Having the right team members is critical for any company, but much more so for a startup. There is not much buffer that startups have at the early stages - missing key people or needing to course correct after mis-hires is particularly costly when trying to get your product launched, a customer onboarded, or raising funding. On the other hand, a strong team can rapidly accelerate a company’s progress. At PSL, we see this every day as our incredible team of engineers and designers reduces the time it takes to launch a company from >1 year to a matter of months.

New founders we speak with often have questions on how to go about building their early team - their first 5 hires. Here are a few insights, based on our experience, to the most frequently asked questions.

What are the types of roles you look for in your first 5 hires?

We generally see the “first 5” include: CEO, CTO, 2 AI engineers, and a designer (see questions below about responsibilities). This composition strikes a balance between technical talent (CTO, engineers), sales (CEO), and product (CEO, designer). But the actual first 5 will flex to the type of company. For example, a company building an AI product for marketers may replace an engineer with a marketer. 

From a timing perspective, the most important role for a founder to fill is the CTO. The CTO sets the technical vision, so investors will expect to see a CTO on the team before feeling comfortable writing a check. The same goes for hiring additional engineers - most engineers will expect to see a technical vision they can contribute to and execute on before accepting an offer.

How has AI changed how you think about a founding team?

There are two main ways in which AI has shifted the way we think about team building.

First, we have seen design increase in importance. Before the rise of generative AI, there was a relatively straightforward way for how users would interact with tech products. While design was still important, early stage startups could manage by copying design principles of existing companies in the market. But that has all changed with AI. We interact with the latest models and tools in entirely novel ways, and it continually is evolving. Users do not know what to expect from AI products - so much is undefined. Do you treat AI as a human you are chatting with? How much can AI do in the background? Where do you need a human in the loop? Companies need to think upfront about design so they build a product that is trusted by and appeals to customers in this new world.

Second, it’s absolutely critical for engineers to have generative AI knowledge and experience, whether through their day job or side projects. The pace of innovation is so fast and unlike anything we have seen for many years - there are new models and technology coming out on nearly a daily basis. The feasibility of products changes with each advancement we see. For example, two months ago it would have taken a substantial tech investment to develop an AI agent that could run in the background of your computer to execute tasks. Now, video input and computer use models that have become available in the past few months make that possible. You need talent that is able to capitalize on each AI advancement to stay competitive in the market.

What is important to screen for when hiring the early team members?

Across all roles, the most important requirement is scrappiness. People who are scrappy are able to innovate in incredible ways. People who are not resourceful can be a drag on the rest of the team.

CTO

It is mission critical for a CTO to be comfortable coding and have AI experience. The CTO is the first engineer, so they need to be confident that they can build the product on their own. We see many people interested in being a CTO that do not realize they have to code - particularly senior leaders from big tech. While there are other skillsets that a CTO needs to have (designing technical architecture, running a sprint, recruiting technical talent), if a CTO is not comfortable coding, founders have to recruit additional engineers, a costly proposition. Additionally, as we mentioned above, it’s critical for teams to be knowledgeable about AI developments. CTOs need to exemplify this - finding the latest research papers, testing different models, and continually evaluating what is possible.

Beyond the above, if the CEO does not have product skills, the CTO may need to be a product leader as well.

AI engineers

As we mentioned earlier, engineers need to be tracking new technology and integrate it into their work fast. You can observe this certainly from their job experience, but it can be seen in other ways, like side projects. How are they playing around with the latest frontier models? Are they using tools to improve their own workflows? Using these advancements is no longer a matter of staying ahead, it’s required to not fall behind. 

The types of engineers you need can vary. Having both engineers as full stack can be helpful so that they flex into front end and back end. However, we also see companies that split front end from back end engineering. Either way, mid level to principal engineers are a good target as they are comfortable operating on their own and navigating ambiguity.

Designer

The designer needs to be able to work end to end - going from customer research (voice of customer calls) all the way to the actual UX. They are the CEO’s partner on creating the right customer experience. Design can be particularly challenging to hire for because the market of potential talent is smaller and designers often specialize in either visual or product design. Getting the combination of both is rare. We have found that designers who have launched new products tend to have the appropriate experience.

In addition to the above, all soft skills you would expect also apply. Being a builder, having a low ego, being able to handle ambiguity, and thinking outside the box are all important characteristics that founders should embody and look for.

What about contracting or outsourcing?

Founders often consider contracting as a means to keep costs down. Contracting can make sense, but it’s important to think carefully about the types of activities you outsource. Contractors inherently are not steeped in your company’s knowledge nor are their learnings kept on as your start-up grows. Eventually your company will need to transition the role from a contractor to a full time employee, which can result in growing pains. 

Outsourcing deeply embedded functions or activities is going to be hard. For example, engineering or design are both core to the strategy of the company, so should be kept in house. In contrast, outsourcing can work well for functions or activities that are relatively standalone. An example is outsourcing to an SDR firm to find prospects. The CEO still sets the sales strategy (like the ideal customer profile, communication method) and owns the funnel (in particular, closing) - the SDR firm is just another channel to execute that strategy. The adverse impact of outsourcing to an SDR firm is low.

What are common missteps founders can make when building their team?

We often see founders who believe their co-founder needs to be someone they can partner well with for 10+ years. That’s an overwhelming decision framework and an almost impossible one to meet. Companies evolve and people change - you cannot know what your company will look like or what kind of people will be needed in the long term. Instead, focus on whether this is a good fit for the next few years.

Beyond that, we also commonly see founders bring on co-founders who are similar to them. We are naturally drawn to people similar to us, but choosing a co-founder based on that inclination will exacerbate existing gaps and eventually require bringing on more people - costly from a time, money, and equity perspective. Additionally, founders with highly overlapping skillsets can result in confusion as to who is setting strategic direction in that area. For example, co-founders who are both product leaders may end up advocating different paths for the product - which one does the team follow? It is critical to evaluate your own skills and gaps and honestly identify the skillsets you are missing - those are the areas in which you want your co-founder and early hires to excel.

What are ways that you leverage AI in your day to day?

Recruiting is a heavily human dependent function today, but our team uses different AI tools to speed up some of the more repeatable tasks - for example, we use Magical AI to pre-draft emails that can get sent to candidates by role. 

However, we do see a gap in how well tech tools address recruiting challenges and think it is one of the areas ripe for AI disruption, like an agent that recommends candidates in our network based on a company and role description. Interested in building in recruiting and AI? Reach out to us at hello@psl.com!

Of course, there is no perfect recipe for success. Mistakes can and will happen. You might end up with someone on your team who just doesn’t fit, whether culturally or based on skills. But, hopefully by using our and others’ learnings, you are able to build a strong team that accelerates your company’s growth.

‍

About Us

Pioneer Square Labs (PSL) is a Seattle-based startup studio and venture capital fund. We partner with exceptional founders to build the next generation of world-changing companies, combining innovative ideas, expert guidance, and investment capital. PSL operates through two primary arms: PSL Studio, which focuses on creating new startups from scratch, and PSL Ventures, which invests in early-stage companies. Our mission is to drive innovation and growth by providing the necessary resources and support to turn big ideas into successful, impactful businesses. If you have a groundbreaking vision, connect with us hello@psl.com, and let’s build something extraordinary.