The Competition for Talent

A key advantage for recruiting Web3 talent is the excitement of the industry. For many potential candidates, they were not a part of the Web1 or even Web2. Web3 is a chance to be a part of a transformative event in tech history.

Next, there is much work to be done. There will need to be new innovations. And not just for software and systems. There will also need to be a rethinking of business models and go-to-market strategies.

Finally, there is the allure of making substantial amounts of money. Granted, there are still plenty of people who are idealistic and want to change the world. But there are probably many more that are driven by the potential for striking it rich.

Yet there are some issues to keep in mind. The reality is that there are not many experienced blockchain and crypto developers. A study by Electric Capital estimates the number at only about 18,000.⁵ For those working in Web3, it’s under 5,000. By comparison, there are over 16 million developers that use JavaScript.

Given the demand in the Web3 industry, there will certainly be much more growth in the number of qualified developers. But it will take time to increase the numbers. The underlying concepts of Web3 can be difficult. There will even need to be some un-learning of traditional development concepts.

Given all this, there should be no surprise that compensation packages for Web3 and crypto talent have skyrocketed. For example, at Coinbase, a senior protocol engineer makes an average of $362,000 a year and the pay for an infrastructure engineer is $672,550.⁶ This is at roughly the 75th percentile of the pay ranges for similar tech companies.

However, having the right message is just a minimum. You will likely need to raise venture capital or get the support of an incubator or accelerator program. If you cannot pay competitive salaries, you will have a tough time putting together the right team.

In fact, when it comes to job ads for Web3 companies, you might want to mention the general funding history. This will help build more confidence in the company.

OK then, so now let’s take a look at the various roles for a Web3 team.

Developer Advocate

For Web3 infrastructure and tools categories, there is often the use of open-source software. This allows for leveraging innovation, but also for providing wider distribution of the technology.

The Developer Advocate will have a rare blend of technical and soft skills. This person should understand a computer language like Rust, Solidity, or C++. There should also be experience using platforms for creating smart contracts.

Even though a Developer Advocate will likely have a technical background, they will not spend any of their time coding. There will simply not be enough time. Rather, the duties will often include interacting with the company’s developers as well as the engineering teams.

Community Manager

Whether a startup is focused on infrastructure or applications, there is usually a need to build a strong community. In the early stages, you want to make sure you can connect with early adopters. They will generally be more engaged with your software. They will also provide useful feedback and tell other users about your company.

While a community manager does not have to be a programmer, they should have a high-level understanding of blockchain and crypto. A startup may also want to provide some training.

The main qualifications for a community manager include good communication skills – and yes, passion for the product and industry. This person will also need thick skin. Communities can sometimes get unruly and harsh. A good community manager will know how to keep their cool.

Creativity is also important. For example, a community manager can help come up with engaging memes. These can certainly be a good way to attract and retain users. Or a community manager can help create promos, contests, and giveaways.

Something else: A key role for the community manager is education. Let’s face it, users do not want to be “sold” to. They want to get value. What’s more, when it comes to new users, they will have lots of questions about Web3.

General Counsel

For entrepreneurs, it can be tempting to not focus much on legal and compliance. This is often just red tape that can hinder growth, right? To some extent, this is true. There are definitely examples where avoiding the legal niceties has paid off. Just look at cases like Uber and Airbnb. They were largely able to thrive because their services were in legal gray areas.

But Web3 is different. Because it usually deals with tokens – which have monetary values – there are legal landmines. For example, a government agency could shut down a startup.

This is why there needs to be a good legal foundation – and this should begin in the early phases of a startup. If anything, some of the highly successful startups in crypto took this approach.

This is not to imply you need to hire a full-time lawyer. This is probably too much for a startup. Rather, a more common approach is to have a lawyer on retainer.

You also want an attorney that is licensed by a state bar. You can also do a background check at lawyers.com and by contacting the local bar association.

Finance or Accounting Manager

A finance or accounting manager is crucial for a startup. Because of the new business models, there needs to be a system to manage the transactions.

This person does not have to be a full-time employee. Instead, you could bring on a contractor or hire an accounting firm.

For these functions, you may want a couple people. The reason is to avoid conflicts of interest. After all, if there is only one person involved, there may be a temptation to embezzle funds.

You should focus on those candidates that are Certified Public Accountants (CPAs). They have gone through extensive education on all the core aspects of accounting. They also will have audit experience.

