Guest Post – Team, the most important ingredient in a startup

Ask any investor or successful entrepreneur, and they will reiterate that the most important factor in a start-up is the quality of its founding team. A team is more important than the idea or the size of the market or the technology or the business case, or indeed any other factor that investors will review to check the investment-worthiness of a venture.

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Even if  – the product is great; the technology is cutting-edge; the market is large and the company has a strong chance to be a dominant player in that large market – investors will hesitate to invest in the venture if they do not get the confidence that the founding team can deliver in the market.

What investors seek is a team that is passionate about the subject, is enthusiastic about the opportunity, has a good grasp on the dynamics of ‘business’ and not just the product/service, and who can demonstrate commitment to fight it out in the market.

While it is good to have experience in the domain, that is not a must, as that will exclude a number of bright people who either do not have work experience or are from a different domain than the concept they are pursuing. However, what is important is that even without experience in the sector, the team should have studied the sector enough to understand it very well. In fact, that is also why passion and interest in the sector is critical, because that makes it easier for a person to study the sector well.

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How do you do team appraisals in a startup?

The way of assessing a person’s value to a team is quite different in a startup than in a post-startup stage company. 

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In a startup, having absolutely the right people in the initial stages is critical. Because a startup will always be starved for resources, there is just no room for laggards or those who do not fit in with the vision and approach of the rest of the founding team. (And by founding team, I do not mean just the founders, but also initial team members, most or some of them will be with some sort of ESOP’s package).

In a startup, founders have to take adequate and more care to ensure that the person is just right for the ‘Organization’.. not just for the role. Here’s why…

In a startup, there is uncertainty about various aspects, including the product sometimes… but most certainly there is uncertainty about pricing, target customers, value proposition/positioning, target markets, business model, etc. Hence, there is no point in hiring just for a very tightly defined role. Ideally, find people who are willing to adjust to the requirements of the startup. Hence, suggestion number 1: Hire for attitude and willingness to adapt, with passion & commitment to the cause/concept/domain.

A person who is passionate, dynamic and a team player will eventually slip into a role that will be most required of him/her to deliver on. I have known people who thought they would do sales in startups, eventually fit beautifully into managing operations.

When you are doing ‘appraisals’ of the founding team, the best way to do it is to do it through regular, honest, transparent and candid conversations. There is no point in doing a numbers-based evaluation in a startup. Instead, assess if the person is enjoying the environment, assess if he/she is contributing to the startup in some way or the other (in some cases, there may not be much for the person to deliver on at the current stage.. .e.g. if you had hired a sales person but if the product development is delayed by a quarter or two, what does the person do?).

As long as the person is contributing to the team in some way, the person should be considered a valuable resource. E.g. in some cases, the person may be needed just because he/she gets a business perspective or even because he/she keeps the spirits high in the office or because he/she brings to the table the maturity that helps sort out issues between squabbling teams.

A good way to do an appraisal is to share the broad vision with the team, clearly identify milestones, define roles and then have a monday morning meeting where each person speaks for 2-3 minutes about what is happening on his/her goals and milestones. (Remember, in most startups the milestones will NOT be met as planned… but as long as the direction and pace is ok, milestones should not be a serious concern).

In the Monday morning meeting, discuss where things are not going well.. identify weak spots… and then get the entire team to support the person/team to overcome challenges.

If the situation does not improve and if the person is incapable of handling that role, but if he/she is attitudinally right, give him/her another role.. discuss with others. and see how you can ‘fit’ the person in.. do it ONLY if the person is attitudinally right and can be a contributor in someway at some later stage. Hunger to learn, inquisitiveness, passion, commitment are things that you should assess.

Importance of an advisory board

Creating a strong advisory board is one practical way of filling in the competencies gap that a startup may have.

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Most startups are resource-starved and hence not in a position to employ people for the various skill sets required for building the business. This often means that the entrepreneurs end up doing the thinking on the most critical aspects about the business EVEN IF THEY ARE NOT THE EXPERTS ON THAT PARTICULAR SUBJECT OR AREA OF ACTIVITY. E.g. a team of two founders with experience in technology and marketing respectively would also ATTEMPT to think on their own, perhaps with some amount of research and talking to experts, about areas like production, procurement, logistics, supply-chain, customer support, etc. Each of these is a specialized area and would require someone with years of experience to provide a perspective on the opportunities and challenges.

This is obviously not going to work in most cases. Think of it this way… If you were starting a cardiac care hospital, and because you are a startup and cannot afford a good surgeon, would you go ahead and operate on a patient if you were not a cardiac surgeon? Well, you won’t because that would be a dangerous thing to do!!! Exactly for the same reason, like cardiac surgery requires a surgeon with specialized expertise, different aspects of a business like supply chain, marketing, sales, technology, etc. should be ideally thought through by some folks with some experience in those areas.

Creating an advisory board allows the founders to get the brain-power, guidance and insights from senior function/domain experts, without having to actually hire senior resources to handle those functions. E.g. a startup may require some serious help on the supply-chain or sourcing side, which the founding team may lack. In such a scenario, getting someone with 15 – 20 years experience in the domain and skill-set as an advisory board member would work well for the startup.

This is a tool that is not used effectively in India, though you would observe many startups in places like Silicon Valley and Israel – the hotbeds of entrepreneurial activity – having strong advisory boards which help them think through their businesses.

 

Why would someone accept to be on the advisory board of a startup? Well, this is where the ability of the founders to sell the vision of the company comes in handy. Of course, you should have a large, aspirational vision to begin with. No one is going to be excited with someone trying to build a company which does not even aspire to be a market leader.

If you have a large vision and if you aspire for your company to have a large impact on that industry, and if you communicate that with passion, the right people would often consider being on the advisory board. If you come across as THE team which can do it well, many of the people you approach for an advisory board position would not want to take the risk of turning you down as they may regret later in case you become super successful. Because if you become super successful, they would like to have the bragging rights to say that they were an advisor to your company.

Of course, it is good to compensate the advisory board members with some equity as you are not likely to have the resources to remunerate them monetarily.