Starting a company is no joke. Somewhere around 90% of all new companies fail, so it is important to do whatever you can to start yours in the most successful manner. For this article, we’re going to explain why building the right team will not only increase your chances for success, but also make your current and future ventures far more successful.
Elements of the Team
Every startup is different, so figuring out which elements you’ll need is going to be a unique experience in each company; however, there are many similarities from company to company which we will discuss here.
CEO Type – This is a person who is incredibly organized and knows the corporate world. He or she will need to be able to conduct meetings, meet the right people, be the face of the company, and build a strong team. No company can succeed without someone in this position, and the best companies will have the best CEOs. A good CEO is a people person and a power networker. It is his job to find out the missing components of a company and fill them. It is also his job to work with company service providers like the lawyer, business coach, and advisory boards.
Design Type – Most companies will need someone who can design a great product. In the product or advertising centered world, this person is crucial. In the service world, many times this position is contracted out unless there is a lot of design work to do. The design person cannot be overlooked though because the design of a product is typically the first impression the bulk of consumers shall have with a product, even business to business products.
The Scientist – This is the person who actually built the product. Many times, he or she is a patent holder who wants to build a company around a patent. For online startups, this is the computer scientist who is building the website and functionality of the site. In service industries, he or she shall be the service provider or creator of a new line of service. Regardless of type of company, the functionality is crucial and he or she will have to work closely with the other members of the team to build their company the way the members choose. Many times, this person will be the same as the CEO, especially when it is a first time startup. This isn’t necessarily a bad thing, but there is a lot of learning to be done. (I know several first time entrepreneurs in this boat.) If the scientist isn’t the CEO, this is the relationship with the most friction.
Marketer – This task can be contracted out, but having in-house marketing can be a huge value-added bonus. The reason for this is you’ll get dedicated branding, PR and advertising in exchange for equity in the company, and marketers have a comparative advantage to doing the marketing far beyond any other position in the company. I would strongly recommend not having someone unfamiliar with the field of marketing try to cover this position because it will end up diluting or harming your company’s brand. Often, startups don’t realize the importance of brand until it is too late. Your brand is your first impression to your consumers so it is a vital consideration at all times.
“I’d rather have 1% of something than 100% of nothing”
It’s a quote commonly heard in startups and a must-have understanding if you’re ever going to get an investor. There are a lot of entrepreneurs out there who are completely unwilling to give up any sort of equity in the companies they start. For that reason, they typically fail. Having two people on the team increases the odds of success substantially more than double, and building the right team is even better.
If there’s nearly 100% chance of failing alone, it should be obvious that building the right team is the way to go, but how do you do it?
You start with an idea, as typically ever startup does. From that idea, you have to sit down as the CEO or first find a CEO who wants to help and discover every skillset you’ll need as the project develops. A lot of work in this stage accelerates the company in the future, so take several months to get this portion right. Don’t jump at the first person who agrees to help, but rather interview people. Trust me, the more business like and organized you are in your team selection process, the more likely you’ll get serious candidates who will stick around through the project. The “until something better” or “transient” entrepreneur is all too common, so watch out.
You’re also going to want to set your expectation in a manner that they cannot be misconstrued. The tendency is that you’ll want to be friendly to get more interest, but be business like, and once again, you’ll attract the “right” people. That isn’t to say you can’t be friendly, but you’re not friends until the company sells. It would be wise to have an equity agreement or partnership/operating agreement prepared for each team member. Go through it with them as well so there can be no misunderstanding. Ideally, you’d want to hire a lawyer for this to save yourself from costly mistakes and to save yourself from spending time building a contract when you should be building a team.
We all know that starting a company is an 80-100 hour a week job, so you’ll want to use your time on the skill sets you have a comparative advantage. This is why lawyers, bookkeepers, secretaries, sometimes marketers and business coaches are worth the money. Spending $500 on a partnership agreement should save you about 40 hours worth of work where you’d be able to dedicate to building a product, a team or a business model. Likewise, no one on your team should be operating across the aisle. If he or she is ahead of another team member, he or she should keep going instead of helping out that team member. It is likely that the team member will catch up, or the company should consider hiring someone to help who has the correct skill set. Frequently I see the CEO helping out the scientist when the CEO should be focusing on building the company, not the product. If the scientist can’t keep up, either bring in another scientist or hire temporary help to catch him or her up.
This is an area most startups don’t think about right away, but they should be one of the very first steps. You’ll want an advisory board that gets equity in the company. Dedicate somewhere between 2-5% of your company to getting excellent advisers who will meet with you once a month. This is a must-have no matter what industry you are. The advisory boards fill gaps in your company that you don’t need a full time person working on. Below are a few advisory board positions that you will commonly see:
Networker – This person has a huge network and can make the introductions needed when building a team, trying to do business to business sales, getting a product recognized on the market or hosting events. If no one on the team can fill this position, you’ll need an adviser who can.
Business Coach – If the startup is run by people who haven’t done at least three startups of their own, a business coach is vital. Otherwise, it is probably a good idea to have a business coach regardless of experience of the company team. Since he or she only meets once a month, you’ll get an outside perspective on how the company is being put together, and an outside perspective is very important, always.
Financial – If your team doesn’t have one, you’ll want someone familiar with the financial aspects of companies. He or she will be able to give a quick overlook of your company and make suggestions of how to monetize the product or service you’re providing. No company succeeds without someone with a basic understanding of finances on the team.
Marketing – If the team doesn’t have a marketer, this person can provide his or her insight into the market the company is in and how to best approach a marketing plan. Often, he or she will actually make a plan for the company to follow.
Legal – Since most startups do not need dedicated legal counsel on the team itself, it is important to have a legal counsel as an adviser, just to avoid the pitfalls that many companies tend to fall into. Things such as licensing, equity agreements, partner disputes, general legal advice and much more are typically beyond the knowledge base of most of the people on startup teams. A small stake in the company is worth the ongoing legal advice this adviser can provide.
In conclusion, it isn’t about building a team so much as building the team that is right for your company. There are a lot of people out there who specialize in identifying skill sets, so if you need help, start by employing or asking for their aid. Since every company is unique, it is tough to create the necessary positions for each company, but I would gladly try to give more guidance on this topic if you seek out my advice.
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