This is a continuation of the article. It’s got some really valuable insights for Founders, and i thought it’s worth highlighting it in separate entries. The first one focuses I shared earlier is focused on the Founder’s qualities. Now it’s time to delve into building your founding team.
Choosing Your Co-Founders
The founder who will lead the company isn’t necessarily the inventor. It is someone who believes in the startup’s idea and product. So much so that they are willing to put their future on the line to turn that idea into a successful company.
You should try and choose professionals that have the skills you lack. Someone who has a skillset to offer in another part of the business. Their skills should complement yours.
Another important factor is ensuring your values, expectations and business goals are aligned. You and your co-founders will become your startup’s core management team. It’s important to be on the same page when it comes to your startup’s mission, business goals, values and timeline.
You need to ask yourself if your personalities are compatible. Gary Tan, Managing Partner at Initialized Capital and previously at YCombinator puts it perfectly:
Will you be able to embrace the conflict with this person? Discussing disagreements on a level playing field to improve your business?
It comes down to one overarching question:
Can you work together over a long period of time?
After all, what good is it if their hard skills complement yours if you don’t actually like the person you have chosen as your cofounder?
Investors will take the dynamics of your relationship into account as they assess if your startup will be the right fit for their portfolio. As well as assessing your co-founder on the same essential qualities they judged you on.
I recommend that you thoroughly and carefully consider a business partner as you would a life partner. Ask yourself, if in the toughest times will that person remember that you are both on the same team and be by your side? More importantly, will they be an asset to your business.
Serial entrepreneur, Andy Miller’s formula is simple: People + Execution = Success. Your potential investors are counting on you and your startup management team to execute on your business plan, gain traction and, ultimately, bring in revenue no matter the hurdles.
Your founding team’s primary responsibility is to plan your journey to market that avoids potential roadblocks. Then, when unexpected roadblocks do inevitably appear, you and your founding team use that plan to navigate them.
As Sean Sheppard puts it:
“Most companies and innovations fail, and the reasons have to do with markets and the behaviours of the people who are running them, not the products themselves”.
You need to be able to trust and count on your co-founders. Choose correctly and you will have a strong foundation on which to move onto the next step: building a startup team.
How to Build a Team for Your Startup
For your startup to grow you will need to assemble a team of top talent who will bring skills to the table that helps you execute your business plan. This factor is important to investors, after all, if you are unable to execute your idea, they won’t see a positive ROI.
Finding the right startup team structure is a delicate combination of art and science where every new role is a key hire.
In a big corporation and mediocre employee can fall under the radar – or at least only cause minimal damage to the company. Whereas in a small team a mediocre hire in the first five years can risk the entire venture.
Many founders fail to build a successful startup team. Early-stage startups rarely have an HR manager so it is left to the founding team to hire. And, for most founders, hiring is just one of a thousand urgent tasks that they have to do as quickly as possible – so, understandably, many take every shortcut possible.
Know Your Strengths, Identify Your Weaknesses
Most startup founders have one core strength. Along the road, they may have developed additional strengths that complement their primary, but no one is the best at every business aspect. Therefore when hiring you need to make a list of strengths and weaknesses within your startup – just as you did when you were searching for co-founders. Ask yourself what is your business missing in terms of:
- Core competencies
- Personal qualities
Building your startup team is an opportunity to find people who fill the talent gaps that will help your growth and speed up your success.
Looking in All the Right Places
Sam Altman states that the first 100 hires at most tech companies typically come through referrals. However, I wouldn’t recommend hiring some purely because they have been referred by someone. All hires need to complete your interview process. It is the only way to ensure they have the abilities, experiences and, above all, the personality and soft skills to fit well into your startup’s ecosystem.
As for actively seeking new hires, you can start by looking at other startups, entrepreneurial-based business programs, startup incubators, local coworking office spaces and trade shows. Startup employees tend to be younger, at earlier stages of their career and are therefore less locked in to the “big corp” culture. That being said never turn down a candidate purely based on their age or background.
Your Rigorous Hiring Process
You need to take your time in planning new hires. I recommend planning your hiring needs around 12-18 months in advance to avoid panic hiring. You should allow six months to actually find that new hire and you should always have candidates in the pipeline.
Most importantly, you should have a thorough process in place for vetting your potential employees. Here are some elements that might be included in your hiring process:
- An initial screening to make sure the candidate’s core competencies for the role – this can be done through assessing the candidate’s resume.
- An Interview to meet the candidate and assess the team fit in terms of their soft skills.
