A startup’s management team is its lifeblood… no amount of awesome ideas will ever overcome a fundamentally flawed management team. In the early stages of any startup, it is all about the people.
But what makes up a good team? How do you know if you have a good team, if you are a good team member, and if an investor will perceive you the way you perceive yourself?
Perhaps it is best to then approach this question from a different point of view…
A startup is fraught with challenges from day one. These include commercial, HR, and technical hurdles of all sorts, to name a few. These generally require a certain attitude and personality attributes from the founders for the startup to have a chance at surviving.
These personality attributes include a combination of confidence, stubbornness, individuality and a sense of self without arrogance, curiosity, humility, energy, maturity, and an eagerness to learn. I have found that founders that share many of these characteristics tend to fare better over the long run than those that do not share these.
While the above are just personality attributes of a likely ‘good’ founder, the equation is in fact far more complex. In addition to the above, I also believe you need to include the following variables as well when doing an analysis:
1) The technical or commercial competency (depending on their focus) of the founding team. This can either mean the founder(s) have the relevant experience from either having done a startup before (or the relevant role) or they have developed the appropriate skills necessary to execute on the stated vision of the company.
2) The ability to resolve conflicts quickly and constructively within a team. As most teams will likely hit road blocks when they can least afford them, an ability to either insert humor at the right time, or to divide a problem into parts, or know when to take a break, can all be really important skills to demonstrate the longer term likelihood of a team staying together and working well in spite of the inevitable conflicts that will arise. Although I have heard of some investors doing an artificial ‘stress test’ during investment reviews, it isn’t standard practice for you can usually tell just from spending time with a team, when a team may have potential internal personality issues.
3) Intuitively know when to persevere and when to quit (on anything). Some people just quit too early, others keep on going too long beyond the point when a strategy is the right one to use. Although harder to evaluate when meeting a founder or their team, this is an important attribute to have internally so as to use an investors time and money most optimally.
4) The team understands the assumptions and metrics about the market they wish to operate in, or have at least an understanding on how to research this information (the Lean ‘Build Measure Learn’ loop is a good example of a framework that is applied). An airplane pilot can fly an airplane through the dark and through really bad weather because he understand where he was, where he is going, and what he needs to be keeping an eye on the dashboard during the flight. Every great team I’ve ever met always understood the dynamics of their market well enough, knew what they needed to find out as part of what their startup was attempting to do, and knew how to measure it so as to know if they were going down the right ‘flight path’.
5) The team or founder can articulate their thoughts and plans. Communication both internally and externally is the most important thing to get right within an organization. It makes absolutely no sense if you have an awesome coder who can put out some amazing things if they are wrong because he didn’t get specificity from management or didn’t understand what he was supposed to be working on. Also, it is pointless if the founders of a company are awesome at building product, but then are entirely unable to communicate their vision to the outside world to both interest others to join their business and also to raise more capital.
6) Although defined as ‘working together to achieve a common goal’, I believe you could argue that collaboration can be summarized as a combination of both conflict resolution skills and communication skills. A team’s ability to collaborate both internally (with team members) and externally (with biz partners, investors, and the media), I believe, greatly increases the chances that they will succeed.
7) The geographical spread of a team is also something to be considered. This has mostly to do with the dynamics of working as a team. Yes, Skype has done marvels to revolutionize the way we communicate, but for the necessary ‘collision’ of ideas (borrowing from Steven Johnson’s book on Where Good Ideas Come From) to occur repeatedly, close physical proximity is an asset for any new team.
8) The equity spread between founders. Although generally speaking most founding teams have an equal equity spread (50/50, 33/33/33, etc) an investor will take note if there is an equity imbalance that makes for a key hire or co-founder to feel unmotivated.
So, when I meet a startup’s management team… aside from looking at the attributes I’ve listed above, I generally ask myself three questions:
- Does this team have the necessary experience it takes to deliver what they have set out to do? (Teams with technical founders are of particular interest to me).
- Does this team have the insight to identify their own weaknesses and hire good people to complement them?
- Can this team constructively deal with all the challenges that are and will occur during the life-cycle of a company?
Once I feel like I’ve been able to answer these questions while also keeping an eye out for the attributes I’ve listed above, then I feel comfortable in appending the arguably overly-simplified statement of “they have a good team” when speaking about a startup.
So, some parting thoughts and advice for anyone evaluating their own team in the context of forming a new startup or raising money:
- Get a co-founder that complements your skills
- Understand what skills you lack as a team and hire them
- Research the hell out of your market & understand your customers
- var stated_vision = (think_big) * 2; -> multiply your vision by two.
