To plan hiring against the money you raised, start from the date you need to begin your next raise, set a runway floor you will not go below at that date, and work backward to how many people you can afford and when. Price every hire at its fully loaded cost, not its salary, and sequence hires so the ones that prove the next milestone come first. Then write down, before you need it, what you will cut if the next round slips.
Key takeaways
- Budget each hire at roughly 1.25 to 1.4 times base salary once payroll taxes, benefits, tools and recruiting are included.
- Pick a runway floor, for example nine months of cash left on the day you start fundraising, and test every hiring plan against it.
- Sequence hires by which milestone they unlock for the next round, not by which gap feels most painful today.
- Tie later hires to triggers (revenue, a signed customer, a shipped product) instead of calendar dates.
- Decide your cut list in advance, while the decision is calm, so a slipped round becomes a plan you execute instead of a crisis you improvise.
Why hiring is the decision that sets your runway
At most early-stage companies, people are 60% to 80% of spend. Every hire you make is a monthly commitment that runs until the next round closes, and unlike a software contract, you cannot cancel it without real cost to the team.
The market makes that commitment heavier than it looks. Crunchbase reported that North American venture funding rose 50% year over year in the third quarter while deal counts fell 16%, with the drop concentrated in seed and early-stage rounds (Crunchbase News). A record number of companies raised a first round this year, and by one PitchBook-based count the median seed check slipped to about $3.0 million even as the median seed pre-money valuation rose (SaaStr). More companies are chasing fewer follow-on rounds with smaller seed checks to get there. The cushion between "hired the team" and "out of money" is thinner than founders often assume.
The hiring market is also not as loose as it was a year ago. Employers added 165,000 jobs in October, and average hourly earnings were up 3.1% over the prior twelve months (Bureau of Labor Statistics). Good people still cost real money, and they still take time to find.
Start with fully loaded cost, not salary
The most common mistake I see in early hiring plans is a spreadsheet with salaries and nothing else. Salary is the largest piece, but it is not the whole cost. For a US employee, add:
- Employer payroll taxes. Social Security, Medicare and unemployment taxes typically add 7% to 9% of salary, depending on the state and the salary level.
- Benefits. Health insurance is the big one. The average total premium for employer family coverage reached $28,303 this year, up 5%, outpacing wage growth, with workers paying $7,471 of it on average (KFF). That leaves the employer carrying roughly $20,000 per covered family. Single coverage costs much less, so your blend depends on your team.
- Tools and equipment. A laptop, software seats and a share of shared tools. Often $4,000 to $8,000 a year per person.
- Recruiting. Agency fees commonly run 20% to 25% of first-year salary. Even without an agency, job posts and the hours your team spends interviewing are real.
- Ramp time. A new engineer or salesperson rarely produces at full speed for two to four months. You pay full cost during that time.
Put together, a fully loaded hire usually costs 1.25 to 1.4 times base salary in the first year. A $170,000 engineer is closer to $220,000. If your plan has ten hires priced at salary, it is understating burn by the cost of two or three more people.
The hiring plan vs. capital calculator does this math for each role and shows how each start date moves your burn.
Set a runway floor and work backward
Runway is not a single number. The number that matters is how much runway you have on the day you start your next raise. Raises routinely take four to six months from first meeting to cash in the bank, and longer when the market is selective. If you start with four months of cash, you are negotiating with a deadline your investors can see.
I suggest a simple rule: plan so that, on the date you expect to start fundraising, you still have at least nine months of cash at the burn rate you will have then. Some founders use twelve. The exact number matters less than writing it down and testing every version of the hiring plan against it.
Working backward looks like this:
- Pick the date you expect to start your next raise, based on the milestone you need to show.
- Multiply the burn you expect at that date by your floor (say nine months). That is the cash you must still have.
- Subtract it from the cash you have today. What is left is your spending budget between now and then.
- Fit your hires, in order, into that budget at their fully loaded cost and start dates.
If the hires do not fit, the answer is not to lower the floor. It is to reorder, delay or drop hires.
A worked example
Here is an illustrative seed company. Say it has $4.0 million in the bank after its round, six people, and a net burn of $120,000 a month. To keep the math simple, ignore revenue growth; a real model would net it in. The founders want to start the Series A raise in twelve months and plan six hires, each about $15,000 a month fully loaded.
Plan A: hire on the calendar. Two hires in month 1, two in month 4, two in month 7. Burn goes to $150,000, then $180,000, then $210,000. Over twelve months the company spends about $2.25 million and has $1.75 million left. At $210,000 a month, that is about 8.3 months of runway on the day the raise starts. Below the floor.