It’s true that a CPA may not have an extensive background with blockchain and Web3. But then again, they should be able to learn about the key topics. The CPA will also help with other non-Web3 aspects, such as invoicing, working with ERP (Enterprise Resource Planning) programs, general accounting, and so on.

Front-end Developer

A front-end developer focuses on the UI of a website or mobile app. In terms of skillsets, they usually are a blend of design and scripting. For example, a front-end developer will need to know HTML, CSS, and JavaScript.

It’s critical that this person have a good sense of the user experience. This is especially important in Web3 since the concepts can be complicated or new. This means that the front-end developer will spend lots of time about where to place messages and buttons. There may also be the use of animations. What’s more, the UI must work on multiple form factors, whether a tablet, smartphone, or desktop screen.

Here's how a job ad from Alchemy describes the role of a front-end developer: “You will help delight blockchain developers with sleek interfaces and intuitive visualizations that make their lives easier. Your work will be the first thing users see and will define the blockchain development experience for developers and enterprises globally.”¹¹

Having a background in blockchain is definitely helpful. But a front-end developer does not need to be an expert in this technology or even know languages like Solidity. Rather, this person will have a background in various front-end libraries and frameworks like React, GraphQL, Angular, Bootstrap, and VueJS. It is also helpful to have some experience with database and cloud platforms like AWS. Finally, it is great if the developer has a background in putting in production apps that have large user bases.

Backend Developer

The backend developer focuses on the server-side of an application. This often means using or writing APIs. These will often integrate with the front-end of the application. Because of this, there is usually much coordination between front-end and backend developers.

The backend developer will certainly need a solid background with programming. Often this will mean having a computer science degree. Although, a candidate may show that they have taken various online courses and have received certifications for them. In terms of the languages to understand, the common ones include C, Java, Python, Golang, C++, Rust, and .Net.

Backend developers will usually need a good understanding of how to work on hosted cloud services, such as from Amazon, Microsoft, or Google. Then there will be a need to know about databases. This could be a traditional relational database, such as from Oracle, or a NonSQL version. In fact, a backend developer can be helpful in providing feedback on what types of databases make more sense for the startup’s use cases.

A good backend developer will provide clear documentation. This is absolutely critical. Let’s face it, there will usually be a group of backend developers. So, they all need to be in sync. But there will be ongoing hirings and you want to make sure that these developers can get up to speed as fast as possible.

Blockchain or Smart Contract Engineer

Early in the startup, you will likely need engineers who understand blockchain and smart contracts. Often this means there must be experience with Ethereum and the Solidity language.

The engineer will create the protocols for the smart contracts and help provide for a solid architecture. There will also need to be a focus on providing security as well as optimization of the performance. As noted in Chapter 3, platforms like Ethereum have problems with scale. An engineer can help deal with this, such as by evaluating and selecting third-part systems.

Security Engineer

In building the Web3 application or platform, you need to have a well-thought-out security infrastructure. Trust is vitally important. If there is a breach, then the startup could easily fizzle out.

Consider a job ad from Web3 startup Dapper Labs. The title was a “Senior API Engineer – Security Hardening, Bots, Scalability” and here was some of the description: “We are open to awesome engineers across a variety of specialties but in particular would love to talk to engineers with consumer API hardening and protection experience. The Top Shot and Dapper APIs are constantly being bombarded by increasingly sophisticated bots and fraudsters. The ideal candidates for this role have worked on high-value targets before – e-commerce gateways, web poker, crypto – and know what to expect.”¹²

In terms of the experience of a Web3 security engineer, the candidate should have a background with applied cryptography and blockchain. But there should also be a good understanding of security for web authentication and protecting data. Finally, there should be knowledge about distributed systems and microservices.

Recruiting

For a startup, there probably will not be an in-house recruiter. Instead, this may be outsourced to an agency. This can still be expensive, though.

As a result, a company will still need to do its own recruiting as well. And often this is for the founders and executives. This will demonstrate to the candidates the importance of getting the best talent. For example, for the executive leadership team, the myriad of speaking engagements, conferences, and meetups can be great opportunities to find strong candidates.

Although, a startup might want to hire a recruiting assistant or HR person. They can handle the administrative details, such as tracking the candidates, documenting the interviews, and doing the screening. They can also help with the sourcing. This could mean using resources like LinkedIn.

