How do entrepreneurs put together the venture team?
It is very difficult to build high growth-potential ventures without a team that has a critical mass of skills and deep understanding and passion of the business space. This means understanding the customers, the existing relationships, and the current products.
As Arthur Rock once said, “A great idea won’t make it without great management.” He commits to and invests in people, not ideas. According to Rock, “If you can find good people, and if they’re wrong about the product, they’ll make a switch, so what good is it to understand the product that they’re talking about in the first place?”
So the “people part” of your business venture should receive the utmost care and attention. After looking at highly successful ventures we found that 60 to 70 percent of the ventures involved two or more founders. Multiple founders make possible a larger effort, drawing upon complementary skills, knowledge, and execution intelligence. This “collaboration under pressure” helped Jeff Hawkins, Donna Dubinsky, and Ed Colligan develop the Palm Pilot, and later at Handspring, to create the Visor.
The founders, or partners, are the first raw strand of DNA assembled. When used in Securities and Exchange Commission (SEC) documents, the term “founder” means the person or persons employed or holding office in the venture the day it was incorporated. There are two other components of DNA that get assembled, usually within the first 100 days after the venture gets funded. The second strand is assembled by the investors; they bring in the early employees and the specialists. The third strand assembled is the board members. Although the literature indicates that what defines a venture team is not clear-cut, we say that, collectively, these three strands of DNA assembled are the venture team.
Structuring the Team
Planting the seeds for competitive advantage means creating a common body of knowledge and experience. Such organizational capability springs from three sources.
– Financial capability pertains to financial efficiencies—not just how to make a profit, but how to make wise investment decisions, and experience in providing a return to investors.
– Marketing capability pertains to building the right products, establishing a close relationship with customers, and having experience in effectively marketing products and services, preferably in this space.
– Technological capability pertains to technical innovation; R&D; being knowledgeable about new products, processes, and technologies; and having experience in successfully bringing a new product to market, preferably in this space.
There are some key positions that need to be filled:
- strategic sales and new business development, are the most important for the early-stage venture
- marketing and sales positions
- research and development and engineering
- financial management
- general management and business administration
- personnel management
- operations and servicing
- legal and corporate tax aspects
Choosing an Organizational Structure
There are three generic choices: functional, geographical, and customer. For example, Dell, which has now settled on the third type of structure, a customer-centric organization, actually has about twelve different businesses focused on large customer segments based on end-users, needs, and uses. Dell’s business groups are consumer business, small-business, K-through-12 educational, higher-educational, federal government, state and local government, medical, large-business, and global-business.
John Chambers of Cisco Systems realized early on that a “world-class engineer with five peers can out-produce 200 regular engineers.” But what is the optimal size for a venture team? Some have determined that the size of the start-up at birth has considerable influence on its chance of survival.
We found that ventures with one, two, or three members at birth have a much lower survival rate than a venture with five employees, and that a venture with five employees at birth has the same survival rate as those starting with ten, twenty, or more employees.