Potential versus experience: how outlier companies hire

Yet, many founders fall into the trap of prioritizing experience too much at the expense of potential, especially when building their core teams in the early days. This approach can lead to high turnover and missed opportunities for long-term growth. The ability to spot potential is something we specifically look to identify in founders because it gives them access to the widest potential talent pool, giving them a competitive edge - I’ve seen this ability in every founder I’ve worked with who has created a multibillion-dollar outcome.

In this piece, we will outline our thinking on why focusing on potential is transformative for startups and how to implement this strategy effectively.

Time-stretched founders often gravitate towards candidates with impressive CVs, thinking that prestigious experience will solve their immediate problems. However, for a startup, adaptability and future capacity are as, if not more, valuable than a roster of impressive job titles, especially in key roles that work with founders directly.

Experience will always be a part of the equation in hiring decisions - although when doing this, it's good to be careful in your assessment of that experience. Look carefully at what was an achievement on the part of the individual, and the extent to which it evidences achievement above their role. 

Potential goes so much further. It encompasses an individual's ability to grow, adapt, and envision solutions even beyond the current scope of the business. Unlike experience, which is backwards-looking and diminishing in the long run, potential is forward-facing — exactly what a rapidly evolving startup needs. 

Other traits and signs of potential include resourcefulness, following through with tasks, and emotional intelligence. Individuals with potential are often open to being coached and to feedback - they are hungry to learn and improve, without ego.

In early-stage companies, positions are fluid and constantly evolving. The person you hire today needs to be capable of handling responsibilities that may not even exist yet. They will also need to work on things that will not scale, but will be crucial for the company in the short term. Employees with high potential thrive in this environment. As they gain energy from growth opportunities and a strong sense of autonomy and ownership, they stay in the company longer. 

Conversely, highly experienced candidates might struggle with the flexibility required, though this is not always the case. When these profiles do struggle, that often stems from fixed thinking about pricing or contracts or being too wedded to one specific tool or app in their work, which can be a sign they’re not comfortable trying new tools. Fixed mindsets about processes, tools, or industry norms can hinder innovation and adaptability — the very qualities that startups need to succeed.

You will always need a combination of technical abilities (operating experience, product knowledge, team management experience) but these skills are relatively easy to validate. It is unlikely that your HR team, or the interviewing panel, will judge these incorrectly. That means that your effort as a founder should be focused on identifying potential. 

Founders often think they are hiring for potential, when in fact they have a laundry list of different specific skills that they want their hires to have right away. When you don’t have someone who checks all the boxes, optimizing for potential might open up a wider pool of talent. 

Founders must also be aware that assessing potential also requires a different approach than evaluating experience. Here are some strategies that we have found work:

1. Use targeted interview questions and case studies to gauge how candidates handle uncertainty and setbacks, especially if they haven’t worked in a startup before.
   
   
2. It’s also important to look for signs of excellence in their background. If they played chess, were they not just part of the robotics club, but leading the team to competition? Really interrogate what they have achieved. For example, real evidence that they have delivered above their named level in a previous role is a good signal. A prestigious job title at a big-name company, or achievements ascribed to their team, on their own, are not. 
   
   
3. Implement skills-based tests that assess learning ability rather than existing knowledge. Revolut, for example, sent out tasks to even non-technical leaders that required them to use SQL. The test filtered out people who weren’t willing to learn a new skill or brush up on rusty skills. The key here was to ascertain if people were willing to learn and stay open, even if they didn’t successfully complete the task.
   
   
4. Look for candidates who show genuine interest and thoughtfulness about your company, not just their own experience. This includes looking for candidates who immediately put themselves in your shoes — even referring to “we” when speaking about working with you in an interview. Potential shines through when a candidate is able to adjust their questions to the specific context of your business the more they learn and interact with you, or by coming highly prepared before the interview. 

It’s also important to look for signs of excellence in their background. A prestigious job title at a big-name company, or achievements ascribed to their team, on their own, are not good signals. When you are thinking about where to get this support, again it is important not to over-index on prestige. Look for help from those who are focused on, and have built real skill in, assessing people on the fundamentals and future potential.

Hiring for potential is just the first step. To truly benefit from this approach, you need to create an environment that nurtures and develops potential:

1. Assign "stretch tasks" that push employees beyond their comfort zones. An early-stage company’s bandwidth is always limited, but it’s not hard to find a task that is additive to the business and may take up 10%-20% of the employee’s time. If you detect talent in an individual in the course or after the completion of a stretch task, double down on that individual. 
   
   
2. Facilitate cross-departmental exposure to broaden skills and perspectives. For example, someone in marketing could be given a task that brings them into contact with sales. Set up both organic and planned opportunities for individuals from different teams to interact. This will also improve communication within the company, helping you avoid issues. 
   
   
3. Make sure that your high potential employees see the big picture. It is easy for people to get caught up in the micro-level - but it is vital everyone understands how their role and projects drive business success. High potential employees will thrive and grow when given the opportunity to work on high level tasks.
   
   
4. Be explicit about rewarding adaptability and flexibility in performance evaluations.
   
   
5. Don't shy away from promoting high-potential individuals, even if they're early in their careers.

High employee churn is a significant challenge for startups; according to Carta, nearly a quarter of 2022 hires left before even completing one year at the company. This turnover is costly — there is a financial cost, both to paying severance and rehiring. Team productivity takes a hit when there is turnover, and this kind of turmoil also affects team morale.

The stakes are even higher when this is a high-level role, such as one of the CEO’s direct reports. The outlier talent pool for roles like this is by definition small, and onboarding for a role like this can be quite lengthy. The CEO’s time - the scarcest resource - is taken up. You need to work to efficiently hire to meet your needs but rushing to do so, and failing to really interrogate potential, can risk damaging culture and generating high turnover. So even though it takes time today, you will reap the rewards in the near future.

Hiring for potential can dramatically reduce this churn. High-potential individuals are more likely to stay with a company that challenges them and offers growth opportunities. Moreover, they create a culture of adaptability and innovation that becomes self-reinforcing, attracting and retaining like-minded talent. These individuals become the glue that holds a highly loyal team together. High potential people find it easy to collaborate with and feel inspired by other high potential people even outside of their department. 

If you feel like the culture of your company has drifted, ask yourself if this is related to your strategy of hiring and promoting high potential people. High potential people work at their best with other high potential people - it creates an environment where everyone pushes themselves to achieve, and thrive.

While the importance of potential never diminishes, the balance between potential and experience may shift as your company grows. In larger organizations, hiring for potential becomes most critical for leadership roles, where adaptability and vision continue to drive company success.

At Bek, we've maintained our focus on potential even as we've grown beyond the startup phase. This approach has built a team capable of constant evolution, allowing us to stay ahead. This is also one of the reasons we at Bek were one of the first VCs to set up a talent function in Europe.

Our approach remains distinctive - specifically to help our portfolio founders focus on fundamental candidate assessment to recognize their potential. We support portfolio companies not only through our talent function but also through our board representation, where we strive to help founders ensure that their management team is made up of high potential people with the mindset to succeed in their role and grow their functions to scale the business.

By prioritizing potential in your hiring strategy, you're not just filling today's roles - you're building tomorrow's leaders. This forward-thinking approach can transform your startup's trajectory, creating a resilient, adaptable team ready to tackle whatever challenges lie ahead.