Why is your startup team important? 🧐
Needless to say, your team is the entire collection of people in your organization. An office dog could technically also be a part of the team, but let's leave that for another day. The formation of a team is the most crucial and fundamental thing in every startup and something you should take very seriously from the get-go. In fact, 23% of startups fail because of team issues. That's an alarming number and a reason why you need to make wise and considered decisions when you are assembling your team.
When building your team, you should start by identifying what task you need to have fulfilled. Take a look at the vision you have for your startup: what are you trying to build? And what is required to do so? Building a team is a very strategic endeavor, and a small startup with limited resources doesn't have a large margin for mistakes. You'll need to identify all the different positions your organization requires to function, both now- and in the near future. As a startup, you are on a mission to grow. For that reason, the people you hire should be selected for the role you need them to fulfil right out the gate, and the position you expect they should grow into in the future. It is impossible to predict the future, nevertheless, as a founder, you'll need to try your best at it.
Building a team is much like playing chess: You'll need to develop the right pieces and get them in a position that provides a strong foundation for the rest of the game. You are playing against an unpredictable force, and the way to beat it is the ability to think several moves ahead. Each move should come from a considered place because one poor mistake could, in theory, be detrimental to what you are trying to achieve. It's impossible not to make some mistakes, but the goal is to make as few as possible.
As a startup, you often need a good mix of specialists and generalists. It usually is an advantage to start with some skilled generalist that is quick on their feet and intelligent enough to solve a broad range of task. But if you want to develop an app, you need someone that is a great developer. The success of your company depends on the quality of the app. Therefore it wouldn't make sense to hire a mediocre developer because that individual also can do the bookkeeping. The logic here is that if you fail in developing a good app, there probably won't be much bookkeeping to do. You'll need a hierarchy for what is most important – and at what time. No startup situation is identically, and you need to figure out what is best for your business. It all depends on the game plan, the budget, and the vision.
When you're assembling your team, there is a clear distinction between recruiting people to the founder team and the employee team. Both are critically important to get right, but there is a world of difference in what type of candidate you're looking for. You could look at it like this, recruiting your founder team is kind of like buying a house, whereas hiring employees is more like renting one. Let's unpack that a bit:
🏗 Founder Team
The founder team is a long-term investment and an arrangement that should sustain the company perpetually, in all eternity, out through the universe. Things can, of course, go wrong, but as a rule of thumb, founders should only leave voluntarily – otherwise, something went wrong. They are there to stay, which is kind of essential to have in mind. With that comes the hard reality: you'll be stuck with each other for quite some time. You'll have to contend with a co-founder and have a desire to share the startup journey with that person through thick and thin. For that reason alone, your vision also has to be somewhat aligned. You'll need to respect- and value their perspective; otherwise, the company will risk ending in a stalemate situation, where your inability to be aligned is stopping the startup from reaching its true potential. We have an entire startup course about how to choose a co-founder if you want to learn more.
🏗 Employee Team
Regarding an employee, you don't necessarily need to have a great personal relationship (though recommended). The important part here is that the individual is good at their job. It might come off as a matter-of-fact, but an employee is hired to accomplish a particular job. If a person can't fulfill that responsibility, you should terminate that individual's employment as soon as possible. That is a challenging task for any management team, but a startup is not a charity, and the main thing is to secure the company's survival at all costs. It's never fun to think about the worst-case scenario, but you'll always need to keep in mind that it might not work out, no matter whom you're taking in. If you want to know more about what you should look for when recruiting new employees, check out this startup course.
Does the team matter to funding? 💰
Oh yes. In terms of funding, investors are investing in the team as much as the idea. A weak team will not succeed with a great idea, whereas a strong team can succeed with a bad idea. So, remember to put a lot of thought and energy into evaluating and selecting your dream team. Hiring the wrong people will turn out to be a significant expense and affect your ability to get funded.
We've compiled a list of things to consider when building your team 👀
🙅🏼♂️ Complementary skills
New founders often make a mistake hiring clones of themself because they are easier to relate to. This is, in fact, counterproductive. Your founder team should complement each other. While you might have an excellent personal relation to a candidate with the same skills as yours, it can benefit your startup more if you choose one (or more) people with skills you don't possess yourself.
Being an entrepreneur can be a challenging lifestyle. It's worth prioritizing entrepreneurial experience when finding the right co-founder. Many people may be fascinated by the thought of starting a business, but the reality is that the entrepreneurial life is not for everybody. Finding a co-founder who is stress tested and already knows the bumps is a formidable idea. You wouldn't wish to be out of business on the count of your co-founder's surrender, would you now?
🐋 Size of the founder team
Another thing to have in mind is the size of your founder team. The more founders you are, the more skills, time, and resources you get. However, equally many challenges may come from different expectations, division of equity, division of roles, and alignment of visions and priorities. A founding team of 2-3 founders is statistically more likely to succeed.
🤝 Partnering up with friends and family
A challenge to be aware of is partnering up with friends and family. While working with people you know very well does come with the advantages of being in sync, trusting each other and sharing the same values; it also has its downside. The risk of arguments becoming personal in close relation with someone is high in the harsh entrepreneurial environment. Going into a startup with friends doesn't necessarily mean getting out of it as friends.
🧑🏽⚖️ Equity agreement and exit strategy
When you've found the perfect team, it's an excellent idea to make an equity agreement to set the framework for your collaboration. How you divide the equity can be arranged based on the injection of capital, time spent working on the startup, or other factors. It's up to you how you choose to draw the contract, but it's essential to do so. The equity agreement should also set up the rules for when it is appropriate to exit the business. To whom can the leaving part sell their shares? Will the staying founder be able to acquire them, and at what price?
Let's wrap it up:
The real assets in a startup are human beings, and the team will make or break a startup. A business with a weak team is like a car with flat tires – it'll get you somewhere but probably not to the desired destination. An employee is like a high school girlfriend and can be perfect for a period in your life. But when it comes to a co-founder, you should ask yourself: are you ready to put a ring on that finger? 💍