In my years of advising startups and occasional investing, I’ve seen many great ideas start and fail, but the right team always seems to make good things happen, even without the ultimate idea. That’s why investors say they invest in people (bet on the jockey, not the horse), rather than the idea. Yet every entrepreneur I meet wants to talk about the idea, and rarely mentions the team.
Thus I was happily surprised when I found the classic book, “The Tech Entrepreneur’s Survival Guide,” by Bernd Schoner, PhD, and cofounder of ThingMagic, which leans heavily on the people side of the equation. He gives a wealth of practical advice on building a successful technical startup, including some specifics that I like on what constitutes a dream team of partners:
- The technical guru. You need to have a technical genius on the team to get your startup product off the ground. Outsourcing your core competency does not work. The technical skill can be highly specific, and the person may be a prima donna, but the role is required. If you’re lucky, your guru also brings some commercial contacts to the table.
- The trusted leader. Running a new company cannot always be a consensus-driven process, especially when hard decisions need to be made that affect everybody’s lives. Being the leader doesn’t mean more equity, nor does it mean the leader will necessarily be CEO. It just means that the cofounders trust one of their own and are willing to follow.
- The industry veteran. It takes a long immersion in the marketplace for someone to be a true insider, understand the subtleties of the competitive landscape, recognize the people who are true assets (independent of titles), and look through the propaganda of technical collateral and PR campaigns. These people also have the credibility to attract investors.
- The sales professional. Young high-tech startups are at constant risk of forgetting that they actually need to sell the wonderful technology they invented. A sales fanatic on the founder team helps to contain that risk. The combination of technical insight, founder authority, and sales experience is a hard-to-beat advantage in a competitive market.
- The financial suit. You need a trained CFO to fill the financial gaps on your team. Outside professionals are always available, but they may have their own agenda, such as building a career, making money quickly, or managing up the stock price for a quick exit. If one of your cofounders has the necessary skills, your team will make the tradeoffs.
- The operations superstar. In the midst of high-tech development, funding, and selling, someone has to keep the office network running, get processes documented, and manage to keep everyone happy and busy. Fortunately, no combination of eccentricity, nerdiness, and charisma is required. Hard work and attention to detail are key.
I’m not suggesting that you need all six of these as cofounders initially, but I always recommend a minimum of two founders with different perspectives. The rest can come from early hires (with stock options to assure commitment), equity investors, or even strategic partners. Outsourcing any of these critical roles is very expensive, and usually not very effective.
If you can’t recruit all of these onto your direct team, the next best alternative is to build a first-class Advisory Board of outside people, with the requisite skills and a wealth of experience. These should be hand-picked, come with a proven track record, be willing and able to help, and be completely trustworthy. The best startups have both strong cofounders and strong advisors.
What if you are convinced that your idea is great, but you just can’t seem to pull together the team and advisors you need? It’s time to think about licensing what you have to an existing company already in business, and give up developing and marketing it yourself. Remember the old adage that a small percentage of something is better than a large percentage of nothing.
Their success with your idea will at least give you the connections and the credibility to get the right team together on your next idea. Another alternative is to rely on that famous first tier of support, called friends, family and fools. Or you can always bootstrap the idea yourself, get some traction, and build your first startup organically. It’s a longer road, but may be more satisfying.
We all love the dark horse who comes from the rear to lead the pack and win the race, but very few of these really happen. Schoner and ThingMagic are now part of JADAK within Novanta, a multibillion-dollar public technology company, so success is possible without that initial dream team. My message is that it can be a lot more fun if you engage the right team at the beginning.