interviews: Lindsay Tjepkema, Founder of Casted Our first episode of the Founders Forward was with Lindsay Tjepkema. Considering she is a podcasting expert, we figured there could not be a better first guest. We chat all things podcasting and alternative media types. However one of the tidbits we found most interesting was Lindsay’s outlook on venture fundraising. Oftentimes fundraising can be a frustrating journey but Lindsay views the process as an opportunity to promote her business and tell her company’s story. Give the full episode a listen here. Amanda Goetz, Founder of House of Wise House of Wise is Amanda’s second go as a startup founder. However things are no less difficult than her first time around. Her first journey was spent worrying about legal aspects and the basics of getting her business running. That was easy with House of Wise but she has faced new challenges (and opportunities) during her second journey. Give the full episode a listen here. Jeff Kahn, Founder of Rise Science Jeff has 10 years of sleep science experience and research. Before starting Rise Science Jeff spent time publishing academic articles and supporting world-class athletes and teams with better sleep. Jeff Kahn is a true expert in all things sleep. During our interview with Jeff, we chatted about how sleep can improve a founder’s leadership skills and productivity. Give the full episode a listen here. Aishetu Dozie, Founder of Bossy Cosmetics Aishetu Dozie started her career in banking and eventually made the transition to starting a cosmetics company. Just like any founder, her first time journey has been full of highs and lows. Aishetu, like many founders and leaders, has struggled with imposter syndrome. We love her thoughts below on how she has tackled imposter syndrome. Give the full episode a listen here. Kyle Poyar, Partner at OpenView Ventures OpenView Ventures is credited with coining the term “Product-Led Growth.” As Kyle and the team at OpenView continue to help SaaS companies grow and become market leaders he has seen it all. From the early days of defining PLG and the impact of COVID-19 Kyle is full of first-hand stories and the data to back it up. Check out how Kyle defines and thinks about PLG below. Give the full episode a listen here. Yin Wu, Founder of Pulley Yin Wu has been through Y Combinator 3 times and has successfully exited 2 companies. Over the course of her founder journey it is safe to say that she has spent a good amount of time fundraising and chatting with investors. Yin likes to bucket investors into 3 categories to structure who she should be chatting with and raising from. Give the full episode a listen here. Cheryl Campos, Head of Venture Growth at Republic Over the past 3 years, the funding options for startups have continued to transform. Over her 3 years at Republic, Cheryl has watched as the market has changed and crowdfunding has become a more viable option. Check out Cheryl’s thoughts on the new funding options below. Give the full episode a listen here. We have plenty of new episodes recorded and ready to share in 2021.

On episode 6 of the Founders Forward Podcast we welcome Yin Wu, CEO and Founder of Pulley. Pulley is a cap table platform for hyper-growth startups. Pulley is the third company that Yin has started so it is safe to say she knows the ins and outs of building a startup. About Yin With her first 2 startups successfully exiting Yin has her eye’s set on a new market and issue that all founder face — cap tables and valuations. During her first bouts as a founder Yin had the realization that “no one starts a company because they want to pair this spreadsheet. You start a company cause there’s this vision, this idea that you want to bring it to this world.” In addition to sharing her learnings from building 3 companies, Yin also shares how founders should think about fundraising, cap table management, and distributing equity. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Yin. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Yin Why Pulley wants to lower the bar to make it easier for founders to start a company Why founders should own 20% of their company by the time they raise a Series A Why they believe founder led companies are more successful in the long run How they are approaching hiring, mostly past founders, at Pulley How they are building their culture at Pulley How they approached their $10M funding round at Pulley What she learned from going through Y Combinator 3 times Related Resources Yin’s Twitter Yin’s LinkedIn Pulley The Founders Forward is Produced by Visible Our platforms helps thousands of founders update investors, track key metrics, and raise capital. Try Visible free for 14 days.