It’s also never too early to think about a company’s culture, which is very important for recruiting. Here’s how Coinbase looks at its own: “There are a few things we look for across all hires we make at Coinbase, regardless of role or team. First, we look for candidates who will thrive in a culture like ours, where we default to trust, embrace feedback, and disrupt ourselves. Second, we expect all employees to commit to our mission-focused approach to our work. Finally, we seek people who are excited to learn about and live crypto, because those are the folks who enjoy the intense moments in our sprint and recharge work culture.”¹³

There’s a saying in the tech world that “the next five hires are the most important when starting a company.” This is certainly spot on. The reason is that this is where the culture will be formed. During this stage, you need to have a good sense of the vision of the company. If not, this could make it difficult to have a unified team that scales.

Given the dynamic changes with Web3, it can be difficult to get a sense of what the goals should be. There is always a temptation to evolve with the changes.

But ultimately, you want to take a long-term approach. What will be needed for the next ten years?

Again, Coinbase is a good example of this. The founder and CEO, Brian Armstrong, started the company in 2012. He became part of the YCombinator program and raised $150,000. At the time, he split with his partner because they disagreed about the vision of the company.

Armstrong was a firm believer in blockchain and bitcoin. However, he realized that it was too complicated for many people. So he wanted to create a marketplace that made it easier for anyone to buy and sell Bitcoin. He also aimed to create a system that focused on compliance. Armstrong thought this would be key to building trust.

Interestingly enough, there were many people who thought his idea was terrible.

But Armstrong persisted and he convinced many employees, investors, and customers about his vision.

Fast-forward to today. Armstrong is one of the wealthiest persons in the world, with a net worth of over $6 billion. As for Coinbase, it is a clear leader in the crypto world.

According to Roger Lee, a venture capitalist in Battery Ventures and an early investor in Coinbase: “The key lesson is to think long-term. Coinbase could have taken a bunch of short-cuts in building out their solution—for example, ignoring and minimizing compliance, regulations and so on. But they chose the long game and are accruing huge value as a result.”¹⁴

Recruiting Best Practices

Recruiting is certainly challenging. A person’s resume might look standout. But the person could still turn out to be the wrong match for the venture. Often this is when there is a clash with the company culture.

Even a few bad hires can be problematic. It could slow the growth of a company. It can also encourage other top employees to leave.

So how can you be a better recruiter? Well, there are some best practices. But it’s also important to keep in mind that success is often about practice.

Before you recruit, though, there are some preliminaries. First of all, you need to put together clear-cut requirements for what you are looking for. True, this may seem basic. But then again, it’s common for the requirements to be vague and this can mean attracting and selecting the wrong candidates. Make sure to spend time on what you are looking for.

Next, you should look at ways to improve the message and vision for the company. You want to make the opportunity as exciting as possible.

You also need to come up with goals and metrics to track the performance of the hiring process. This will not be very exact, especially in the early stages. But you still need to come up with some benchmarks – and you can change these over time.

With Web3 recruiting, you will probably have difficulties in finding people with relevant experience. The reason is that many of the technologies are fairly new. If you have a job ad that says you are looking for a Solidity programmer that has ten years’ experience, you will probably be laughed at.

“Recruiting is one of the toughest parts of any tech startup,” said Denis Mars, who is the CEO and founder of Proxy. “But it’s even tougher for new categories. So, what I look for are those candidates who want to solve hard problems. And yes, there are many problems to be solved with Web3.”¹⁵

He points out the example of Google, which has hired tens of thousands of talented engineers. “The company was solving a tough problem – that is, searching effectively all the information on the Internet,” he said. “It was very interesting to computer science PhDs.”

Mars looks for candidates that have completed their own independent projects. One example was a developer who used Bluetooth technology that allowed for peer-to-peer communication. In other words, it was able to do this without the need for Internet access.

Another popular way to gauge the skills of a developer is to setup a code challenge. Although, make sure to have a reasonable deadline and focus on a certain element of Web3.

In some cases, a startup will use pair programming. This is a code challenge, but two developers will work on it. You want to get a sense of the collaboration and communications skills.

With the limited supply of tech talent, you have little choice but to look outside the United States. Because of this, many Web3 companies are remote-first organizations or fully remote.

Although, this does not mean there should be no contact. For example, you can set up events to bring people together. There can also be periodic meetings where all the company’s team members meet up.

Then what about sourcing talent? As mentioned earlier, LinkedIn is a good option. It definitely helps that you get a resume and listing of projects.

You should spend time creating a compelling career page. It should not just be a listing of the jobs either. Instead, provide the vision for the company and the values. You should also have photos and videos of the team.

Compensation

The high compensation levels in the tech industry are certainly a major barrier. But startups do have some advantages. In fact, with a Web3 company, there may be the opportunity to provide crypto tokens as part of the salary. Such digital coins can ultimately be worth significant amounts of money. However, there can be complex tax issues. We’ll cover this topic in the last chapter of this book.

