| When investor group evaluates a start-up proposal, | | | | mentor is a stake advisor; these are mentors who |
| they report about 25% of the final decision is based | | | | place a small amount of funds in the company in |
| on the team. It is a good idea to look at the criteria | | | | exchange they promise to advice the company |
| used by investors, even if external funding isn't in the | | | | whenever they request it. |
| start-up's future plans. Investors have seen | | | | Customer Advisory Boards |
| thousands of start-ups flare up and flame out quickly, | | | | Customer advisory boards bring the end user into the |
| and they've seen the stellar successes that have | | | | team. This advisory method has been used to great |
| become household names. Investors look at a | | | | success; for example, Mexico's Grupo Reforma |
| start-up with an objective eye. They aren't | | | | newspaper uses citizen editors and community |
| emotionally attached to the company or the product | | | | boards in the "ultra-local" concept. This approach |
| concept. | | | | allows newspapers to be embedded in communities. |
| A team is an organized group of people working | | | | The newspaper has created 12-14 editorial boards, |
| together to achieve a goal. Many of today's hi-tech | | | | corresponding to every section of the newspaper. |
| products are so complex that no one person is | | | | The community board terms are for one year, and |
| capable of understanding every aspect of the | | | | these boards guide the issues and stories covered by |
| product or how to successfully bring the product to | | | | the sections. |
| market. The success or failure of a start-up hinges | | | | Myths and Common Mistakes |
| upon the team assembled. Having the right | | | | A START-UP OF ONE. The slogan "Army of One" |
| combination of people at the right time is the key to | | | | didn't work for the military, and it doesn't work for |
| success. A start-up team can be more than the | | | | investors either. A team is not one person. No one |
| founders and the employees; it is also the corporate | | | | can do it alone. Investors are willing to help you build |
| advisory board members, mentors, and customer | | | | a start-up team, but not the whole team needed to |
| advisory board. | | | | move the start-up forward. Investors don't want to |
| The Founders and the Start-up Team | | | | invest in one person shows. If the founder can't |
| Why is the founding team so important? At the | | | | convince other people to join in the company, why |
| beginning, there is nothing but an idea. Investors are | | | | should the investor believe the founder could |
| funding a team and a belief that they can do what | | | | convince customers to buy the product? A start-up |
| they say they can do. Not only does everyone need | | | | needs to demonstrate the diversity of roles needed |
| to perform a diverse range of functions, they all | | | | to make a company successful and appreciation for |
| need to work in concert with each other to achieve | | | | those other necessary skills. |
| the end goal. | | | | RIGHT PEOPLE AT THE WRONG TIME. Hiring a great |
| People hire people like themselves. if the founding | | | | experienced person at the wrong time during the |
| team isn't a good team, it not likely to get better. | | | | corporation's life cycle is a misstep. You shouldn't hire |
| Three roles are the most important roles to fill. The | | | | an experienced senior executive from a large, |
| chief technologist leads the product development | | | | established company for a seed stage start-up. |
| effort. The chief marketing person leads the effort | | | | Often, the executive's best skills are making |
| to understand the customer, promote awareness for | | | | incremental process improvements, driving efficiency |
| the product, and figure out how to make money | | | | into an organization, and expanding an established |
| with the product. The visionary has the ability to | | | | market presence. They are often like fish out of |
| influence the skeptics among the customers, market, | | | | water in a start-up - trying to build a team, a |
| and investors. In the early stages, the marketing | | | | product, and market presence from nothing. |
| person may be the same person as the visionary, | | | | THE LOPSIDED ORGANIZATION. A recipe for failure |
| but this eventually diverges as the workload | | | | is when the founders build a lopsided team, heavily |
| increases. | | | | weighted to one specific function, and neglect other |
| Experience is of the utmost importance when there | | | | functions. Often, this mistake occurs because |
| is only one person to perform a job function in a | | | | founders stick with what they know best and |
| start-up. Never confuse the number of years | | | | trivialize the importance of the other functions in |
| someone has worked with years of experience. A | | | | making the company successful. Some technical |
| candidate may have worked for 15 years, but that | | | | founders believe "if you build it, they will come." |
| does not necessarily imply that they can perform at | | | | Unfortunately, they often learn the hard way that |
| a level beyond someone with only a few years of | | | | products don't sell themselves. Sales founders believe |
| experience. Credibility is based upon accomplishments, | | | | "if engineering can build it, we can sell it." Sales people |