What is organizational alignment? Generally speaking, a startup is a fast moving organization. The goal is to grow quickly and attack a market. If a startup has raised venture capital, this is particularly true. A startup is likely hiring and deploying capital at a quick clip. Staying aligned as a team as new faces continue to pop up in the office is a key to success. Mix in the state of remote work and organizational alignment is vital. Organizational alignment is a strategy where company employees and stakeholders are aligned to grow, achieve goals, and execute on company mission, vision, and values more effectively and quickly. Related Reading: How To Manage Remote Teams: 16 Tips From a Remote Startup Importance of organizational alignment As we alluded to earlier in the post, startups are fast moving organizations generally with a focused goal or vision. Being able to effectively communicate, make decisions, and grow is vital. Below are a few of the important aspects of organizational alignment. Business strategy When starting a business there is likely a set business strategy that executives and founding members believe will be the key to success. Organizational alignment will allow everyone involved, plus new hires, to stick to the strategy to efficiently grow. Decision-making Making quick decisions is important in the growth stage of a business. In order to best and most efficiently make it is important that everyone is aware of what is happening with the business. By having all stakeholders engaged the decision will come quicker with more conviction. Business performance At the end of the day a more aligned organization will lead to better business outcomes as a whole. Company/corporate culture One of the biggest benefits of organizational alignment is the ability to lift and solidify a company culture. Gone are the days of employees being attracted by ping pong tables, free lunch, and company happy hours. Top talent is attracted to an organization because of the work and the company culture. They are in search of transparency, ownership, and responsibility in the workplace. Organizational alignment is a great way to help employees feel as they are solving problems and helping the business grow. Employee Engagement Piggybacking off of the idea that organizational alignment will help promote a strong company culture it will also help employees engage. When employees are aware of what is going on and their feedback is welcome, they will be more engaged and more invested in the success of the company and their personal growth. How to build organizational alignment There are countless methods and approaches to create company alignment (more specific frameworks below) but we have found there are 3 areas to focus on that will help companies build organizational alignment. Individual Goals and Purpose Before you can start building alignment across the entire organization, individuals need to have a deep understanding of their own purpose and goals. If an employee is not feeling the ownership and importance of their role aligning them with the rest of the organization won’t give them the benefits organizational alignment can offer. One aspect of this is understanding the role and position they are filling but also on the leadership team to understand their desires to make sure they are filling the right position. As Jeff Boss put it in an article for Forbes, “Ask your people what motivates them, why they’re doing what they’re doing, where they see themselves in three years and what might happen if they don’t get there. Set the conditions for candor now to prevent the loss of talent later.” Team Goals and Purpose Once an employee has a clear understanding and their role you can begin to align the individuals in a team or business unit. Because everyone knows their position everyone should be able to come together and align themselves as a team. No one should be questioning who owns what or how they can contribute. Different teams likely have their own set of metrics and KPIs that they are responsible for. Every individual in a team should know how they can contribute to the growth or achievement of their team’s KPIs. Cross Team Alignment Now that individual teams are aligned and aware of their goals they can start aligning across an organization. Business units and teams can’t be siloed and expected to impact the business as best as possible. In order to best perform all teams need to be informed and aligned. Jeff Boss uses an example of sales and marketing teams: “It doesn’t matter how great your sales teams perform if your marketing teams fail to get the message out, and vice versa… What impedes alignment between teams, they say, are disparate systems, lack of transparency and visibility on goals, and skewed expectations—all of which fall under the umbrella of poor communication.” Organizational alignment starts with an individual knowing their role and position in the organization. From there a startup can set up a system and framework to best align their individuals and teams. Organizational alignment model/framework examples Below are a few of our favorite frameworks that have stood the test of time to help organizations stay aligned: McKinsey 7-s model Originally introduced in the 1970s the McKinsey 7-s model has certainly stood the test of time. As defined by the team at Corporate Finance Institute, “The McKinsey 7S Model refers to a tool that analyzes a company’s “organizational design.” The goal of the model is to depict how effectiveness can be achieved in an organization through the interactions of seven key elements – Structure, Strategy, Skill, System, Shared Values, Style, and Staff.” The 7s are split into 2 groups — hard and soft: As defined by the team at Strategic Management Insight, “Strategy, structure and systems are hard elements that are much easier to identify and manage when compared to soft elements. On the other hand, soft areas, although harder to manage, are the foundation of the organization and are more likely to create the sustained competitive advantage.” We put quick definitions of each “s” below but you can learn more here. Strategy — The business plan and strategy behind the organization’s product, go-to-market, and growth. Structured — How the organization is structured and organized. Systems — The chain of command, communication, and decision making framework across the organization. Style — How individuals interact and work with each other. Can resemble company culture. Staff — The human resource and talent related to hiring, alignment, and recruiting. Skills — The specific skills of individuals and teams that allow a company to execute on a strategy. Shared Values — The mission, vision, and values of an organization. Image from the team at Mind Tools. The team at Mindtools explains how to execute on the 7-s model in 4 steps: Start with your shared values: are they consistent with your structure, strategy, and systems? If not, what needs to change? Then look at the hard elements. How well does each one support the others? Identify where changes need to be made. Next, look at the soft elements. Do they support the desired hard elements? Do they support one another? If not, what needs to change? As you adjust and align the elements, you’ll need to use an iterative (and often time-consuming) process of making adjustments, and then re-analyzing how that impacts other elements and their alignment. The end result of better performance will be worth it. V2MOM – Salesforce model One of our favorite alignment strategies at Visible is the V2MOM Model from Salesforce. As Marc Benioff, CEO of Salesforce, described it himself, “The vision helped us define what we wanted to do. The values