- Thorough vetting of the candidate’s references
- Spending time with the candidates individually and within a team.
Bear in mind, also, that whoever is doing the interviewing needs to communicate your startup’s values, vision and culture clearly. You will ultimately be “selling” candidates your company and making them excited to join your team.
Your initial hires will have to wear many hats and together you will probably moulding and creating their role as you go along. Your startup’s product, market, and premise may change through the company’s journey. The only thing that will keep the team moving in the same direction is your startup’s vision, values and culture.
Look For Diverse Personalities
Initial employees in a startup are different from those who are great at their jobs in an established company. Not unlike founders, these initial hires are usually more comfortable with taking risks. They are more optimistic and flexible when it comes to job descriptions and roles within the company.
It is important to balance your team with different personalities. By this, I mean some who are:
- Executors – Those who make ideas into reality by assigning tasks and organising processes.
- Creatives – who have the ability to compel people with narratives, a key element to building connections
- Listeners – these personalities are great at living in the moment and are able to ask great follow-up questions
- Communicators – a combination of listener and executor. Someone who can understand what someone is sharing and act on it according
- Mediators – A combination of the listener and communicator, this personality is able to listen objectively to two sides of an argument and come to a solution.
- Recruiters – This personality envelops themselves in the company culture and is able to get other employees onboard on pretty much every aspect of your startup. Whether it is helping onboard new hires, or making sure everyone turns up to team events such as dinners, drinks, team-building exercises, etc.
In a previous article, I’ve talked about how all members of your startup team need to have a “Musketeer’s Attitude” of “all for one and one for all.”
This is imperative for any startup team. They should take ownership, as a group, that the job is carried out. When one person wins, the whole group wins. When one fails, the whole team takes that failure on their shoulders and support each other to find a solution.
Be Smart When it Comes to Compensation
Those attracted to working at a startup are rarely driven by high salaries. In fact, most entrepreneurs will take a pay cut for the opportunity to be in on the ground floor of an exciting young startup. They are instead motivated by a combination of long term equity or stock opportunities twinned with lifestyle benefits such as flexible hours, autonomy, a creative work environment, making a difference and pride of inventorship.
When it comes to non-critical skills or short-term needs I would recommend outsourcing – provided you do it in the right way. Paying for services when possible is typically cheaper and quicker than hiring someone in-house and paying them with long-term equity options.
The Second Wave
Hiring both your founding and core team is a challenge. However, arguably, a larger challenge is the second wave of hires as your company grows – and it is equally important to long-term investors. It is the responsibility of the founding team and long-term employees to do everything possible to help onboard new employees into the culture of your startup. Something worth bearing in mind from day one; it is up to you to set the precedent for your team when it comes to your desired company culture.
Your Third-Party Advisors & Investors
Advisory boards are vital to your startup’s expansion – and some of your investors may join this board. And, as with smart money investors, the goal is to build a group with a broad knowledge and industry expertise. Without creating an imbalance within your in-house team. External advisors is another way to fill the gaps in your team’s expertise, with the added bonus of industry influence in many cases.
An advisor’s responsibility is to help you and your founding team run the business. This is the key difference between a board of advisors and board of directors. They are important partners for your startup and are usually compensated with common shares, similar to management and employees. There are some cases where advisors are simply on your payroll.
Note: This is different from a board of directors. They are responsible to the shareholders and, therefore, become the boss of the founders. Their responsibility is to make money for the company. In an ideal scenario, they do this by helping you and your founding team execute your vision. But sometimes they will just replace the founding team with more experienced management.
Keeping Your Foundership as Your Company Grows
As your startup progresses you will be diluting your company at every round as you bring on new investors. A concern of many founders is keeping control of their company for as long as possible.
At the early stages, it’s important to negotiate your valuation so you don’t dilute your company too quickly. One thing you can do when presented with an investor who is asking for a lot of equity is to negotiate and offer them a board seat. Most will be happy with a lower equity stake at this point. As a board member, they have a legally binding vote in regard to the running of the company. At this point, you have to consider, of course, whether they have the experience in your industry to be a good fit on your board of directors.
As Mark Suster says, when building a startup “everything goes wrong and only great teams can respond to competitors, markets, funding environments, staff departures, PR disasters and the like.”
So even though your team is just one aspect of investor’s decision making; it’s arguably the most important one.
I’ll leave you with another quote from Simon Sinek which, in my opinion, encapsulates why the right startup team is so important to investors: