This is the fourth in a series of articles on what it means to be a Five Star Startup. In my first article, I explained the five dimensions that most startups are evaluated on. In my second article, I described the first dimension, what it means to have a Five Star PRODUCT. In my third article, I described the second dimension, what it means to have a Five Star MARKET. The third dimension isTEAM. In this article, I will describe the five star team (in my system of evaluation) and offer some of the underlining criteria by which you can score your team. Here we go:
The second biggest reason startups fail (behind no market) is having the wrong team. You understand that you do not yet have the right (complete) team, and one of your key priorities is identifying the people you are going to need to build a successful company. You know what you don’t know, you are not blind to your limitations and those of your co-founders. You and the other core members of your team are working in the venture full-time. You have a 24-month staffing plan that will fill in the gaps.
You love your idea…think it can be a game-changer, but you believe it is less important than your team’s ability to execute on it. You believe that speed is a weapon. You are obsessed with outrunning and out executing the competition. You and your co-founders are seasoned pros. You’ve seen your share of successes and failures. You know what works and what doesn’t work, which is what makes you so confident that you can win in this new venture. And you have the chops to see it to the end. You are still hungry, still driven, and still determined to make a bigger mark.
There is a special, unbreakable bond, between you and your co-founders. You didn’t just meet at an ideation event last week and decide to start a company together. You have been through the team-building phases of forming, storming and norming. You’re ready to perform! There is a clear division of labor, authority, and accountability among the core team members – no overlap. One has product, one has sales, and one has finance and operations. One is the CEO and there is no question that he/she is the “boss.” You’re filling in the gaps with the other talent you need and you are ruthless about who you let in the door. You know that one bad hire can sow the seeds of dysfunction and tank the whole company.
No one is operating on a handshake. The founders do not have a 50/50 equity split and the shares were not all issued upfront. The company has at least one outside board member who can vote to break a stalemate. The founder’s shares vest over 3-4 years based on performance. You have executed restricted stock agreements with buy-sell provisions. At least 15% of the company has been allocated for new hires. All team members, whether employees or contractors, have executed confidentiality and intellectual property assignment agreements. You are working with good legal and financial professionals. You have a trusted slate of informal mentors, if not a formal advisory board.
You have begun to foster a company culture based on the uniqueness of your product, and accentuated by the personalities of the founders. Your culture is driven by a set of core values and an unrelenting focus on customer happiness. The founders are obsessed with innovation and market dominance, not with speaking engagements and media coverage. There are no prima donnas at your startup. Every team member is as valued as much as the next, and every one of them is essential for success.
Finally, you have the ability to sell investors on a billion-dollar opportunity. It wasn’t just the fact that the background check they ran on you and your team came back positive. They believe in your venture, because they believe in you and the team you have assembled. They trust you with their money and with their reputations. They will go to bat for you time-and-time again. They have faith that if anyone can do it, it will be you and your team.
Score the following criteria on a scale of 1 to 10, with 10 being the highest. Try not to use the numbers 4, 5, and 6 — they are fudge numbers. Your team and team dynamics are either excellent, or they are subpar:
____ The core team is working full-time in the venture and are not otherwise committed to time-consuming outside projects.
____ The team has identified the skills/talent needed (the gaps) to build the company and created a short list of candidates. There is a 24-month staffing plan, subject to financing/revenue.
____ The core team has breadth and depth of experience, and understands the space the company is competing in.
____ The team is driven, has a sense of urgency, and believes that good execution (not ideas) will win the day.
____ The team has more than a casual working relationship. It has either been through similar battles together, or bonded through this venture.
____ There is a clear division of authority and labor among the team members. Each team member has his/her specific job and deliverables, and is held accountable by the other team members.
____ All team members have signed a restricted stock agreement or stock options agreement with buy-sell provisions, and the stock vests over 3-4 years based on performance.
____ The company has engaged professional advisors and the core team members have relationships with mentors who can help them with introductions and their responsibilities.
____ The team has begun to foster and coalesce around a unique culture, and hires new people based on how well they fit with the culture. A rigorous screening/interviewing process weeds out potential misfits.
____ Core team members have (or can) pass a background check and have the ability to engender trust among investors.
Total your score, divide by 10. If your score is between 7 and 10, congrats, you have a Five Star Startup Team!
The next article in this series describes what it means to have a Five Star Startup Strategy. Read on…