established what was most important about that vision; it set the principles and beliefs that guided it (in priority). The methods illustrated how we would get the job done by outlining the actions and the steps that everyone needed to take. The obstacles identified the challenges, problems, and issues we would have to overcome to achieve our vision. Finally, the measures specified the actual result we aimed to achieve; often this was defined as a numerical outcome.” The components of the V2MOM can be found below: An example from Benioff and the team at Salesforce can be found below: Learn more about V2MOM and how you can use it at your organization in our blog post here. How to measure organizational alignment Organizational alignment can be quite subjective. Because of this there are a lack of quantitative metrics that you can use to measure organizational alignment. Yes, you can look at revenue, headcount, employee retention to make sure things are going in the right direction but there is a chance that employees still feel lost and are not aligned with other team members. However, this is not a bad thing. You can use a qualitative approach to measure your alignment. Managers can send surveys, poll employees, or just ask questions during a 1 on 1 to understand how well their organization is aligned. Organizational alignment tools Obviously organizational alignment is vital to a company’s success there are countless tools and tricks to help companies stay aligned. OKRs As defined by the team at What Matters, “The definition of “OKRs” is “Objectives and Key Results.” It is a collaborative goal-setting tool used by teams and individuals to set challenging, ambitious organizational goals with measurable results. OKRs are how you track progress, create alignment, and encourage engagement around measurable and clear goals.” An objective is the overarching goal that needs to be achieved. The key results are what need to be measured and accomplished along the way to complete the objective. OKRs are a great way to keep everyone on the team focused on the same goal (objective). Employee engagement There are also countless tools to help organizations measure employee engagement. One of our favorites is TinyPulse. TinyPulse allows teams to send out quick employee surveys to generate an employee engagement report. This can be used by managers to pinpoint what employees may be struggling to feel aligned with the organization as a whole. Team Updates At Visible, we recommend using team updates to create an aligned organization. We see quite a few customers send out a weekly team update to help keep their team headed in the same direction. A quick example might look like this: A weekly update sent on Mondays recapping key metrics, wins and losses from the previous week, employee shout outs, and any interesting finds from the previous week. Give your team the transparency and communication they deserve with a quick update. Send your first team update now. Related resource: Why the Chief of Staff is Important for a Startup

Everyone, especially startup leaders and founders, are constantly looking for “hacks” to be more productive. A quick Google Search suggests “to-do lists, management tools, OKRs, etc.” But what if we told you one of the easiest ways to increase productivity is right in front of you? We recently had the opportunity to interview Jeff Kahn, CEO and Founder of Rise Science, on the Founders Forward Podcast. Rise is the only app that unlocks the real-world benefits of better sleep. Being a sleep expert and a startup founder himself, there is no doubt that Jeff spends time pondering how to be more productive. While Jeff offered countless tidbits of knowledge to better your sleep and health, 2 things stuck with us when it came to productivity. Scheduling Around Your Circadian Rhythm As defined by SleepFoundation.org, “Circadian rhythms are 24-hour cycles that are part of the body’s internal clock, running in the background to carry out essential functions and processes.” As Jeff explains it, “You actually have a part in the brain that’s controlling all the cells in your body and organ systems, basically when to be active and alert and when not to be. And as a result of that sort of on and off activity and recovery state we actually have these different times when we should be performing at different times when we’re just not as performance.” So what does this have to do with productivity? There are natural times when you are more productive and alert than other times. This means that you could be most productive at 9am and have a “dip” in the afternoon when you are less productive. Jeff encourages leaders (and everyone) to schedule their days around this biological phenomenon. “What this means is you need to be tuned into when you’re going to be at your peak performance and when you’re not, and then be able to plan your day accordingly.” As Jeff and Mike Preuss, our CEO, explain, they use their circadian rhythms and “dips and peaks” to schedule their day. For example, Mike has a peak (AKA is most productive) in the morning so tries to block this time in his day to do more strategic thinking and planning. Whereas when he is in a “dip” he may schedule demos and do other tasks he does not need to be 100% as his best performance for. This isn’t the first time someone has brought this up on the Founders Forward Podcast. Amanda Goetz, Founder of House of Wise, actually tracks her sleeping patterns and circadian rhythms to schedule her day as well. How do I track Circadian Rhythm? There are different applications and rituals that people will suggest to track circadian rhythms but we actually use Rise ourselves at Visible. They have what they call an “energy schedule” that is based on your sleep schedule so you can see your natural peaks and dips throughout the day. For example, here is my energy schedule from the app: There is actually a second “peak” not shown in the screenshot (which I was in as I wrote this) when I tend to get my best writing done. So what is Jeff’s other tip to productivity? Categorizing the Day Throughout the course of a week, a founder is pulled in every direction. Maybe it is fundraising, or customer calls, or HR, or finances, etc. In order to stay fully prioritized Jeff “categorizes” his day. This means that Jeff buckets his different activities/calendar events throughout the day into different categories. “I basically organize my day into sort of categories. Let’s say I’m working on a fundraise or I’m working on something on B2B or product or consumer or HR or whatever it happens to be, I sort of have these different categories. And every time I start a new task I track that and track the category. And what I found, there’s sort of two useful learnings.“ The first useful learning is that tracking his task allows Jeff to look back on a week and understand if he focused his time in the right place. Going into a week Jeff will have one (or a few) overarching things he would like to focus on. If he looks back at the week and sees that his time spent on the focus area was low, he knows he needs to change something in his scheduling. The second learning is that categorizing his task allows him to fully understand how time he spent on “focused work.” Over time Jeff has determined his optimal amount of time he should be working over the course of a week. How do I categorize my day? Jeff uses a tool called Toggl. It allows you to prioritize and categorize your day. Jeff has set up a Zapier Zap between Toggl where he sends his status to Slack so his team can see what he is working on. If you’re interested in learning more about sleep, productivity, and founder life check out the rest of the podcast with Jeff.

