Chapter 6 Building the Founding Team

Chapter 6

Building the Founding Team

W. Bygrave and A. Zacharakis (2007) Entrepreneurship.

The biggest challengeTheres plenty of entrepreneurs, plenty of venture capital. Whats in short supply is great teams. Your biggest challenge will be building a great team.

John Doerr Partner, Kleiner, Perkins, Caulfield, & Byers (kpcb.com)


Anchoring vision in team philosophy and attitudesThe most successful entrepreneurs seem to anchor their vision of the future in certain entrepreneurial philosophies and attitudes:What a team isWhat its mission isHow it will be rewardedUnwritten ground rules, rewards, compensation, and incentive structures rest o these philosophy and attitudes


Anchoring vision in team philosophy and attitudesThe capacity of the lead entrepreneur to craft a vision, and then to lead, inspire, persuade, and cajole key people to sign up for an deliver the dream makes an enormous difference between success and failure.

Jeffrey Timmons


Advantages of having a team for a start-up


Things to keep in mind when creating a start-up Evaluate your skills Use your strengths Ask for feedback of your actions


Building a powerful teamCreate a staffing planFind people to fill positionsYour personal networkYour advisors NetworkYour extended NetworkFriendsFamilyProfessorsAlums


Attributes of successful teamsCohesion Were in this togetherTeamwork make others job easier; no individual heroesIntegrity hard choices and trade-offs based on what is good for the customerCommitment to the long haul no one benefits by signing up now and bailing out earlyHarvest mind-set capital gain is the goal, not a paycheck


Attributes of successful teamsCommitment to value creation making the pie bigger for everyoneEqual inequality democracy does not work well in start-ups (more on next slide)Fairness rewards are based on contribution, performance, and results over timeSharing of the harvest 10 20% of winnings is frequently set aside to distribute to key employees; characteristic of the most successful entrepreneurs


Equal inequalityCompany A - 4 employees34% to president, 23 % each for marketing and technical VPs, 6% for controller


Chart2

34

23

23

6

Equity distribution, Company A

Sheet1

President34President22

VP Mktg23VP115

VP Tech23VP215

Controller6VP315

VP415

Other9

Other9

Sheet1


Equity Distribution, Company B

Equal inequalityCompany B 7 employees22% to president, 15% each for four VPs, 9% each to two other contributors


Chart1

22

15

15

15

15

9

9


Sheet1

President34President22

VP Mktg23VP115

VP Tech23VP215

Controller6VP315

VP415

Other9

Other9

Sheet1



Filling the gapsSuccessful entrepreneurs search for people and form and build a team based on what the opportunity requires, and when.*Team members contribute high value when they complement and balance the lead entrepreneur and each otherThe process of evaluating and deciding who is needed, and when, is dynamic and not a one-time event* Timmons, 1975


Filling the gapsThe founderEvery team starts with the founder (aka, the lead entrepreneur)Founder determines whether team is needed, assesses talent, skills, track record, and contacts of possible membersFounder needs to determine what the venture requires in order to succeed


Filling the gapsThe opportunityWhatever the team needs are depends on the fit between the lead entrepreneur and the opportunityEntrepreneur must clearly define:the value added and logic of business model (revenues and costs)Critical success factors Extent to which s/he has access to critical resources and relationships


Filling the gapsOutside resourcesGaps can be filled by external resources:Boards of directors, accountants, lawyers, consultants, etc.Entrepreneur must consider:Whether need is specialized, one-time or part-time or a critical continuous needWhat trade secrets might be compromised if external expertise is used


External Team Members


Do Nots of double employmentDo not use your employers resourcesDo not expropriate intellectual property from your current employerDo not solicit your employers customers until you quit the jobDo not conceal the fact that you are founding your own venture


Types of Compensation


Problems that new venture teams face


Slicing the founders pieMaking the pie as big as possible is the primary considerationThe ultimate goal of any VC-backed firm is to realize a 5x to 10x ROI, usually via IPO or acquisition by larger companyWork backwards from IPO capital structure to determine what will happen and who will get what


Chapter 6 Building the Founding Team

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