Building a successful tech company without a great team is next to impossible. A great team is made up of a diverse set of individuals, with expertise in their individual area who work together for the good of the enterprise.
But building great teams in startups is difficult. Startups are not well funded, often they can’t pay employees market value (or anything), they are considered high risk, they don’t offer great (or even any) employee benefits, they are not well-known entities, the culture may not be established, there may be no company vision to shoot at and you, as CEO, may not have cross-functional management experience to even know what you are looking for. Plus, there is great competition for key talent from other startups or even larger companies that are currently hot in your geography. So, attracting great talent requires knowledge, skill and even luck.
But the real key to attracting talent is you. As the CEO (or member of the leadership team), you need to know what to look for, what positions need to be filled in what sequence and how to attract the right talent. If you don’t, your company is dead.
There are two overarching reasons that entrepreneurs don’t build killer teams. One is that they can’t due to lack of resources, available talent or they lack experience on how to build a team. And the other is that they won’t. In the latter case, entrepreneurs either think that they can do everything themselves or they don’t want to lose control of functions in the organization. One of the biggest mistakes that an entrepreneur can make is to make himself/herself indispensable to the organization. Your job is the opposite…to try to make yourself irrelevant over time. The reason, of course, is that “you can’t scale yourself”. No one can. Your job is to build a company, not a consultancy for yourself. And, while your input and skill is needed at the very beginning, you need to bring in talent to handle the key functions. Lacking appreciation for the ability to build out various areas of the company based on talent and experience is a common entrepreneurial issue. Often entrepreneurs over-value their own domain expertise, but under-value the expertise of the key personnel that they actually need to build their company. These skills include, sales, marketing customer support, finance, HR, project management, product marketing.
If you only have managed a team of similar people (like you) in a singular area, which is often the case with domain expert founders, how do you expand your knowledge and expertise to areas where you don’t have knowledge and expertise? Well, that is the challenge and there is no singular answer to that question. But it can be done and is done all the time. Successful entrepreneurs can learn how to build great teams.
You need to understand that great teams are essentially made up of people with three different skills… visionary, hustler and hacker. Most people have multiple disciplines. But the key to building a great team is to make sure that all three are represented. A team of visionaries with no one to do the work or get the customers is not going to get very far.
Often the founder/CEO is the visionary. But this does not mean simply product visionary. It means company visionary. A great CEO is more interested in build a company than a product. If your interest is in building a product, you are a founder, not a CEO. The second skill set is the hustler. This is the person who gets the customers and makes sure that all of the parts of the organization are working together. Again, this should be a skill set of the CEO. Finally, there is the hacker. These are the people that do the individual work in their areas (not to be confused with a programmer). A hacker can be an accountant or a client services representative or product manager or even a sales person. A hacker executes in their area. All three skill sets need to be represented on a great team.
So, to get started, here are 15 keys to building the killer team you need.
- Vision – Developing and communicating a company vision can have profound impact on your ability to recruit talent. Talented people often are looking for a company that has a strong and well-laid out future. A realistic and compelling vision for your company helps with this. A strong and believable vision can help overcome some of the issues that cause early stage companies to not attract talent.
- Culture – Can you articulate the kind of company that you want? Do you know your values? Talented people also gravitate to companies that have cultures that match their values. They don’ It is important to hire for culture as well as talent. Entrepreneurs need to define what values are important to them and communicate that culture and those values constantly. Hiring for talent at the expense of cultural fit will disrupt your company’s success.
- Roles – You need to clearly articulate roles and responsibilities. While this appears obvious, it is rarely done. What is the role (or what are the roles) that you want the person to have? What expectations of performance do you have in what time frames? How do you see the role evolving over time (and what time)? How does this role interact with the other roles in the organization? How will decisions be made? How will conflicts be resolved?
- Storytelling is also critical to building a great team. We already covered the idea that getting top-notch people to join your startup is difficult due to lack of resources, lack of market presence, risk and the fact that there is great competition for great talent. The way most entrepreneurs build great teams is with great storytelling…or sales skills. You need to convince these talented people to join you and not some other better known and/or better funded organization. Articulating the above vision for where you are going, the culture that they should want to join, and a story that they want to be part of takes skill and passion. Remember that a great product is simply a prerequisite for a great company. It does not make a great company.
- Employee Value Proposition. Just like your business needs a value proposition for its customers, your employees need a value proposition for why they should work in your company. Your EVP should be defined by the kind of people you are looking for, the kind of company you are creating, your vision of success and what the benefits of working for your company are.
- Interviewing – Interviewing for talent is difficult. You will need to develop and hone a good list of interview questions that will let you properly select key team members that match your skill and cultural requirements. Interviews tend to be superficial. You will need to learn to better delve into depth to get past this. Even then, it is not uncommon to have half of your team hires not work out. Hire slowly (but don’t lose candidates through analysis paralysis) and fire quickly.