Startups are in a constant competition for 2 resources — capital and talent. In the early days of building a business, hiring is crucial to the trajectory of your business. Some people may tell you to hire a product team first, or customer success, or marketing team members. There is a blog post or Tweet making the case for different early stage hiring decisions. What about executives at the early stage? Generally speaking, we think of executives at the early stage as a founder type person that is deeply ingrained in the company DNA. But does it have to be this way? What about a part-time executive to help you get the business to the next level. We had the chance to interview Amanda Goetz, the part-time CMO at Teal and part-time founder of House of Wise, on the Founders Forward Podcast. As Amanda is living the “part-time executive” life herself, she offered lots of great advice and reasoning for founders that may be evaluating a part-time executive. As Dave Fano, the CEO of TealHQ, wrote: “Today I couldn’t be more excited to welcome Amanda as our half-time CMO at Teal. Beyond getting an exceptional executive, we are excited to show that the traditional models of employment need to change. It does not have to be all or nothing, a person can be a committed and meaningful contributor to a company while also pursuing entrepreneurial effort. We are thrilled to learn from Amanda and support her in every way we can in building House of Wise. As a team we’ve already learned so much from watching how she’s navigated building her brand, being an entrepreneur & team leader.” Consultant vs. Part-time Executive Earlier in her career Amanda led a masterclass for Teal and fell in love with their community. At the same time she knew that she was going to be parting ways with The Knot and was debating taking the leap as a full-time founder (with House of Wise). Amanda approached the CEO of Teal about her love for building brands and that she would love to get Teal to their Series A and help hire her backfill. While most people may think, “oh, just hire a consultant.” Amanda made the case she should be a part-time executive. As she put it herself, “There’s something about being in the trenches and caring so much about not only the product, but the team that’s working day in and day out.. And you can’t get that as a consultant. And I think especially for seed stage companies, you have to be in the research. You have to be in that agile moment of are we this? Are we this? Let’s like pressure test this. I love the zero to one.” This allowed Amanda to be invested in the team and culture at Teal over a consultant who may be viewing things from the outside. Be Clear From the Start When approaching a part-time executive you have to be extremely clear about what you are looking for. As Amanda put it, “If you need somebody to be managing social everyday, writing content, hitting your SEO content goals, that is not a part-time executive.” You need to be transparent during the hiring process and let them see under the hood of the business so they know where they can help to get the business to the next level. Which brings us to the next point. A part-time executive is someone that should challenge you: A Sparring Partner At the seed and early stage, an executive is someone that can set you up for success in the future. They will be there to test strategy, acquisition models, etc. and ultimately help you set up your organization and structure so you are ready to go in the future. As Amanda put it, “What you’re getting from a seasoned executive is someone to spar with, to have those really meaty strategy conversations with to challenge you.” If done correctly, a part-time executive can be an incredibly valuable position early in your company’s lifecycle. While it may not be a great fit for every business there are certainly businesses and individuals that can make it work. To learn more about Amanda Goetz and her journey from the wedding world to the CBD and part-time executive world, give her episode a listen here.

