Got 990 free hours?

Not likely. Yet that’s how long it takes the typical startup to hire 12 engineers. Even if you spread your hiring over the course of a year, you’ll need to spend more than 19 hours a week recruiting candidates to hit that target.

A shortage of engineers is the biggest challenge facing Silicon Valley startups today. Hiring is what enables you to execute your product roadmap. So falling behind on recruiting is a competitive issue.

Yet many fast-growing startups resist hiring a recruiter. It makes sense to rely on your network of contacts for the first handful of developers. But at Sequoia, we think that once you have product-market fit, the risk to your business is too great not to have someone dedicated to staffing.

Recruiting Calculator

We put together this calculator to help you plan your recruiting efforts. In particular, it highlights two variables that have the biggest impact on the time it takes to build a team: your referral percentage and your ability to close candidates.

How Many Engineers?

To figure out how many engineers you need to hire, start by breaking down your development plan into its component parts and estimating how long each chunk will take to build.

Estimating this baseline poorly usually isn't a mortal wound, but share your development plan with a mentor and get feedback on how your hiring goals match up.

Your plan should be based on what a human can accomplish, not some super engineer. But you should still resist hiring just to fill slots and hold out for strong, adaptable people.

--Bill Coughran

Start by entering the number of engineers you’re looking to hire and how many months you have to meet this goal. Then enter the percentage of your hires that typically come from referrals and the percentage of candidates who typically accept your offers. If you don’t know these, start tracking.The tool will calculate how many hours you’ll spend recruiting and shepherding candidates through the hiring process.

Finally, the calculator will suggest how many full-time recruiters it will take to meet your hiring goal. A seasoned recruiter at a company with a lot of resources can directly source and hire about 30 engineers a year. For reasons we'll outline below, the number climbs to 70 if candidates come from referrals.

Hiring Funnel

The recruiting process starts when someone hears about your company. For the Googles, Facebooks and Twitters of the world this isn’t a problem. And not surprisingly, these companies are flooded with inbound applications.

For a lesser-known company an impression is harder to come by. A well-placed news story, conference talk, or blog post can raise awareness. But building a pipeline of candidates requires brute force.

To find one new engineer, you need to scour LinkedIn, GitHub and your employees’ networks to identify 100 people who appear to have the right skills. Then you need to craft emails that show the recipient why your company is a good fit and take time to follow up. Depending on the company, it could make sense to have the founder, CEO, or head of engineering send that first email.

For each 100 impressions, around 10 people will be interested and open to a job change. You’ll then have a phone call or meet for coffee to discuss your company and the person’s background and figure out whether there’s a fit.

Some of these people will say no after that first conversation, so you’ll likely be left with around seven candidates who’ve heard your pitch and are interested in moving forward. These are the people you’ll give an engineering screen to and bring in for interviews. This is the part of the hiring process most people are familiar with: You interview; you like some people more than others; you spend a lot of time with a few candidates who look like exceptional fits.

Eventually you’ll emerge with a number-one prospect. You’ll need to work hard to get this person to accept your offer or else you’ll need to start the process all over again with the next 100 prospects.

Value of Referrals

Referrals allow you to skip the impression and engagement stages of recruiting—the candidate’s contact at your company did that for you.

Increasing your referral percentage is the single most important thing you can do to grow your team. A company that hires 20% of its engineers from referrals will spend more than 1,200 hours adding 12 engineers. The same company with an 80% referral percentage will spend about 750 hours.

A healthy referral percentage is between 40% and 60%. If yours is less than that you likely aren’t doing enough to encourage referrals, or worse, your employees can’t recommend your company to their friends. It’s also possible you’ve exhausted your networks, but in most cases companies don’t push enough to find this limit.

Companies with high referral percentages tend to make a big effort to get them. They tend to make hiring a top company goal, providing regular updates at all-hands meetings.

Some companies go further. Dropbox, for instance, built an app to manage referrals. Employees enter a candidate into the system and can track the hiring process. When you refer someone, being able to follow the process makes a big difference. Also, a fast hiring process is always important, but especially with referrals. Nothing kills referrals faster than letting people languish in the interview queue.

Don’t become too dependent on referrals. If your referral rate is above 60%, you likely have a hard time hiring people who don’t already know someone at your company. This can work for a while, but overtime you’ll tap out your network, limiting your ability to grow. Also, it will likely make it harder to hire into new areas or start new departments.

Giving multiple small thank-you gifts when referrals are made generally does more to encourage referrals than a single, large gift when someone is hired. Reward the referral behavior and eventually the hires will come.

Don’t just sit around and wait for employees to recommend friends. A referral program should be a systemized way to get leads. Sit with employees and make lists of the best people from their previous jobs, colleges and peer networks. These leads are just as valuable as the name of a friend who is looking for a job.

Take time to court and get to know the people on your referral list. Even if they don’t join, they can and will be advocates for your company.

Use Signing Bonuses

Most startups don’t like signing bonuses. The idea of paying people for contributions they haven’t yet made doesn’t fit the startup culture where individual and collective effort holds the promise of outsized future rewards.

But judicious use of this tool can help smaller companies close hires who might otherwise join a larger, deeper-pocketed rival--with the added bonuses of actually saving money over the long term and keeping the existing corporate salary structure in place.

Read more →

Close, Close, Close

If you decide to make an offer to someone, make sure your candidate accepts. The cost of getting through the funnel and losing your candidate is just too high, doubling the amount of time a search takes if there isn’t a viable alternative in your pool of finalists.

You should aim to close between 60% and 75% of the people you make an offer to and attempt to improve over time. If you’re below this percentage, learn why. There may be something about your company that potential hires don’t like or you aren’t doing a good job matching candidates against what your company has to offer.

Giving people the opportunity to disqualify themselves early in the process will save you time and effort in the long run. Always ask and set expectations for salary, work hours, benefits and equity before you make an offer.

Closing starts the first time you contact a prospective hire. Remember, taking a new job is an emotional decision as much as it is a rational one. Moving someone through the process quickly can make him or her feel wanted and leave less time for doubt to creep in.

Hiring Recruiters

Doing this all yourself is tough. That’s where recruiters come in.

In our experience, there’s a real benefit to bringing someone in house, even if you don’t think there’s enough recruiting work to justify a full-time position. A recruiter who works for your company is likely to be a better advocate for you.

Recruiters come with different backgrounds and levels of seniority. If you have a low referral percentage, you’ll need someone more experienced who can spend time identifying candidates and building a pipeline. If you have a high referral percentage, your recruiter will spend more time shepherding candidates through the hiring process, which means you can hire someone more junior.

In both cases, you want someone who cares deeply about the candidates’ experience interacting with your organization and who can be a champion of your company’s culture and product.

While the calculator was designed with engineering hires in mind, the same principles apply to other hires. Expect to spend more time recruiting for some specialties, such as mobile, UI/UX and security.

As a general rule, for every three recruiters you’ll need one coordinator; you’ll need a recruiting manager when your recruiting department reaches six people. (Your manager may be able to double as a recruiter.)

We made several assumptions when we built the calculator. You can see those, along with all the formulas, in this spreadsheet, which factors in things like non-engineering hires and attrition. Also, check out the "hiring" section of Grove for more team-building advice.

Recruiting is hard work. We hope that the calculator can make it clear just how much effort really is required to build a team and that it prompts you to think about hiring as methodically and creatively as you do your product. Good luck and happy recruiting.