- Onboarding. One of the most common mistakes that entrepreneurs make is failing to properly onboard key hires with respect to roles, responsibilities, culture, performance expectations and overall company vision. Without proper training and solid employee communications you are leaving success to chance.
- Communications – There is perhaps nothing more important than honest, straightforward communications between you and your team and the team members themselves. The saying goes “The single biggest problem in communication is the illusion that it has taken place.” It is essential that you over-communicate vision, culture, objectives, metrics, strategy, tactics, feedback and anything else that will drive your success
- Setting metrics and holding people accountable. The above-referenced storytelling does not get you to the finish line without quantifiable metrics that you hold yourself and your company accountable for. Knowing the important metrics that will drive your company’s value is critical and assigning responsibilities to people to achieve those metrics is essential. There is no sense in setting metrics if people are not held accountable for achieving them. Accountability needs clear goal and metrics setting with specific time frames. Constant review of progress is required. Also, it is critical to know what you are going to do if metrics and goals are not achieved.
- Trust and Respect – Attracting and keeping talent requires you to build and maintain mutual trust and respect. The trust and respect must be between you and the employee but also between the members of the management team. Trust must be earned by you and the team members. It is essential to provide guidance as to how that trust will be earned and discuss this on a regular basis. As the saying goes “Trust takes a long time to build but can be destroyed instantly.” Once trust is violated, it takes a long time to re-establish.
- Listening to Team Members – You will not always agree with every team member. But hearing out their thoughts and opinions is essential. In the end, you need to make the decisions that you believe to be right. If these decisions go against the input from team members, it is important for you to explain why you are doing what you are doing, what metrics and time frames you will use to measure whether the decision is the right one and even an alternative plan if the decision does not work out. It is essential that you get the team members to back your decision under the above circumstances.
- Compensation – Compensation in an early stage company can be tricky. You may not have sufficient cash to pay for the talent you really require. In this case, you need to balance cash with equity. This is where a 409A valuation comes into play. Establishing a true value for your company and establishing what a proper option price should be is very important. Don’t be stingy with options. It is good practice to have the options vest over four years. The first quarter can vest annually on the first anniversary of the employee’s hire date. This provides sufficient time to evaluate performance and dismiss employees that do not work out without them getting any stock. After that, vesting can be either monthly or annually. Also, incentive compensation can be established. It is critical to tie incentive compensation to company financial performance. The key variables to use are Year-end Monthly Recurring Revenue (or ARR), cash and net income. Example compensation plans are available from Arbor Dakota.
- Fundraising and revenue generation. You need money to pay people and continue to build out your team. There are only two ways to get money. These are fundraising and revenue generation. In today’s environment, you can’t raise money without revenue generating customers. So, generating cash is a huge requirement for building a killer team. There are several obstacles to raising money. One is the aforementioned concept that fund raising requires revenue. Many entrepreneurs do not understand or accept this as fact. But it is. Second, many entrepreneurs do not want to give up equity in their organization. This is compounded by the fact that many of these people over-value their startup and try to hold out for unrealistic valuations. Finally, most entrepreneurs do not understand the mentality of an investor or don’t think like an investor. Investors are presented with great opportunities all the time. The fundamental question that investors have is “If I invest $1.00 in your company today, how will I get back at least $10.00 in the future and how long will that take?” The follow-on questions are “What assumptions are we making? And “How much total investment do you need to get to profitability or cash-flow positive status?” This REQUIRES a realistic financial plan on market traction and adoption, expenses, key ratios (like new sales to sales people or closes per pipeline generated or customers to client services personnel). Most entrepreneurs cannot build out a financial model. This hurts them in the end with respect to managing the business, getting funding and therefore hiring critical talent. But more importantly, it is essential to develop a continuous revenue stream. That can only happen with sales. The goal is not to continuously raise money. The goal is to get paying customers so you don’t have to continuously raise money. Therefore, your sales hire is the most critical member of your team.
- Celebrate Success – All great teams want to be able to celebrate success. It is an important part of team building. The question is “What constitutes success?” Many organizations celebrate the wrong successes. For instance, a company may not want to celebrate the release of a product, but instead celebrate when the product achieves its first 3 paying customers. This is a business, not a hobby. Success is normally defined by customers or revenue.
- Use Your Resources – Don’t be afraid to use recruiters or job sites or your board or mentors to help you get the absolute best talent you can. You can’t do it alone.
Building a killer team is a complex job and requires knowledge and skill. But this is an essential role of the CEO and is the most critical driver to company success. If you think you can do it all yourself, you are dead wrong.
To learn more about building a killer team or any of the itemized issues listed above, please contact Arbor Dakota.