Founder Resources
How Magma Partners thinks about HR tech in Latin America
In this article, we share how we think about HR tech in Latin America: the three main types of HR tech startups we see, the common traps, and what we look for when investing.
Before you raise money, you’ll be doing everything. As Mark Suster says, “doer of all tasks” is an early-stage founder’s most accurate title. You need to be hands-on during the early days. If you hire a Series A team too early, you’ll burn through money with subpar results. But, if you keep your early-stage team and don’t ever add to it, at some point you’ll break.
Once you’ve raised money, you need to start delegating. What has gotten you from point A to B won’t be what gets you from B to C. If you have a team largely made up of high-slope people and have just raised your first money, you probably need to hire a Senior Autonomous Leader.
A Senior Autonomous Leader is someone you can delegate important projects to AND know they will do an amazing job.
Founders, especially first-time and underestimated founders, often hold onto control of every decision in their startup for too long. Raising funds might be an early signal that you’re on the right track but it also changes the game, and you need to level up to succeed in the new game you’re playing. Founders are the most valuable resources to a startup, and leveling up means you need to hire people who can get things done and provide you leverage so you can spend more time on the things only you can do.
You need to hire a senior autonomous leader whom you trust to deliver high-quality work, have good judgment, and work well with you. Senior autonomous leaders give you the leverage that you need.
If you cling to control over everything in your startup for too long, things will start to break down. As top solo VC Elad Gil says, “Things will initially seem to just truck along as usual, and then suddenly everything at the company will break at once. Most, but not all, of this breakage is avoidable, but most first-time founders screw it up.”
If you remain the “doer of all things” as you try to scale, you’ll start to notice these common signs that things are about to collapse:
Suddenly, things will start breaking all at the same time. Your team will be overwhelmed and unhappy with you, your customers will be frustrated with your product, and you’ll be frustrated with your own performance.
At this point, founders realize they need to hire someone who can help get important things done. They slam on the breaks, flip all their attention to hiring, and message me saying “we urgently need someone to start ASAP.” Usually, they’re right.
In most cases, extreme urgency to hire leads founders to hire the first person they think might be able to do the job, and skip important recruiting steps like knowing what you really need to hire, planning where to find top talent, interviewing well, working with the candidate, and referencing candidates. Sometimes you’ll get lucky and the person you hire will be great in the role. However, more often, you’ll hire someone who turns out mediocre, or worse, you’ll have to fire them and rehire for the role.
Messing up important hires can be a death spiral. The good thing is that if you are proactive about bringing on key senior hires, you can avoid this worst-case scenario.
Founders often don’t delegate because:
VCs invested in you because they think you can build a business that scales 10-100x. An important part of being able to scale is hiring and retaining top-tier talent that gives you leverage. You need to transform from just a doer to being a doer and a leader. Detach your company’s growth from your personal capacity.
Delegating important tasks and projects to someone else doesn’t mean that you won’t be involved in anything, it means that you don't have to be involved in everything. Hiring a senior person allows you to do less and finish more. As Mark Suster says:
“Do less. And do the things that you ARE doing better and with higher quality. Have a shorter to-do list with more things that are in the “done” category.”
When top executive search funds recruit for executive roles, they evaluate candidates using three main criteria:
Regardless of the specific role, all Senior Autonomous Leaders share key qualities across the “competencies, culture, potential” framework. Common traits include:
The shared qualities in Competencies and Culture are table stakes that senior autonomous leaders need to have to be successful. The best senior hires also have high potential:
Senior autonomous leaders are competent, which allows you to trust that they’ll produce high-quality work. They are cultural fits and cultural adds, which allows you to work well together and trust in their judgment. They have the potential to grow with you, so they can be a thought partner for you over time.
You raised your first money and you want to avoid things breaking down. You want to hire one senior person but are unsure what role to hire for.
Every founder is different and every business is different. When I work with a founder, or co-founders, making their first big hire, I ask 4 questions:
Answer these questions and put them into a 4-quadrant graph that looks like this:
This simple activity makes it clear what you should be, and just as importantly, what you shouldn’t be, spending your time doing:
Quadrant 1, things you’re great at and that give you energy: This is your sweet spot. Keep doing all of these, and try to spend as much time here as possible
Quadrant 2, things that you’re not good at and that give you energy: This is the easiest place to waste time. Offload the tasks in this box to someone on your team, or hire a senior leader who can do them.
Quadrant 3, things that you’re not good at and drain your energy: You should spend zero time on these tasks. Hire someone who can do this.
Quadrant 4, things that you’re great at and drain your energy: You’re never going to be 100% optimized in quadrant 1. You need to keep doing these things at an early stage. Maybe down the line, you can find someone who is just as good or better than you at these things who you can hire or offload to.
The first Senior Autonomous Leader you should hire should be doing the bulk of their work in tasks that fall into your quadrant 2 and 3. Here are a couple examples of how to use your quadrant to decide on who to hire:
Try to spend as much time on the things that only you can do. As former Chairman and CEO of Adtalem Global Education Lisa Wardell says, “If you’re doing something that others on your team could do just as well, you’re just wasting your time.”
