This is how startup founders should go about hiring, according to VCs

This article is from two episodes of Matrix Moments by Matrix Partners India, a podcast featuring candid conversations on what it really takes to survive the startup world. This is heavily revised from the original show transcripts. For the full interviews, go here and here.

Hiring a strong team is one proven way to ensure startup success. But it’s also one of the biggest issues founders or CEOs face when building their organization.

In this episode, Matrix Partners India managing directors Tarun Davda and Vikram Vaidyanathan talk about “extreme referencing” and “extreme hiring,” respectively, for startups.

What does extreme referencing mean and why is it important?

Davda: The reality is that you actually don’t know what you’re getting yourself into when hiring talent. There are almost always surprises down the road, and that leads to frustration, loss of time, and loss of productivity. The stakes are even higher when you hire senior talent. In my experience, doing references for people that you are looking to invest in drastically reduces the chances of error.

The interview process generally reveals what are most commonly known as “extrinsics”: the person’s background, experience, education, projects, and challenges faced in the past. But there is very little that you can find out about their intrinsic capability: personality, key strengths, motivation, work ethics, and culture fit.

Moreover, one can fake a four- or six-hour interview, but it’s hard to fake the day-to-day output. So what we have seen is that speaking to a few people who have worked closely with the candidate tends to reveal a lot more than any interview can.

There is a saying that eventually you are the sum of the five people you hang out or work with. If that’s true, we believe that getting to those five people and learning about what they think of the candidate is paramount before founders or CEOs make a decision.

What are the top things to keep in mind when doing extreme referencing?

Davda: First, who you speak with is as important as what you ask. I almost always skip the references the candidate provides. Instead, I rely on my network to get to three to six people who have worked with the candidate directly and have had the chance to observe not only the hard skills but also the soft skills of that individual over a reasonable period of time. Only then can you get the real color of the candidate.

Second is how you ask is as important as what you ask.

Third, what the person doesn’t say is as important as what they say. Very often, reading between the lines tells us a lot more than what is just being said.

Fourth, how the person says it is as important as what the person says. One time, a reference had given me a positive feedback about a candidate. Two days later, I spoke to the same reference, but for a different candidate. He gave positive feedback too, but he was much more excited about the person I’m looking to hire this time. To me, that’s a huge difference.

How should a founder go about extreme hiring?

Vaidyanathan: It’s important to build this muscle early on both for the founder and the organization. I often ask founders what their number one problem is, and they say hiring. And then I ask, “How much time are you spending on hiring?” Some of them say they don’t have the time or they’re spending only 5% of their time.