What are employee stock options (ESOs)? Employee stock options are vital for all startup founders and employees to understand. For startup employees the benefits often come in other forms than salary — one of the major ones being ownership in the company. Discussing stock options and compensation plans can be intimidating — especially for first time founders or employees working at a startup for the first time. New terms are thrown and legal documents are thrown around in conversation which can lead to confusion and intimidation. However, this does not need to be the case. The guide below is intended to help both startup founders and employees understand the basics on employee stock options. Investopedia defines employee stock options as, “a type of equity compensation granted by companies to their employees and executives. Rather than granting shares of stock directly, the company gives derivative options on the stock instead. These options come in the form of regular call options and give the employee the right to buy the company’s stock at a specified price for a finite period of time. Terms of ESOs will be fully spelled out for an employee in an employee stock options agreement.” The benefit of ESOs for early employees is quite simple. By choosing to work for a startup an employee is taking an inherent risk. To get compensated for the risk employees are offered ESOs. If the startup’s stock price rises above the exercise price, an owner of stock options will make out well. On the flip side, startups are also incentivized to offer employee stock options. By offering stock options founders and startups are incentivizing employees to work towards growing the company’s valuation and also encourages an employee to stay with the company as they have to wait for the stocks to vest (more on that later). Ultimately, employee stock options are an instrumental part of finding and retaining top talent for startups. While strapped for cash, startups often cannot compete with salary offers from larger firms so can attract top talent by offering equity and ownership in the company. Is an Employee Stock Ownership Plan (ESOP) the Same Thing? Similar but not to be confused with employee stock option plans are employee stock ownership plans. As defined by the SEC, “An employee stock ownership plan (ESOP) is a retirement plan in which the company contributes its stock (or money to buy its stock) to the plan for the benefit of the company’s employees. The plan maintains an account for each employee participating in the plan. Shares of stock vest over time before an employee is entitled to them. With an ESOP, you never buy or hold the stock directly while still employed with the company. If an employee is terminated, retires, becomes disabled or dies, the plan will distribute the shares of stock in the employee’s account.” The key difference between an employee stock ownership plan and employee stock option is that an ESOP is a retirement plan. Whereas an ESO is when an employee has the right to buy shares at a set price over a given period of time. Related Resource: How to Choose the Right Law Firm for Your Startup Are there different types of employee stock options? Employee stock options come in two main types of options: incentive stock options and non-qualified stock options. The main difference between the two mostly revolves around their tax structure. There is a third type rarely used called “restricted stock units.” For the sake of this post we will be focusing on incentive stock options and non-qualified stock options. Incentive Stock Options (ISOs) As defined by Investopedia, “an incentive stock option (ISO) is a company benefit that gives an employee the right to buy stock shares at a discounted price with the added allure of a tax break on the profit. The profit on incentive stock options is taxed at the capital gains rate, not the higher rate for ordinary income.” Let’s break that down. To get started, there are a few tax benefits when it comes to ISO. The first benefit comes when exercising (AKA buying) your shares. Generally speaking, you do not have to pay taxes when buying incentive stock options. Assuming you exercise your shares and hold on to them for at least one year, you qualify for a tax benefit on the selling end as well. As Investopedia mentions above, when selling your ISO shares you are potentially taxed at capital gains as opposed to ordinary income. Generally speaking capital gains taxes are less than ordinary income taxes. This means that you’ll be taxed at the lower bracket. However, if you sell your shares immediately after exercising you will be taxes at the ordinary income level (similar to Non-qualified stock options). ISOs are generally awarded to high level managers and high value employees. For a startup, this usually means the early employees and founders. Non-Qualified Stock Options (NSOs) On the opposite end of incentive stock options are non-qualified stock options. As defined by Investopedia, “a non-qualified stock option (NSO) is a type of employee stock option wherein you pay ordinary income tax on the difference between the grant price and the price at which you exercise the option.” So how do NSOs differ from ISOs? As we mentioned earlier, it comes down to the tax benefits. Whereas incentive stock options are only taxed when selling (and potentially taxed at the capital gains rate), non-qualified stock options are taxed when exercising and selling your shares. Non-qualified stock options are more common than incentive stock options. Related Resource: The Main Difference Between ISOs and NSOs How Do Employee Stock Options Work? It is important for both startup founders and early employees it is important to understand how employee stock options work. The different tax structures, terminology, and legal documents can make it an intimidating task. As stock options are an integral part of startup culture there are a few terms and ideas that everyone should be familiar discussing. Granting Generally when signing a job offer you will receive an offer grant. This is when the company is offering/”granting” the option to buy stocks. It is important to remember that stock options are not actual shares of stock but rather the option to buy these shares at a set price on a later date. So how do you make money on stock options? When the price between the offer or grant price (the price you can buy the shares at) and the market value of the company rises. At the time of receiving an offer letter you will also receive a stock option agreement. This document will include different dates, terms, and