| not years worked. Whoever is on the team will come | | | | can be eternally optimistic and can often be heard |
| under scrutiny by investors, and sometimes also | | | | saying, "If only the product were ready, I could have |
| partners and customers. Investors always ask who is | | | | closed a multi-million dollar deal today." Then when the |
| the team, why they are on the team, what role each | | | | product is complete, the deals don't materialize. |
| is playing, what they've worked on in the past, and | | | | Marketing founders believe "it is technically impossible |
| most importantly, what they accomplished in previous | | | | not to develop the product." What they mean by |
| positions. Because of the small size of a start-up, | | | | impossible is they believe product development is a |
| employees may participate in many aspects of the | | | | short and easy task. |
| business. | | | | A TEAM IS NOT A COLLECTION. A team is not a |
| Management and leadership is another area where | | | | random group of individuals who simply are willing to |
| there can be shortcomings in the team. Just because | | | | work on the project. This may seem obvious, but it |
| someone has years of experience performing a | | | | is amazing how many times a group of disparate |
| specific skill does not mean they can lead a team. Nor | | | | people form a start-up with no rhyme or reason as |
| does giving someone a managerial title make the | | | | to what roles they play within the organization or |
| team follow that person's direction. Start-ups thrive | | | | whether their skill sets even make sense. Every |
| with experienced staff members. Seasoned | | | | team member serves a purpose and should have an |
| employees will not follow someone's lead without | | | | area of expertise and a focused job function. Often, |
| believing in the task and the direction in which the | | | | this means a team member performs a needed job |
| project is going. Start-ups need to attract and build | | | | function and not necessarily what he wants to do. |
| small, highly effective, performance oriented teams. | | | | THE LOW COST EMPLOYEE. If you only have a lone |
| Advisory Boards and Mentor Capital | | | | attorney, human resources, finance, or marketing |
| Advisory boards can fill in the gaps with the direct | | | | person, it's crucial they know what to do and how to |
| team. Mostly, they advise the company on | | | | do it without any help. When there is only one |
| management or technology issues. Many investors | | | | inexperienced person in a job function, many |
| believe an advisory board should be less than six | | | | mistakes happen and cost the company valuable |
| people. These are usually term board members | | | | time. Even though this is a low cost employee for |
| because who is needed to advise a start-up today is | | | | the job function, it's better to hire a part-time or |
| not necessarily who will be needed in the future. In | | | | interim person through an outside firm. |
| order for an advisory board to be effective, the | | | | BOARD MEMBERS FOR FUTURE POTENTIAL. While |
| start-up needs to keep in regular contact with the | | | | some advisors may also be investors, it is not |
| board members. This contact can be through email | | | | recommended that an advisor be placed on the |
| updates and monthly lunches to discuss what's going | | | | board because of a potential future investment, |
| on with the company. It doesn't have to be a formal | | | | particularly if the advisor represents a venture capital |
| board meeting. These advisors will implicitly act as | | | | firm. If the venture capitalist doesn't take a stake in |
| references for the start-up with potential investors | | | | the next funding round, then other investors may |
| because investors will contact them to find out what | | | | shy away from the company because the obvious |
| they think. | | | | question will be why this board member didn't invest. |
| Mentors are people you can go to for advice or who | | | | OVER EXTENDED BOARD MEMBERS. One |
| will act as sounding boards, but they don't want to | | | | consideration for naming someone to an advisory |
| formalize a relationship with the start-up. Start-ups | | | | board is whether they have enough time to devote |
| can have informational meetings with venture | | | | to your project. If a potential advisor is already |
| capitalists to get feedback about their proposals | | | | guiding 12 or more companies, he/she probably |
| without asking for funding. Likewise, start-ups can | | | | doesn't have the time to take on another and be an |
| have meetings with executives of companies to | | | | effective advisor. |
| discuss various aspects of their business proposal. | | | | A hi-tech start-up team is an entrepreneur team |
| Many times, there are similarities between businesses | | | | embarking upon a high risk adventure. To be |
| in different industries, and a start-up may want to | | | | successful at all, regardless of whether it's the next |
| transfer a methodology from a seemingly unrelated | | | | multi-billion dollar company or just a few million, means |
| business. A mentor may not want to commit a | | | | you've won against extraordinary odds. The team is |
| certain amount of time to the start-up, but is willing | | | | one of the top reasons for success. Choose it wisely. |
| to be an advisor on a casual basis. Another form of | | | | |