Spend On Scarce Talent And Borrow The Rest

Spend your money on scarce talent, and borrow the rest. Scarce Talent: the most transformational talent a business can acquire that propels it to greatness.

Traditional Talent: important team players that perform a critical, but common craft necessary to build the business.

We prefer entrepreneurial teams that are comprised of truly scarce talent. It’s our preferred investment because it's easier to surround a founding team with traditional talent then scarce talent. Scarce talent is not readily available or easy to acquire. However, it's the most important talent because it's truly transformational. Here are a few characteristics we consider to be scarce. The entrepreneur:

  1. Has a significant industry network that leads either to an unfair distribution advantage or an unfair asset advantage (e.g.: the accumulation of inventory or information assets)

  2. Has a deep domain insight into a sophisticated industry with a strong point of view on how to monetize the insight

  3. Has truly elite talent at the one craft that is most critical to make the business work. (Important: elite and very good are not the same, elite is the top 1%, there are not that many of them.)

Early stage businesses already borrow talent. Two common examples are legal talent and accounting talent. Generally, it is easier and less costly to borrow this talent until the company is big enough to require it full-time. When a founding team decides to borrow legal or financial talent, the implicit question they ask themselves is, "Does my business require this talent full-time?" The answer is nearly rhetorical, "no."

However, I believe there’s subtlety in the question and a deeper understanding of the subtlety gives the founding team more options. The real question they’re asking is: “Does my business require this talent full time, now?” The challenge they’re facing when answering this question is to properly define “now.”

In the earliest stages of significant new product development or brand creation, a company frequently encounters a spike in the need for traditional talent resources. This spike is simply the temporary increased need for talent that does not have a long-term home in the company. It is critical that the leadership team recognize these scenarios in advance because, in the long run, the cost of borrowing traditional talent is far less than staffing up too far ahead of the curve.

Here’s an additional collection of talent I believe early stage businesses can borrow for a period of time. Important to note, traditional talent does not mean untalented, it simply means more readily available.

  • Developers

  • Brand designers

  • Project managers

  • Product designers

This may seem obvious, but the general makeup of most early stage technology businesses is very similar. They perceive the need to overweight the team with software developers and focus on getting code to market. In certain cases, this is likely to be the right call. However, in other situations, it’s a suboptimal solution. There are other ways to get code to market. Borrow the talent. There’s lots of industry momentum at the moment to value “design” and to have a “great designer” on the team. In certain businesses, it probably makes sense to have designers on board full time (it made sense for Thinktiv), in other situations; it’s simply not the right call. There are other ways to build a great UX or brand for a business. They are often more cost-effective and more impactful.

We encourage the leaders within our companies to ask themselves the question, “does my business require this talent full time, now, and am I acquiring traditional or scarce talent?” We spend time focused on the ‘now’ portion of the question, because that’s where the challenge lies. Borrowing talent typically costs a bit more per unit of work than hiring that talent full time (overseas outsourcing can be an exception) and there may be intellectual experience that's lost when borrowed talent leaves. We spend time focused on the 'scarce' portion of the question because it's important to correctly identify whether or not your need is related to a spike in the need for traditional talent. If you hire traditional talent to solve a resource spike, you risk a financially bloated, unaligned team that can be difficult to manage and impossible to build a culture around.

What's worse, you'll be using precious dollars on traditional talent when you could be spending them on scarce talent that radically transforms your business.