details that are pertinent to your grant. This includes what type of options you will receive, number of shares, vesting schedule, and the expiration date. Vesting Vesting is a mechanism that companies can use to encourage employees to stay longer. As defined by Investopedia, “Vesting is a legal term that means to give or earn a right to a present or future payment, asset, or benefit. It is most commonly used in reference to retirement plan benefits when an employee accrues nonforfeitable rights over employer-provided stock incentives or employer contributions made to the employee’s qualified retirement plan account or pension plan.” As we mentioned earlier when you receive a stock option this is not actual shares but rather the ability to buy shares at a later date. In order to retain employees, most companies will include a vesting schedule with their offer. This is the schedule in which you will have the ability to exercise your shares. A vesting schedule usually takes place over a period of time and may be split over the course of a few years or milestones. The most common vesting schedule for startups is a time-based schedule. This means that you’ll receive a set amount of shares over a set amount of time. Usually there is a “cliff” which is a set date where you get the first portion of your shares. The most common startup setup is a 4 year vesting schedule with a 1 year cliff. This means that after working for a company for a full year, the employee will receive the first quarter of their shares (1 year cliff). After the first year, the employee will receive their remaining shares over the next 3 years on a specific calendar. Usually 1/36 of the remaining shares each month. What Are the Benefits of Employee Stock Options? There are clear pros and cons of employee stock options. Generally speaking the benefits of ESOs outweigh the cons. From the perspective of a startup, the benefits of ESOs are quite clear. Generally speaking startups are strapped for cash and may not be able to compete with larger firms hiring for the same positions. When top talent is evaluating where to work they are generally looking for a few things: ownership, collaboration, transparency, and growth. Ownership can come in 2 forms, ownership in their work and ownership in the company. Offering ownership in the form of stock options is a surefire way for a startup to find and retain top talent. At the end of the day, early startup employees are taking a risk and likely a paycut to join a team that is attacking an interesting market or building a strong product. Rewarding talent for taking the risk is a must for early stage startups. Pros As we alluded to above, the pros of offering employee stock options are quite clear for a startup. On top of the ability they can be used as a tool to attract and retain top talent there are a few other pros: Employee stock options give employees ownership in the company. This leads them to feel more invested in the success of the business. ESOs offers startups financial benefits. Instead of paying a large salary they can make more competitive and attractive offers. ESOs also improve employee retention. This will allow human resources and management to focus on building the business as opposed to hiring new talent. Employees are directly rewarded for the growth of the company. If the valuation of the company goes up, so does their net worth. If employees are offered incentive stock options (ISOs) instead of Non-qualified stock options (NSOs) there are plenty of tax incentives. However, with pros comes cons. While not as plentiful as the pros of offering employee stock options there still are cons of offering ESOs. Cons As we mentioned above, there are still cons when it comes to startups offering employee stock options. A few common cons startups often see with employee stock options are: While the examples above are the most basic forms of tax implications. However the tax structure can get complicated and frustrating for employees. The more shareholders you have on the captable the more important dilution becomes. Dilution can be costly for investors and employees on your cap table and will be something startups need to be wary of. Valuing stock options can be difficult. At the end of the day, the value is on paper. Employees are required to rely on the output of their co-workers and management to make sure their stock is valued as high as possible. Related Resource: Everything You Should Know About Diluting Shares While the pros generally outweigh the cons of offering employee stock options. There still are cons that startups and founders need to work through when it comes to offering stock options as a form of employee compensation at their company. How to Issue Employee Stock Options? Deciding when and how to issue employee stock options can be a difficult task. A startup or founder needs to understand how much they should pay employees in cash and then add in stock options. When setting out to issue stock options it probably looks something like this: Define the role you are looking to hire. Decide what their total compensation should be. This can be taken from similar job postings and the market as a whole. Decide how much of their total compensation you would like to pay in cash (AKA their salary). Determine the gap between their salary and total compensation. This is entirely up to the startup or founder. It can be difficult to place a number here as the value of the company is solely on paper. Samuel Gil of JME Partners recommends doubling the value here. For example if there was a $10K difference in their salary and total compensation a startup should offer $20K in added compensation. The next step is to determine the exercise price for the stock options. As Samuel Gil writes, “As we have previously reasoned, we will assume that a fair price for the stock options is the same as the price of the common stock. So, how much is the common stock worth? The most frequent procedure is to apply a discount (e.g. 25%) to the latest preferred stock value, since common stock doesn’t have the same economical and political rights that preferred stock (what VCs usually buy) does.” Issue the number of shares. This is up to the startup and founder but can be calculated with the logic above. If you find the common stock price to be $5 and need to compensate an employee $20K that would be 4000 shares. This can be quite subjective as we need to remember dilution and valuation can rapidly change. Related Reading: How do you Determine Proper Compensation for Startup CEOs and Early Employees? How Are Stock Options