- Rehearse your pitch A LOT
- Don’t be arrogant, but also add some spice and humor to your presentation
John W. Mullins, PhD, Associate Professor of Management Practice, Marketing and Entrepreneurship at London Business School has kindly offered for download chapter 7 of his book titled The New Business Road Test.
In my experience, the more subjective a subject matter is, the better off you are by getting more opinions to ‘triangulate’ around a ‘right answer’. To that end, I asked some friends of mine what their thoughts were around this topic. I have included their thoughts below:
In my view, I look for three things:
(i) Leadership: a CEO who can articulate a vision that excites and imbues a sense of mission in his team is very important. This is often evidenced by the calibre of team he is able to recruit around him [when he has nothing else to offer].
(ii) Self Awareness:
a) Breadth: businesses need ‘flour to balance the yeast’. The great teams have a balanced breadth of expertise and experience, not just one hero.
b) Evolution: as a business grows, so the team must evolve. A willingness to embrace this change is critical.
(iii) Openness: We look for teams who are willing to consult and collaborate. We are not good passengers and we wish to work closely with and assist teams wherever possible.
”I look for founding teams with a balance of skills in the following three areas:
1) design / ux,
2) marketing / distribution and
However the skills are distributed amongst the founders, they need to be present. I don’t worry too much about traditonal management skills, other than the founder who is the CEO showing a desire to learn them.”
“When we look at very early start ups, there is not much to judge, but the story and how it is told. The delivery of the story is as important as its content. The founder(s) have to be credible. One of the issues is that technical founders are proud of their technical competence and tend to overdo it on tech and lose the perspective of the other side of the table, that is thinking “are these guys going to make me money?” That is the bottom line, but it is not a question you can ask directly. The first attempt to answer comes out of the observation of the team during the first hour of meeting (it then needs more time to confirm it, but if the first impression is negative, there is the end of the journey). Are they passionate? Competent? Ambitious? Do they come across as honest and dedicated? Is this “a project”, or is this the thing they will be doing 22 hours a day for the next years? how is the team dynamic? Do they complement each other or are their duplication of the same guy. Is there a decision making process, or is it one guy that decides. Do they argue against each other (bi no-no during the pitch) or they have built a good delivery of the pitch so that it shows maturity and collaboration. “
1) Balance: product, technology, market/commercial.
2) A Leader [in the team].
3) Good mutual respect for one another.
“Eden likes to invest in a team. That is NOT one founder who has hired a group of employees but still holds all the equity him/herself. To us, a team is a group of like-minded people who have come together to pursue a common vision. They are all ‘at risk’ in the opportunity and so are looking for significant wealth creation. They regard each other as ‘peers’ in the business and have comparable equity stakes.’
They have to be smart. And persistent. One good sign is where the team worked together before, it didn’t work out but here they are again on the next gig. Let’s call it ‘stickability’.
’It’s easy to build a team once you have raised money. We often hear that ‘the team will come once the money is in’. This is not what we are looking for – we are looking for a team that has been built on a common vision through the tough times of starting a company. Where the founders have got behind the opportunity, as a team, before the cash came in.’”
”Metrics, knowing your numbers cold, measuring everything. I’m all over that stuff. Seriously. Don’t know what’s going right or wrong if you’re not measuring it.”
“There are lots of “obvious” qualities which a founder/management team should have – they must know their market, they must me smart, they must be extremely dedicated etc. This has been said a million times already of course, but that doesn’t mean it’s wrong.
To pick one quality which is particularly important from our point of view, the founders need to be able to build a kick-ass product which solves a real problem. As early-stages investors we can and love to help in many areas like sales, marketing, hiring, financing etc., but the ability to create a great product with a clear product/market fit is something we believe needs to be in the founder team DNA.”
”I look for teams that innovate vs optimize.”
I recently wrote a blog post on understanding how an investor evaluates the vision of the founders.
- With Great Startups It’s All About The Execution (startupprofessionals.com)
- There Are Alternatives When Your Startup Falters (startupprofessionals.com)
- 8 Key Questions to Break Thru Entrepreneur Hype (startupprofessionals.com)
- How to Build a Stellar Team at a High-Potential Startup | Entrepreneur.com (bjconquest.com)
- A Deeper Look At Blackbox’s Data On Startup Failure And Its Top Cause: Premature Scaling [Infographic] (techcrunch.com)
- Marty Zwilling: You Built a Great Startup, But Can You Scale It? (huffingtonpost.com)
- Adult Supervision (startupcfo.ca)