It’s 2003. I’m sitting in a conference room with Peter Thiel discussing the investment strategy for his hedge fund Clarium Capital. The conversation veers towards first principles, as a conversation with Peter will tend to do, and then Peter stands up and draws a diagram on the white board:
Peter argues that you can do well in the upper left quadrant – identifying the correct outcomes is paramount – but all true outliers are in the upper right. He emphasizes the need to be right and believe something most other people don’t. Conversely, the biggest disasters occur when a crowd all believes something to be true, driving up its price, and the belief turns out to be wrong.
Some things just stick with you. Fast forward 20 years, and the mental model depicted in the diagram above informs how we think about investing in people at PingPod. Peter was talking about investments in financial assets, but the framework equally applies to investing in a startup’s most important asset: its people.
In order to build a world-class team, a startup needs to convince talented people (the right people) to join at below market prices. A startup will never outbid Google for an engineer (if it does, its backers have likely given it too much funding). How, then, does a startup like PingPod attract top talent? We must identify talent that has yet to be discovered, or appeal to recognized talent on the basis of something beyond cash compensation. We actively cultivate relationships with the best of this talent over time, creating a foundation of trust that will allow us to act decisively when it comes time to hire.
Unrecognized talent is not obvious. Recruiters are not stalking these LinkedIn profiles. The applicant’s resume, without any context, is not sending a strong signal to the market.
There are generally two broad categories of unrecognized talent:
1) Young, hungry, unproven
2) Mature, non-standard background
Young, Hungry, Unproven
If we have two people of equal talent, one with real work experience and the other with no experience, the latter will command a lower price in the labor market, creating an opportunity for employers willing to take the risk. The payoff to betting on upside potential is the possibility of identifying the next superstar. But not all young talent is a good fit for a startup like PingPod, nor will a startup environment be appealing to all young talent. So what young talent do we look for specifically? How do we know when we have found them? And how do we convince them to join us?
We are looking for young talent that is both ambitious and entrepreneurial – someone who’d want to become a founder later in their career, who optimizes for maximum learning over padding their resume, and who’d consider receiving more responsibility a more desirable reward than receiving a raise.
We look for clear signs of a growth mindset and entrepreneurial tendencies in candidates. Candidates with a growth mindset are always learning and can’t hide their natural curiosity. They are not afraid to tackle new things and develop new skills or areas of knowledge. We look for clues in the questions they ask, the books they read, the podcasts they listen to, and how they spend their time outside of work. Candidates with an entrepreneurial bent usually try things early in life. They figured out a way to sell a product for more than it cost them to buy. They created something of value, and then tried to sell it. They built a website in their spare time. They pitch us a clever business idea when we meet them. We look for clues in how they talk about a business they admire.
What can we offer that is attractive to this type of young talent?
- A promise that competence will be rewarded with increasing levels of responsibility.
- An endless stream of interesting problems to solve.
- A culture that favors the best person for a project over the most qualified.
- Mentorship from team members who care about developing the next generation.
- Equity upside that will dwarf salary if the company is a success – upside that can put the individual in a position to take bigger risks earlier in their career.
The mature version of young and unproven is an individual with a non-standard background. This could be someone who has had success in another industry, and is pivoting. The skills they have developed may be relevant to PingPod, but not obviously so on paper. Or it could be someone who has yet to experience a big win. They might have experienced the entrepreneurial struggle, excelled at their role, and learned from being part of a failed venture. As most startups fail, being part of a failed venture should not necessarily reflect negatively on the individual.
Mature people with a non-standard background and entrepreneurial inclinations will seek out a startup like PingPod that publicly articulates its mission, culture, and the types of people it wants to attract. They are resourceful. They will have studied our business, used the product, and maybe even talked to customers. They know how to network. By the time they approach us, they have an idea for how they might help. We need goal-oriented problem solvers. What better way to demonstrate that ability than to donate time and energy to working on a project with us without expecting immediate compensation? If a candidate’s LinkedIn profile doesn’t tell the story, they must take matters into their own hands. Instead of asking for a job, they should demonstrate value. The best will make it impossible for us not to hire them.
If we can identify the best talent in this category, there are a host of added benefits beyond gaining top talent at a below-market price. Taking a non-obvious risk on somebody tends to foster loyalty. These hires are grateful to be on our team and highly motivated to learn and succeed. They have something to prove – and as a result, they tend to make up for lack of experience by outworking more credentialed candidates.
One unique example of mature, non-standard talent is service members from the Special Operations community looking to pivot to the business world. Within the Department of Defense (DoD), Special Operations stands apart as a fast-moving, adaptable organization whose ethos is surprisingly similar to entrepreneurship. Special Operators execute no-fail missions in high-stress, unpredictable environments, remaining calm in the face of adversity. On a Special Operations team, ideas and competence matter more than hierarchy. Above all – trust in your team members is paramount.
PingPod has been able to leverage some of this talent. We are fortunate to have Teddy Ritter, a former Major from Marine Special Operations, as a leader on our Operations team. He has worked his network to find two top notch Special Operations talents that will join us this summer through the Skill Bridge Program. This unique DoD program partners with companies to provide internships for military personnel transitioning from active duty to business. The DoD pays the salary of the candidates during the internship, creating a great win-win scenario for the candidate and the company. Other free programs to find transitioning talent from the Special Operations community include The Honor Foundation.
By investing some of our time to develop these candidates, we get a free look at top-notch talent, and they get valuable experience at a fast-growing startup.
While the key with unrecognized talent is willingness and ability to identify it, the key with recognized talent is to appeal to these candidates with rewards beyond cash compensation. We need to convince this talent to make what – superficially – might look like a contrarian career move.
So what can we offer?
- We offer a mission that matters: to make fun, healthy experiences accessible to everyone.
- We offer the chance to help bring about a future with more players, having more fun, on a path of continuous improvement through play.
- We offer meaningful, challenging work with great people.
- We offer a high degree of autonomy.
- We offer the opportunity to have a tangible impact on the direction of the company, and a seat at the table on big decisions.
- We offer the equity upside that comes from joining a startup at the earlier stages.
At PingPod, we think of a job offer as a tool that reveals a candidate’s preferences. As a startup, we won’t be competitive with offers from larger firms on cash compensation. The willingness of a recognized talent to make sacrifices to join our company reveals a long-term orientation and commitment to our mission. The candidate is actively choosing to join. We want them to choose our firm over other great options.
If the PingPod mission speaks to you and you recognize yourself in this blog post, we want to hear from you. Connect with me on LinkedIn to start a conversation!