Company founders usually need to build a team around them to ensure that all the necessary skills and experience are available to succeed, but it’s a lot harder in practice than it sounds…
Most startups need a range of different skills and experience within the team: Finance, technology, sales, marketing, management, leadership, IT, HR… The list can be almost endless, and investors will usually be looking for evidence of capability in all areas!
There are a number of barriers to bringing a team with all these skills together…
- Team Size: In large companies, each major function within the organisation will have a separate senior manager or executive to lead it, and many specialists working under them. Most startups have to make do with a very small group of founders, so each person needs to bring a fairly broad range of skills. This limits the pool of people who are suitable for key roles in startups.
- Money: Even in well funded startup, investors don’t like to see their cash being spent on lavish salaries.
- Credibility: Without any track record of success, joining a startup is a risk for any potential employee or executive, both financially and in termas of their reputation.
- Timing: Often startups need to be able to name future staff in their business plan to be credible to investors, but have no money to pay anyone until they have received investment. Furthermore, it can take a long time to raise money, during which time people who had originally been identified for key roles may take up other offers.
- Sequence: Usually founders meet potential co-founders or key employees over a period of time, but each has different skills. If a company needs expertise in sales, marketing and finance and meets a candidate with excellent marketing skills, how likely it is they will meet someone with sales AND finance expertise?
All of these factors make building the team in startups harder than recruitment in larger companies, which means some different approaches are needed:
- Recruiting is Selling: For startups, “recruitment” is as much about the company selling itself to the candidate as vice-versa.
- Imaginative Rewards: To attract good people, startups need to offer other rewards or benefits, such as equity, flexibility, experience or opportunity to grow with the company.
- Aspirations: Many individuals have aspirations that can be met in a startup more easily than elsewhere, for example people looking for director level or leadership experience. Obviously offering these to the wrong person can be hugely damaging, but it can make a significant difference in attracting the right person.
- Pay as you Go: Using contractors or consultants can be a great way to bring in expertise when it is needed without any long term committment.
- Part-Time: Where cash is short but not non-existant, it can be much better to work with someone great two days a week than to have someone mediocre full time. I see this working well in a lot of startups with part-time CFOs and Business Development people.
- Soft Starts: To manage cash in the startup, and risk for both parties, soft starts are worth considering. Bring someone in on a contract or part time basis, with the understanding that a broader full-time role is there (e.g. after investment) if it works out. If either party decides the engagement isn’t right, they can step away without too much embarassment. In practice, part-time and contracting engagements can end up being soft-starts
- NxD: By asking people for a relatively small amount of time There are plenty of people who would like to break into the Non Executive Director market who you would not attract in any other way, but who still bring credibility and expertise.
- Board of Advisors: More widely used in the US than here, a board of advisors is a set of people who offer advice in their own areas of expertise (usually rewarded with equity) but are not legal directors of the company. Very often, they will work through one-to-one meetings or phone calls with the CEO rather than board meetings, but they can still be listed as advisors in the business plan.
Especially when it comes to directorships and leadership roles, there are obviously a (very) limited number of positions available so they have to be used very carefully!
Building a team with all the right ingredients is the biggest challenge many startups will face – bigger even than raising equity funding since the right team will be a huge factor in impressing investors. The best advice I can offer is to meet as many people as possible, then be imaginative in figuring out how to bring them on board!