Taxed? As we mentioned above the tax benefits, or lack thereof, are an integral part of employee stock options. To recap here, the main difference comes between incentive stock options and non-qualified stock options. On one hand, we have incentive stock options. ISOs offer many tax benefits. ISOs are only taxed when selling the shares of stocks — and only taxed at the capital gains rate (which is generally less than ordinary income tax). On the other hand, we have non-qualified stock options. While more common, NSOs do not offer the same tax benefits as incentive stock options. NSOs are taxed both when exercising and selling. What Happens When Employee Stock Options Are Exercised? We’ve covered what stock options are, how they are issued, how they are vested, and how they can be a benefit for both employees and startups. But what happens when ESOs are actually exercised? As we mentioned above, an employee usually does not have the ability to exercise their stock options until they have vested. For this example, we will say this is on a standard vesting schedule so they are allowed to exercise their options after the 1 year cliff. So what happens after year 1 when an employee is allowed to exercise their options? Depending on your company, there may be a few different options when it comes to exercising your stocks. Two common options for exercising stock options you might see: Pay cash — use your own cash to pay for the shares yourself. This is the highway risk approach as you are not guaranteed to make any profit on your share moving forward. Cashless — on the other hand you can use a cashless approach. This means one of two things. You can either sell enough of your shares to cover the purchase price of your shares. Or you can sell all of your shares in a single move. Employee Stock Options Terms You Should Know As we’ve alluded to throughout the post, there are quite a few terms, conditions, documents, etc. that all parties should be familiar with when navigating their employee stock options. Below are a few employee stock options terms you should know: Vesting — The process used to reward shares and stocks to employees. Generally this takes place over a period of time so shares are gradually rewarded. A common schedule for startups takes place over 4 years with a cliff after year 1. Vesting allows startups to retain employees by slowly rewarding shares. Incentivized Stock Options — One common form of employee stock options. Incentivized Stock Options are more preferable for tax purposes. Generally, someone only pays capital gain taxes when selling their shares. Non-qualified Stock Options — The other common stock option is non-qualified stock options. While more common, NSOs require someone to pay more taxes. NSOs are taxed when exercising and selling their shares. Restricted Stock Unit — Restricted stock units are grants of stocks a company will offer employees that do not require purchase. Employee Stock Ownership Plans — Employee stock ownership plans is a retirement plan for employees. Employers contribute stocks to an ESOP account over a scheduled period. An employee participating in an ESOP plan never buy or holds the stocks while being employed by the company. Employee stock options are an integral part of a startup’s success. ESOs are a powerful tool to attract and retain top talent. In order to best set up your ESO plan, you need to understand the basics of employee stock options. To learn more about attracting and retaining top talent, subscribe to our Founders Forward Newsletter We search the web for the best tips to attract, engage and close investors, then deliver them to thousands of inboxes every week.

Naval Ravikant, the founder of AngelList, recently began a new project called Spearhead. The program gives founders $1M to start angel investing, and seeks to educate those who wish to enter the space. The Spearhead podcast, meant to scale these efforts, is a treasure trove of insights not just for those who wish to be angels, but for entrepreneurs looking to raise a Seed round. You can find the full podcast & transcribed episodes at spearhead.co. Here are 7 insights for founders from the podcast: Angels build brands. Be aware of who you’re associating yourself with. Investors in early stage companies need not just deal flow, but access to the best deals. To get access, angels build brands. They do this in many different ways – Jason Lemkin built the SaaStr conference, Naval built AngelList, and Fred Wilson blogs. You should be mindful that the brands you associate yourself with in the early days can have an impact on the future of your company. Angels with great brands can get you access to key hires, new customers, & helpful mentorship. Future investors may also use the brand of your angels as a signal as to whether or not they should invest. If your early stage investors have have a track record of success, securing later funding gets easier. Avoid angels who put too much on the line. It can lead to bad behavior. If an angel invests so much into your company that they stand to lose a large portion of their net worth if you fail, this could lead to tense situations. This applies to family member & friend investments as well. Angel investing is a high risk sport, you should only play with people who understand this. Don’t use FOMO as a fundraising tactic. The best angels refuse to be pressured into a deal. Telling a high level angel investor that they ‘only have 24 hours to get into the round!’ can backfire. There is a fine line with this, as social proof and scarcity are tools that you need to leverage when fundraising. However, being overly aggressive or pushy makes people hesitant about working with you – especially investors with experience and strong brands. Social proof is key. Angels are often wary about getting involved in deals where they have no network connections to the founders or fellow investors. Naval & Nivi explain this by saying that good angels should be cautious about deals that are made up of complete strangers. If a founder is raising money and none of their direct connections or past investors are involved, that may be a bad sign. Similarly, if an angel with excellent judgement writes a huge check to a company, it sends a message to other investors that they’re a strong bet. Cold emailing is part of the fundraising process, but you’ll have far more success with people you already know. Your network is critical. Build it before you have to. Get your psychology right. Great founders often toe the line between visionary & madness. To build a massive company, you need to attempt something that most people don’t think will work. It takes a special mindset to do this. Naval explains that great angels don’t expect founders to be ‘coachable’ or have perfect records, as they sometimes have to operate as an outsider at first to be successful. Instead, founders should be aggressive and seek to build traction. However, you should avoid the perils of over-aggressiveness. If you prioritize hyper growth at the expense of traction, you can end up ‘blitzfailing’ as David Sacks explains on a guest episode of Spearhead. You need to keep your genius in check, and ensure that you’re prioritizing the right things in your business. Build a technical network. Angels are looking for huge returns in exchange for taking a chance on you. This is an all or nothing game, and you’ll need to be very right when others are wrong. It’s often the only way to generate massive returns. This is why you should solve technical challenges where you have what Naval calls ‘specific knowledge.’ Many of the most valuable startup opportunities are in technology. Build relationships with scientists & technologists at the source of new developments. These people can give you access to angels who seek to invest in tech companies, in addition to talent and insight that comes from the source of innovation. Get your team right. Angel investors are betting on founding teams more than their initial ideas. Pivots are common in startups, and savvy early stage investors understand this. When a company pivots, the common denominator ends up being the team the angels invested in. Naval explains that you should seek to create a company of world class builders, salespeople, & community creators. These are vague categories that take on different meanings in different industries. A builder could be a software engineer or a logistics expert, while a seller could be a fundraiser or a marketer. The key is to have both. An amazing product with no distribution won’t win, and Naval calls the outsourcing of product development a “red flag.” Team up with skilled people who have the 3 traits Naval & Nivi look for in partners – intelligence, energy, and integrity. If you do this, you’ll attract investment, and be more likely to whether the inevitable storms that come with starting a company. When marketing any product, you start by understanding your customer. Why wouldn’t you do the same when selling investment opportunities in your company? We think that Spearhead is a great entry point into understanding the psychology of an angel investor, and hope that you can use these insights when raising funding for your early stage startup. Want more advice delivered to your inbox every Thursday? Subscribe to our Founders Forward Newsletter. We search the web for the best tips to attract, engage and close investors, then deliver them to thousands of inboxes every week.

Leading under the current circumstances is an audition to lead for the coming years. Being able to step up as a leader amid the COVID-19 pandemic is an opportunity to cement a strong future for your company and yourself. Last week, Scott Dorsey, Managing Director of High Alpha, joined us to chat about all things leadership and fundraising. Prior to High Alpha, Scott co-founded ExactTarget and led the company as CEO and Chairman from start-up to global marketing software leader. ExactTarget went public on the New York Stock Exchange in March of 2012 and was acquired by Salesforce in July of 2013 for $2.5 Billion. Post-acquisition, he led the Salesforce Marketing Cloud which encompassed 3,000 employees around the world. It is safe to say that Scott knows what it means to be a leader. Scott started ExactTarget during the Dot-com Bubble and successfully IPO’d shortly after the Great Recession. The webinar was full of stories and anecdotes from Scott’s time building ExactTarget. Check out our favorite takeaways below: Cash is King While cash has always been king, Scott mentions that it is even more important during a downturn. As a founder, you need to have a deep understanding of your cash flow and burn rate. It may be difficult to fundraise during a downturn but you need to be able to show your investors that you can (1) make it through a downturn and (2) thrive on the other side. If you can successfully display that you’re in a good cash position and ready to thrive after, you’ll improve your odds of raising capital. Closer than ever with Customers During uncertain times, it is more important than ever to be close to your customers. Your customers are going through the same things that you are going through. Establish and preserve your relationship so you can grow together on the other side of the downturn. In the early days, Scott suggests companies project confidence, show they’re stable, and are growing & innovative. One of the best ways to do this is by envisioning your 3, 5, and 10 year journey with potential customers. Where will you be in 10 years? What will the product and relationship look like? Clients want to lock-in on a long-term relationship. If you don’t have everything built in the immediate, that’s fine. Show that you can be all the way there in the future. The Friday Note During uncertain times most leaders communicate less. However, communication is one of the best ways to make it through a downturn. Scott has almost become synonymous with the “Friday Note.” Simply put, the Friday Note was an email Scott sent every Friday to everyone in the company letting them know what was happening with the business. During the Great Recession, Scott found himself communicating with employees less. From that point, Scott made it a point to send a note every Friday to the team so everyone always knew what was happening and there was a path to 1-on-1 communication. In fact, Scott turned all of his Friday Notes into a book when ExactTarget was acquired by Salesforce. Personal Board of Directors According to Jim Rohm, “You’re the average of the 5 people you spend the most time with.” With that being said, it is important to surround yourself with a diverse mix of people who are smart, friendly, and can grow with. Scott himself has a personal board of directors made up of about 5-6 people. These are people that Scott can lean on for guidance, faith, personal balance, etc. This is your inner circle — don’t be afraid to approach people you admire to ask for help. We hope this is helpful as you work through these uncertain times. Scott is the definition of a leader and a reminder that great leaders and businesses can be built during downturns. As a reminder, you can check out the full webinar recording here.