Today’s blog is the 7th in a 10 part series on the Entrepreneurial Puzzle. Today’s installment is about the TEAM that you select for your venture.
For the first blog in the series on the IDEA, click HERE. To read part 6 on ENCOURAGEMENT, click HERE.
So you’ve had an idea and you have vetted that idea with market research. Those are the first two steps in the process of building a successful new venture. This is true both within a corporate environment (a “skunk works”) or in a startup.
You’ve written a plan and put together a 10/20/30 powerpoint that would make Guy Kawasaki proud. You are determined to succeed, no matter what risks you face. You are ready with your risk mitigation plan.
You have a strong group of people that have your back and will support you through thick and thin (hopefully including someone who is supporting you financially until you get to cash flow positive).
You are ready to get started and have done absolutely everything that you can do on your own. You have defined the kind of culture that you want to have and the values on which you will build your business. For an example of how to articulate these values, see Solutionz Values. As you build your team, you will want them to support those values and build on your desired culture.
Once that is done, it’s time to build your dream team.
|Sequoia Capital believes that it
predict a startup’s success
potential based on the
quality of the first
10 to 12 hires.
The fact of the matter is that the characteristics of a real dream team are quite different from what you might have been led to believe.
It is a well known fact that both angels and VCs invest in “A” teams. So for my first entrepreneurial venture, when it was time to go out and raise money beyond the initial $2m seed round that allowed us to build the product, I went for what I thought of as the classic dream team – pedigree and brand names.
On our road trip to raise additional
money, more than once, potential investors commented that I had indeed
put together the quintessential dream team.
The leadership team that my seed investor and I hired were highly experienced and very talented. Their credentials were impeccable. They were enthusiastic about the product/idea. Their expertise and skills complemented mine. So far so good.
But here are the three things that I learned about building a leadership team in an early stage venture:
1. An entrepreneurial bent is an absolute must to qualify as an “A” team player in a startup
If you have never had to use your Master Card to pay your Visa and that paycheck has always magically landed in your bank account on payday, you may not be well suited to handle the funding uncertainties of a startup.
It is unnerving to not know where the money is coming from to pay the development company you have selected, or to know how you will meet payroll once you start paying your core team, especially when it means that paying them may mean that you don’t get paid yourself.
And once you have funding, justifying the ongoing spending needs before revenue begins to flow is akin to asking daddy to give you money for what you need next week and then having to justify why your allowance is gone and why you need more.
These things are often what separate those who succeed in early stage ventures from those who end up returning to the [relative] safety of a corporate job.
That is not to say that corporate executives can’t make the leap to an entrepreneurial venture, with me as a case in point. But the fact was that I never fit as a corporate executive and it wasn’t until much later that I realized that I was an entrepreneur at heart. There are many talented individuals that fit in this same description.
But the majority of those that have succeeded right out of a corporate executive position have generally had a large pot of their own money from successful IPOs or have had investors that believed in them (and the team that they could assemble) at the outset of their venture.
Alternatively, they have the luxury of having a spouse with a great job, that affords them being able to work for a period of time without a salary or are able to fund their passions with another revenue stream (savings, consulting, etc.).
Knowing each person’s personal risk tolerance is essential before bringing them onto your team.
2. Great team chemistry and experience working together is also an essential element of success
It goes without saying that you need to make certain that you have all of the pieces of the puzzle covered from a skill and experience perspective. Everyone (including the founder) should be doing what they love and do well and what energizes them. They should be managing those things that they may do well, but they hate (or it drains them).
But chemistry doesn’t mean just having complementary skills and liking one another. Investors look for teams that have worked together before.
I didn’t understand the importance of this one and opted for name recognition instead. Each of my leadership team had individual track records that were very impressive, but it only took investors a few minutes to recognize that they didn’t have the experience together.
That experience is a critical element during the tough times that invariably come in a new venture. If you haven’t fought (and made up) with a leadership team member, you may not really know them.
3. Authentic, passionate founders are a talent
magnet for the best workers and growth capital
One of the things that I am gifted with is vision and passion and an ability to draw in talent to stand with me as I pursue my dreams. In this particular venture, I was also able to raise a total of $7m, with $2m committed before we brought on the leadership team.
My core team and my initial partner for this particular venture had been with me in my consulting firm and had worked together on various projects for nearly a decade. They were there from the very beginning of the idea and many had worked without pay for the better part of a year, believing that their reward would come with our success. In the first six months of the venture they researched the market, defined the product and helped to secure our launch client, a prominent Online Travel Agency.
They were the best and they emitted the same
missionary zeal I did for solving our market’s burning pain
points. They weren’t just joining a cool startup in the hope of making lots of
money, but they believed in the vision.
But I knew my own limitations and brought in a COO/President as my first hire. This was a great move, as I am very strategically minded and needed someone who could focus on execution and delivery of the concept to the market and I selected someone that I had great confidence in to take that role.
Our second hire was a CMO, who was able to tell our story in a compelling manner and put together the launch plan to carry our story to the marketplace.
I then decided that in order to raise the amount of money needed (a total of $10m), that I should bring in a more powerful CEO that would give investors the confidence that he/she could take the company to the next level.
The problem was that it was too soon and we hadn’t even launched the product yet, achieving the first level in business – proof of concept.
So no matter how competent and experienced that individual was, in my zeal to bring in the balance of the funding needed to succeed long term, I simply stepped aside too soon.
Timing is everything and the fact is that nothing or no one matches the founder’s vision and passion. Nothing matches the founder’s authenticity and their depth of belief in the idea.
There is a time for a founder to step aside, but recognize that stepping aside too soon can actually increase the business’ risk of failure.
One of the best tools that I have found to help figure out what you need and when is Mary Lippitt’s Leadership Spectrum Profile. She has both a book, which you should read, and she has a tool that you can utilize to test the people that you are considering bringing into your venture.
It looks at the six priorities in business and the various stages in the business life cycle and how these priorities apply. I am an inventor and a catalyst in an early stage business and when involved in a mature business (such as when I consult), I am definitely a challenger. And as you have probably surmised, I need to hire people that fulfill the “developer, performer and protector” roles, as they are not my natural business priorities.
The bottom line is that you need to have objective criteria when you build your team. In addition to measurement tools like the Leadership Spectrum, this is also where your business advisors (the encouragers) come in.
Make sure you have people that you both trust and LISTEN to. If you have a board of directors, make sure it includes more than just your investor.
If they tell you that you are being impulsive, listen. If they tell you that the person might not be the best fit, listen. If they tell you to slow down or speed up, listen.
Timing is everything and of course, hiring right also takes money.
Tomorrow we will talk about investment and the ways to fund your vision.