The structure of their team is crucial
Does the startup team share the same vision or does it just follow the CEO’s direction? What should a CEO expect from their team? Work? Skills? Capabilities? Commitment? A combination of everything? Of course they should. And what should the team members expect? A salary? A good atmosphere? Growing within the company? Do the members of a startup need to be friends or is it enough to tolerate each other?
Fellow Funders has been thinking about the main role of the CEO: they must set the course, direct the crew, take the helm, sometimes even help to set the sails… he is both the skipper of the ship and its cabin boy… However, it is also necessary to think about the team as a whole.
For Fellow Funders the analysis of the composition of the team and its proper organisation is essential. Fellow Funders does a Scoring of the company (based on intelligent algorithms) that must reach a score above 65/100. In this Scoring we value: the composition of the team, its adaptability, the capabilities of each of the members and the level of commitment that they demonstrate.
This week Fellow Funders has read some news about the negative evolution of some startups that received strong equity investments which has made us think about the aspects that we should analyse when performing due diligence on the team that makes up a startup or an SME. Some doubts have certainly arisen and we would like to share them with you:
Does the person who comes up with the idea and creates the startup have to be its CEO?
It seems commonly accepted that this is the way it should be, but why does a visionary have to be both strategist and CEO? While it might make sense at first, as the startup grows and develops, the CEO’s deficiencies begin to appear and could compromise the company itself. At what point should there be a move to a professional CEO to manage growth?
When setting up the startup, does anyone think about the optimum team structure?
Generally, and given the high technological component that characterises a startup, there is a tendency to strengthen the technical (CTO, COO, etc) or commercial (CMO) aspects, but equally significant factors that can compromise the future of the company tend to be neglected. How many startups do not have a CFO? And a Head of Human Resources? Is this logical? In our opinion it is not.
What do you look for in the people you hire for a startup team?
Are job descriptions made on the basis of needs that are identified and filled with people who only demonstrate skills? Are people sought to take responsibility or only to execute a plan set out by the CEO? It seems sensible to look for people with specialised skills, but also for personal qualities that allow them to be self-sufficient and relatively independent in managing their area.
Should there be a governance that serves as a basis for the relationships between team members in a start-up?
Although initially, when the team is small, relations between members may be mainly informal in nature, it is highly desirable to develop formal, written processes known to all as soon as possible in order to avoid “friction” or dysfunction.
Does the entire team of a startup need to be shareholders and/or have stock options?
One of the aspects that seem basic to us is the need for the involvement of the entire team in the future development of the start-up. Is this possible if they are only considered employees and without participation in the expected future profits of the company? We believe that at least, in the initial phase, it seems appropriate to establish some kind of link between the team and the economic and financial evolution of the company, although this is a very “sensitive” aspect on which there is no unanimity.
In conclusion, it seems that perhaps on too many occasions the necessary attention is not paid to the appropriate configuration of the team: no thought is given to the real needs, more skills than competences are sought, mere specialists are required and not independent executors who take responsibility for a series of functions always with a strategic and long-term vision… In other words, human resources are considered as a mere accumulation of people and tasks and not an axis that forms the basis for the future development of the start-up.
In this regard, we recommend reading a recent Harvard Business Review article which recommends that “to create a good team, look for skills but also for psychology”. How often we rely exclusively on skills but do not take into consideration whether the candidate “fits” the team!
In short, Fellow Funders believes that it is necessary to create a team and define a plan to adapt it to the pursued goals. When you set up a startup and commit to its development, you have two options:
- Continue all their lives in their “garage” fostering informal relationships and adapting the company to the skills of its components.
- Or choose to truly build a team, with people with expert skills but also with psychologies that fit the company’s strategy.
Fellow Funders opts for the second option, although it is certainly much more complicated and sometimes even thankless. We must always look for the right team for the company’s strategy and not adapt the strategy to the team we have. Furthermore, we are convinced that Equity Crowdfunding is an interesting product, but we must always be clear about the need to diversify the portfolio and the risks that are assumed.