Hiring only "essential" employees is often not a very intelligent strategy, if you have the funding to hire more aggressively and the opportunities to use the employees productivity.
I kind of disagree with this. I've seen many startups make poor hiring mistakes that eroded culture, slowed development, and added layers of management that were unnecessary. All of the hires, of course, were made based on the theory that the employees could be productive to the organization.
I've never once seen a company with a good hiring strategy for acquiring employees before actually needing them that worked. The fact that Digg has 60 employees is absurd. What in the hell does eBay do with 13,500 employees? A 4-person startup could rebuild all essential parts of eBay in six months.
Startups have shown over and over again that you can make great use of technology with very few people. As people are added to the team, especially in engineering departments, productivity starts to slow. There is a ton of overhead in integration, teaching and building company processes, and management.
I'm not so sure that you could replicate eBay (or Digg) with four people. I do agree that it's harder to maintain culture as you get bigger - but that's the whole point of management.
We're trying to build a tiny little mini-eBay in a tiny little niche market, and it's taking us fucking forever to do stuff. The issue is that it's really hard to determine what's essential - and to get a new seller (and we don't ask people to leave eBay; we just want them to add Dawdle as a venue), we have to be better than eBay on all those things that particular user feels is essential.
That's why Mixx, despite being a nicer community, with all sorts of bells and whistles, and links on lots of major sites, isn't taking off (http://siteanalytics.compete.com/mixx.com+digg.com/?metric=u...). There's a certain je ne sais quoi about a site that determines what makes it "essential" - and it usually isn't feature equivalence.
It's hard to filter things to their essential features, but that ability is kind of what defines a good entrepreneur.
Building those essential things-- those things people absolutely need to use your service (and maybe to differentiate it)-- and then iterating upwards is the key. In six months, I think you could replicate the majority of eBay's functionality with four people.
The things you're discussing are mostly user acquisition problems. That problem is not solved by hiring more engineers.
You might decompose burn rate into a core that is rather fixed (a few employees that you have to have, an office space, substantial hosting or other commercial machinery) and an incremental component that increases with projects undertaken.
As an investor, one may wish for several related ideas to be explored concurrently with the hope that one sticks. As an investor, one may also desire that the business be prepared for aggressive sales when their idea (hopefully) finally goes big. Go hard or go home, so to speak.
I'm not arguing for or against these mindsets, just that if there was not common value in staffing large and fast, VC rounds would be structured like trust funds, not lottery payouts.
Well, I'm obviously not arguing you should hire indiscriminately. I just think that asking "will the employee be essential to the existence of the company?" is the wrong test for deciding whether to hire someone.
Employees are toxic.
That is over-simplified to the point of being almost content-free. Beyond a certain point, adding more engineers to a team obviously decreases total productivity (per MMM); that's not to say that there's no value in, say, adding new sales engineers to support new customer engagements, or adding new employees to kick-start an entirely new project.
I wouldn't pretend to be able to tell you what eBay does with 13,500 employees. But four? I would bet they retain more than four people purely for the handling of account disputes.
If you want to get eBay down to four people, you might have a startup auction site, but you won't have anything resembling eBay (for better or worse).
Generally speaking, that's a fair statement. But when a whole bunch of companies suddenly do layoffs you have to ask yourself if it's just another fad. They're not all running out of money at the same moment that the press is going hogwild with "the Valley is melting!" stories.
