Building a winning leadership team starts with identifying gaps in an organization and hiring talent with the risk management skills needed to close them.
The run-of-the-mill interview process, popularized at larger companies, is ineffectual for startups seeking long-term success, says billionaire venture capitalist Vinod Khosla, a former member of Square’s board and founder of Khosla Ventures, a VC firm that has invested in companies like DoorDash, Square, and RingCentral.
Instead, startup CEOs should hone in on candidates who have fixed similar problems in past roles that their company may later face, saving the them both time and money,
Khosla is a longtime proponent of what he calls gene pool engineering, in which companies identify candidates who are likely to yield high innovation teams through their diverse work experience and demographic diversity.
“This is a specific method to say, how should startups build their starting team? How do you engineer the gene pool to maximize the probability of success?” he tells Fortune. The strategy can be applied companywide or tailored to business functions such as engineering or marketing.
It’s especially critical that a startup’s very first hires are risk-focused because they create adaptable companies that are better positioned to pinpoint and solve business problems at the earliest stages.
“Either you’re thinking big and building a team to think really big, or you’re thinking smaller steps and only preparing for the small steps,” Khosla says. “In hiring the gene pool of a company, you set up its future five, seven, years ahead.” He adds: “The early part of the team is the gene pool to either take you to billions or only to millions.”
While Kholsa pioneered this method for hiring a startup’s elemental team members, others like Gokul Rajaram also make use of the recruitment strategy.
In a recent Twitter thread, the DoorDash executive, who also sits on the board of Coinbase and Pinterest, laid out a playbook for recruiting functional leaders.
When hiring for a team or a project, startups must first identify the opportunities and risks that need addressing at the company, as well as the skills needed to tackle said threats. Startups should also identify companies or teams, both inside and outside their industry, that have solved problems similar to the ones they’re likely to face. For a leadership candidate, Rajaram recommends scouting employees who report directly to the leader of a team that has previously solved problems the hiring team is accounting for.
“These people are the most likely to leave because they want to lead the function at another company,” Rajaram wrote in his Twitter thread.
But a word to the wise: startups should avoid targeting employees who are still too green or whose career development has plateaued in that role; instead, look for someone who has held the role for three to five years and has a track record of increasing scope and responsibility, he says.
It may even be helpful to create an organizational chart, starting with the leader of a particular business function and trickling down to their direct reports. This can easily be done by scrolling through LinkedIn connections, interviewing employees, or using resources like The Org, which offers users a network of organizational charts at public and private companies.
The fintech company Square used a similar method in its early days, according to its former head of people Aaron Zamost. “Early Square went a further level down the org chart, targeting the high upside deputies of deputies,” Zamost wrote on Twitter. “There’s a reason so many of them are CEOs now.”
He’s not wrong. Many of Square’s early employees have since launched their own ventures, including Opendoor founder and chief technology officer Ian Wong, and wholesale marketplace platform Faire CEO Max Rhodes, both of whom have received financial backing from Khosla Ventures.
“It’s definitely a practice you see used to great effect among early-stage companies,” DoorDash’s Rajaram wrote in a statement to Fortune. “Of course, as companies mature, they are able to leverage other means of attracting talent.”
Dedicating in-house time and resources to skulking around an organization’s talent roster might seem like an odd investment. After all, most organizations hire consultants and recruiting agencies. But when the average headhunter fee costs 20-25% of a hire’s first-year salary, such an approach can help trim some fat off startups’ recruitment costs. Plus, it forces companies to center recruitment in its business strategy.
“Consultants can help advise you, but this is something at the core of a company, and entrepreneurs need to internalize it,” Khosla says.
In practice, leaders who want to leverage a similar tactic must first identify a need on their team, then hire two to three people to address it, he says. With these new hires, the team will not only have the skills needed to effectively perform a job, but the dexterity to predict and solve for additional risks they came across in a past role. Leadership will also be spared from future headaches that come with hiring personnel to address a problem at a later stage.
“The company you build is the team you build, not the plan you build,” Khosla says. “Your plan is rather logically less relevant than the team you are building if you want to build a really large company… because once you hire a right, bold, big-thinking team, the team starts thinking big— and teams are much harder to change than the plan.”
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