SHOULD YOU HIRE A TOP EXECUTIVE EARLY ON?

Good or Not so good move?

A Fintech startup I admire, Brex raised their Series D few weeks ago & hired a Meta(Facebook) executive as part of their expansion strategy.

My friend, Ikeoffiah Pius asked my thoughts on the move & it got me thinking. On the surface, it looks like a good move, but is it? Is it feasible? What is the cost/effect on their business? How do you convince these guys to join? Even if they agree, does it make any business sense at the early stages of of the business? Say their seed round?

Here are some cons to the move:

1. It is expensive: So if you're trying to manage a $3M seed round or a lot less, you have to give up too much equity early on.

2. Giving out too much equity to people outside the founding team could disturb the team dynamics early on.

3. Many of these top/old executives don't have the energy/desire/motivation to start afresh from day one because they are mostly already rich. They are better at decision making, but not as good in the hustle part.

4. The hefty salaries you have pay top execs could influence your balance sheet & runway. If you're paying a top CFO $1.5M/year, then the CEO/COO/CTO/CMO/CGO have to earn $800K+ annually if not, you may not have a good working balance. Smaller runway= raising more money= more dilution. Not good for founders...and even investors.

On the positive side:

1. They make better decisions because they've likely experienced similar situations. Better decisions = better business.

2. You can generally raise at a higher valuation. Higher valuations = Less dilutions. It kinda balances out the hefty salaries on your balance sheet. But then, higher valuations means you have to have groundbreaking growth between then & your next funding round, else you're toast.

3. They have stronger connections with regulators, VCs, policy makers & other founders. If Iyin is your CEO, then you would probably navigate Emefiele & his brothers better.

4. Trust & media coverage. At the early stage, founders are trying to build trust with customers, investors & staff. If you have top execs on your cap table (as teammates or advisors), it's just generally easier to navigate the first days.

Summary:

1. I think it's a better move to hire top execs as founders. That way they are part of the hustle & building from day one. They would naturally have sufficient equity which will balance out the need to pay them $7/8 figures annually. But then, convincing them to join at that stage where things are uncertain is harder than getting a full scholarship at Havard. Good luck trying.

2. Better yet, you can bring them in later like Brex did in their last round. If you raise $750M at a $15B valuation for instance, you have the funds & leverage to hire nearly every executive in the world.

What are you thoughts?