Plan B: hire on triggers. Two hires in month 1 (the ones that unlock the core milestone), one in month 4, one in month 8, and the last two only when annual recurring revenue crosses an agreed threshold. If the trigger is not hit before the raise, burn reaches $180,000 a month by month 8. Over twelve months the company spends about $2.01 million and has $1.99 million left, about 11 months of runway at the start of the raise. Above the floor.
Plan B is not timid. It still adds four people in a year. It just makes the fifth and sixth hires earn their place with evidence. If revenue grows faster than planned, those hires happen early and the investors see a company that hires into demand. If it does not, the company enters its raise with time to spare instead of a countdown.
You can run both plans side by side in the runway and burn modeler and see the zero-cash date move as you shift start dates.
Sequence hires by the milestone they unlock
The next round will be priced on a short list of things: revenue and growth, retention, a product that works, and a team that can scale it. Every hire should map to one of those.
A useful test for each role: if this person is great, what will be different in the data room nine months from now? If the answer is clear (a second sales rep should add a predictable amount of pipeline; a senior engineer should ship the feature that blocks enterprise deals), the hire belongs early. If the answer is vague ("we need more help on operations"), it belongs later, or as a contractor first.
Some patterns that hold up well:
- Hire the people who touch revenue or the core product before the people who manage them.
- Use contractors or fractional help for functions you need part-time, such as finance, recruiting or design, until the workload is steady.
- Avoid hiring two senior people in the same function in the same quarter. If the first one is wrong, you have doubled the cost of finding out.
- Document every offer, equity grant and vesting term cleanly as you go. A recent law firm note on early-stage portfolios makes the same point: sloppy hiring and equity paperwork becomes a diligence problem later (Morgan Lewis).
What to cut if the next round slips
Write the cut list now, while it is a planning exercise. Order it from least painful to most painful:
- Unfilled roles. Pause open requisitions first. This is the cheapest cut because no one loses a job.
- Non-people spend. Software you do not use, events, agencies, office space you have outgrown or not grown into.
- Founder and executive pay. A temporary reduction, with a clear end date, signals seriousness to the team and to investors.
- Contractors. Reduce or end contracts before touching employees.
- Headcount. If you need to reduce the team, do it once, deeply enough that you do not have to do it twice.
Next to each step, write the monthly savings and the runway it buys. Then set a trigger: "If we do not have a term sheet by month 16, we execute steps 1 to 3." Share the plan with your lead investor. If you later need a bridge, the same Morgan Lewis note makes a point worth taking seriously: a bridge should fund achievable progress, not postpone a demand or execution problem. A written cut list is evidence you know the difference.
The lasting point
A hiring plan is a runway plan in disguise. Price every person at what they really cost, decide how much runway you must have when the next raise begins, and let evidence, not the calendar, pull the later hires forward. Founders who do this rarely have to make a panicked cut, and when the round takes longer than planned, they have options instead of a deadline.
Frequently asked questions
How much does an employee really cost a startup?
In the first year, a fully loaded hire usually costs 1.25 to 1.4 times base salary. That covers employer payroll taxes, health and other benefits, equipment and software, and recruiting. A $170,000 engineer is closer to $220,000 once those are included.
How much runway should I have when I start raising my next round?
A practical floor is nine months of cash at your burn rate on the day you start fundraising, and some founders use twelve. Raises often take four to six months, so starting with less leaves you negotiating against a visible deadline.
Which hires should a seed-stage startup make first?
Hire first for the roles that directly unlock the milestone your next round will be priced on, usually revenue, retention or a core product capability. Managers and part-time functions can come later or start as contractors and fractional help.
What should I cut first if my fundraise is delayed?
Start with unfilled roles and non-people spend, then temporary founder and executive pay reductions, then contractors. If you must reduce headcount, do it once and deeply enough that you do not need a second round of cuts.
Should hires be tied to dates or milestones?
Tie the first few critical hires to dates, and tie later hires to triggers such as a revenue threshold or a signed customer. That way hiring speeds up when the business is working and slows down automatically when it is not.
Sources
- More Money, Fewer Checks: These 3 Charts Show The Divide Behind VC's Record Funding Year
- A Record 8,625 Startups Raised Their First Venture Round This Year. Smaller VCs Now Have to Find Founders Before They Found Anything.
- The Employment Situation, October 2026
- Workers Now Pay $7,471 on Average Annually for Family Health Coverage, Up 9% or $621 from 2025, Benchmark Employer Health Benefits Survey Finds
- Managing Early-Stage Portfolio Investments for Sustainable Growth