One common challenge for founders building teams is a lack of resources. Can you afford the extra (or extra special) new team members?

But what if the opposite was equally tricky? What if you raised funds and went on a hiring spree only to regret it later?

Startups often hire in anticipation of demand, to match competitors, or because they think their challenges are manpower related.

In reality, hiring too quickly can cause problems

I've worked at 3 companies in tech, logistics, and education where funding (at least initially) was abundant. All 3 encountered problems with hiring too much too soon. Here's what happened and why founders should not rush headlong into hiring.

Problem #1: The business model may not be validated yet

If you haven't found product-market fit, splurging on a team for an imagined future is risky. At the education business, the owners had previously bought and optimized existing businesses. This time they were starting from scratch and failed to account for time to gain traction. The seasoned team they hired had too few customers to serve.

Problem #2: Employee morale can be negatively affected

When things are so quiet you can hear a pin drop, this cascades into office politics and "bullshit" make-work to justify existence. Eventually there's a "pivot" and a bunch of people are let go. Which begs the question - did you need to hire that aggressively in the first place?

Problem #3: The hiring may not be scalable

At some point, hiring to "throw people at a problem" is unsustainable. At both the tech and logistics companies, "high touch" with a mass market was the goal and customer service rep hiring grew in step with newly acquired users, to the moon in a not so good way. The whole point of scalability is to get more efficient.

All this doesn't mean that hiring and team building aren't critical. But don't expect new hires to solve more fundamental problems with your business.