Price’s Law Explained: Three Things Tech Founders Should Know
Congratulations—you’ve made your first five critical hires. This is a pivotal milestone in your journey as a founder, and it’s a testament to your ability to build a team with the skills, passion, and drive to bring your vision to life. But as your business grows and you prepare to hire the next 50, the stakes only get higher. Scaling is not just about filling seats; it’s about building a team that will define the future performance of your company.
That’s where Price’s Law becomes invaluable for guiding your hiring strategy. This principle reveals that 50% of the work in any system is done by the square root of the total number of participants. As your team grows, a small group will continue to drive the majority of results, making every hire more consequential.
Why a Conservative Approach to Hiring Pays Off
In the rush to scale, it’s easy to fall into the trap of hiring fast to meet immediate demands. But overhiring—especially without clear alignment to business priorities—can dilute productivity, strain your culture, and burn through your budget. Price’s Law reminds us that productivity doesn’t scale linearly: while your team grows, the core group driving results remains relatively small
Taking a conservative approach to hiring isn’t about being slow; it’s about being intentional. Thoughtful hiring ensures you bring on people who complement your existing team, align with your culture, and are capable of contributing to your company’s long-term success.
Three Things Tech Founders Should Know About Hiring and Scaling
1. The First 5 Hires Set the Foundation—The Next 50 Build the Tower
Your first hires are foundational—they set the tone for your company’s culture, work ethic, and values. But your next phase of hiring is even more critical. These employees will build the systems, manage the execution, and shape the future of your company’s performance.
Words of Wisdom:
Take the time to refine your hiring process. Look beyond technical skills and assess how each candidate will fit into your company’s long-term vision. Remember, a single bad hire in a small team can have outsized consequences.
2. Scaling Teams Doesn’t Mean Scaling Results
Price’s Law reveals that as your team grows, the majority of the work will still come from a small, high-performing group. If you hire too quickly or indiscriminately, you risk creating a bloated team where contributions become uneven and inefficiencies creep in.
Words of Wisdom:
Focus on building lean, agile teams that deliver results rather than hiring for headcount. It’s better to have 20 motivated, high-performing individuals than 50 who struggle with misaligned goals.
3. Hiring Is an Investment—Not a Race
Every hire you make impacts your company’s future. Hiring conservatively forces you to prioritize the roles that matter most and ensures you’re not overextending your resources. This approach also helps you maintain the culture that made your company successful in the first place.
Words of Wisdom:
Ask yourself: “Do I really need this hire today?” If the answer isn’t clear, wait. Hiring for immediate needs instead of anticipated ones will keep your team lean and focused. Companies like Basecamp and Stripe have famously maintained small, highly productive teams by hiring selectively and avoiding unnecessary growth.
Scaling Thoughtfully: The Path to Long-Term Success
As a founder, your ability to scale thoughtfully will define the trajectory of your business. Each new hire represents an opportunity to strengthen your team—or dilute it. By taking a conservative approach to hiring, you’re ensuring that every addition is intentional and adds long-term value.