Next, equity is another way to attract top-notch talent. Some of the early crypto companies like Coinbase have minted many millionaires.

With options, you can provide a strong incentive for employees to stay on board. This is done by using vesting. This means an employee must remain as a part of the company for a certain period of time to get the equity or stock option.

A common approach is to have vesting for four to five years. For example, suppose you hire a hotshot developer and grant a stock option for 20,000 shares. If the vesting is for four years, the employee will earn 5,000 shares each year.

But suppose that an employee leaves after two years. In this case, they can exercise – or purchase – 10,000 shares. But they will forfeit the remaining 10,000 shares of the option.

Now, in some cases, the option grant may backfire. This happens when there is a huge surge in the valuation of the company. Thus, an employee may do minimal work in order to keep vesting the options. This is often referred to as VIP or vesting in peace.

Yet it can be extremely difficult to avoid this problem. The good news is that – for many high-performance people – they will strive to do great work.

For the types of equity compensation, there are two main categories. One is the employee stock option. This gives you the right to buy a fixed number of shares at a fixed price for a period of time.

Let’s take an example. Suppose you hire someone and grant an option for 5,000 shares. At the time, the stock price of your startup is $2 a share. This will also be the exercise price for the option or what the employee will pay for the shares.

Suppose that your startup does extremely well, and the stock price goes to $20 a share after two years. The employee has vested 2,000 shares. They can purchase all of these for a total of $4,000 or $2 multiplied by 2,000. In other words, the employee will have a gain of $16,000.

The next type of equity offering is the restricted stock grant. This means that you issue the shares to the employee but there is vesting.

Let’s continue with our prior example. Instead of granting an option for 2,000 shares, you make a restricted grant for the same number of shares. But to get the value of these, the employee will have a two-year vesting schedule. Using our example, in two years, your startup will transfer ownership of the 2,000 shares to the employee.

But there is a potential problem. The taxes could be at the ordinary rate, not the favorable capital gains rate (which has a maximum of 20%). But there is a way to deal with this: the 83b-1 election.

This is how it works. When you get the restricted stock grant, you will pay for the shares. In our example, you will write a check for $2,000. Then you will send a simple document to the IRS within 30 days. Also, if you miss this deadline, there is no recourse.

OK then, so how much equity should you allocate? There is no clear-cut answer for this. But the first step is to set up an option pool. This is a percentage of the company’s equity that is for the granting of options or restricted stock. This can range from 5% to 25% of the outstanding shares.

In the early days of a startup, the equity allocations can be significant. For example, the first few nonfounding employees may get 1% of the outstanding shares. Then the next ten or twenty may receive 0.50% and so on.

However, there are certain employees where you will grant ever larger allocations – regardless of the stage of the startup. Note that it is not uncommon for a CEO to get 5% to 10% of the outstanding shares.

Finally, when it comes to putting together an option plan, you should seek the assistance of a qualified attorney. This is something that you want to make sure that is done correctly. You do not want to be in a position where your company falls out of compliance or you have to pay an unexpected tax bill.

Reskilling

Since many of your developers may not have deep experience with Web3 or blockchain, you will have to look at ways to educate your team. There are different bootcamps that can be a big help. There are also online education platforms like Coursera, PluralSight, and Udemy that have useful and affordable courses.

But there are still many gaps. Because of this, your startup may have to put together some of its own courses. True, this will take time. But the long-term impact is likely to be very positive. Besides, you can focus on those areas that have the most impact for the success of your venture.

You can also set up programs to allow your experienced developers to be mentors. This can be rewarding for everyone. It can also allow for faster learning.

Conclusion

In this chapter, we looked at the key team members for a typical Web3 startup. They include community managers, legal experts, front-end developers, backend developers, financial managers, and so on.

Finding this talent is no easy feat and the compensation is not cheap. And this is likely to last for many years. But there are ways to help with recruiting. You can leverage equity compensation and perhaps the use of tokens. You should also have a compelling vision that attracts top talent.

The reality is that recruiting is a must-have priority for startups. It’s also something that should be hands-on with the founders and executives.

Even when you hire developers, you will probably need to provide training. While there are good education programs, you might need to come up with your own courses.

Being a remote organization is probably the right option too. Finding talent often means looking overseas.

As for the next chapter, we will take a look at DAOs or Decentralized Autonomous Organizations, which provide the governance for Web3 platforms.