Don’t confuse this advice for going crazy and hiring an entire C-suite once you’ve raised a seed round. You need to prioritize what is most important. Start by picking one key senior hire you can make that will have the biggest impact on your company today.
You know you need to hire someone senior, but you’ve never done it before, and you don’t have a head of people yet. Your company is small and relatively unknown to top talent.
Just as building market awareness for a new product is hard, building awareness of your early-stage startup to top talent is hard. Our recommended steps to reach the best candidates and have a chance at hiring them are:
When hiring executives, think only about hiring for the next 12 months. I like using Brad Feld’s general rule when looking for the best candidates:
“If you are a CEO who is interviewing for a new member of your leadership team, ask the person you are interviewing if they have ever been in the same role as a company that grew from size -50% to +200% of yours.” - Brad Feld
So if you have a team of 30 people, look for people who have been at a company that grew from 15-60 people. If you have a team of 50, look for someone who has been at a company that grew from 25-100 people.
Use this as a guideline, not a hard and fast rule. In Latin America, fewer people have helped scale a startup once or twice before than in the US. And remember, not all scaling is created equal. You’d much rather hire someone who has led smaller but more sustained growth than someone who believes you need to 3x your team to 3x your top line. Team size can often be unrelated and sometimes even inversely related to company success.
Say you have a couple hundred thousand dollars in annual revenue today and you just raised a seed round. You and your investors think you can eventually grow to $10M in annual revenue.
You know you need someone to lead sales. A friend of yours knows the head of sales at a company in your industry doing $10M in revenue. Your friend tells you this head of sales is looking for a new role and “you need to hire them!” While hiring this person can work, most of the time it doesn’t.
Don’t skip steps.
It’s great that you have lofty expectations. But getting from a couple hundred thousand USD in annual revenue to $10M is not getting from a→b. It’s more like getting from a→z.
The head of sales at the big company might be a great hire for when you get to z. But first, you need to hire someone who can take you from a→b, and hopefully b→c. Don’t skip steps and overhire.
Companies often overhire, resulting in what I call organ rejection: the company rejects the leader because the leader has no idea how to manage a smaller team with fewer resources. The head of sales from a bigger company is probably used to having a team of 40+ people, and unless they have grown a company from the earliest stages before, they probably don’t have the skill set to do what you need.
To avoid making organ rejection hires, I recommend hiring for the next 12 months. Hire someone that you know can get you where you want to be in 12 months. Answer these 14 questions and you’ll know what that is. Don’t hire for future potential problems, hire for today’s real problems.
While the focus of this article is on how to decide and make your first senior hire, I often get questions from Series A companies about bringing in more senior talent versus promoting from within. Every case is different.
While you want to promote your high-growth people, a common problem that startups make is over-promoting your best do-it-all team members into leadership roles that they are not ready for. This is the Peter Principle, promoting your best employees until they’re in a role that they are bad at, leaving you with a company full of people who are incompetent in their roles.
As former Google and Stripe executive Claire Hughes Johnson says in her book Scaling People, it is your job as a leader to “retain high performers you might be tempted to promote into management when you recognize they could be much more effective in non-manager roles”
Give your best high-slope people more opportunities, but keep in mind that different skill sets are necessary for different roles. The analyst you hired 4 years ago, who excelled and was promoted several times, might now lead a team of 10. However, the skills needed to manage a team of 10 won’t overlap much with the skills that first got them promoted. You need to judge if they will be able to do well in the new role before you promote them to it. When the person is able to keep growing and excel in their new role, it’s a huge win for your entire team and culture.
In all companies, hiring vs promoting internally is a balance. Your team will continue to grow and expand. Some of your longest-tenured people will continue to get promoted and grow with your company. You’ll also have to hire several senior executives who are experts in a specific domain and can take you to the next level. You’ll even have to periodically review if you are in the best role to push the company forward. Each of these decisions are difficult and nuanced, but incredibly important. At Magma, we help portfolio companies through this process, but by using tips in our People guides, you can stay on top of your team, and make better people decisions.
Building a great early-stage team is all about having a high output/team member multiple. The two types of team members to hire, identify, and retain in early-stage startups are:
The bulk of your early-stage team should be high-slope people who are young, smart, and can help you grow. But once you raise your first money, you need to start thinking about hiring a Senior Autonomous Leader who you can delegate to with confidence that they’ll do a great job. Hiring these two types of team members helps you execute, recruit, uplevel the rest of your team, and fundraise
Understand that your team is constantly evolving, just as your company is. One of the most important jobs you have as a founder is building and retaining a great team. Use frameworks like the A, B, C player framework, Danny Meyer’s 4 Types of Employees, and Keith Rabois’ Barrels and Ammunition to keep the pulse of your company.
Always try to hire the most high-impact people you can. Build a strong recruiting and interviewing process so you don’t make avoidable mistakes, and remember that hiring the right people at the right time can make all the difference for your startup.
