Authors: Keith Downham; Mitchell Posada: Andy Shober
You have a talented team, and your teammates both embrace your vision and are helping you shape a matching culture. Congratulations as these are two big ‘wins’ that many investors will rank above opportunity size. Why? Because, while trite, the old adage of ‘an A team with a C idea is better than a C team with an A idea’ is true. However, those wins—and company value—are either enhanced or destroyed depending on how the organization is built and the foundations on which it is established. From our experience building and leading organizations, new and seasoned founders alike should adhere to a few, simple principles of organization building to ‘get it right’ and stay on a path to success.
Solve the Biggest Problems —Startups are just beginning, which means everything is new and opportunities are abundant...but so are the problems, which seem to be infinite. Fortunately, not all problems are created equal—either in magnitude or timing. Running a startup is very much about identifying and solving the biggest problem. Being busy or productive in the areas that don’t matter to customers or investors or that considers your cash flow and path to profitability will kill your startup. The key is to identify and focus on the two or three lethal problem(s). The others can wait. Your investors and customers are not only key stakeholders and observers but also willing problem solvers—the savvy entrepreneur will leverage them.
Embrace True Collaboration —To solve the biggest problems, entrepreneurs need to carefully balance their inherent self-reliance, drive, and vision with an understanding that one person cannot do everything well. Key investor due diligence questions include: Are the founders sufficiently focused in time and attention on the core business? Can they work together...effectively? Are the right skills present? If the answers to these questions are no, investors may be concerned that the founders will experience burn-out, critical decisions will linger, speed will suffer, and returns will not be realized. We advise our clients to, “Delegate, Trust and Let go.” Simple in theory but hard in reality. It means not only having clear areas of responsibility but trusting the person—or hired gun—to manage/execute their area well. Letting go then allows focus and attention on what truly needs to get done. Knowing your weaknesses and bandwidth limitations is a leadership strength...and the company as a whole will benefit.
Don't Let the “Bitch Session” Last —Misunderstandings and mistakes happen. It’s tough communicating in high-pressure, fast-paced environments in which early-stage founders and team members must thrive. There’s a reason why investors like teams that have worked and suffered challenges together...they know how to work with each other and they don’t let “bitch sessions” last. Whereas freedom to test hypotheses from anyone on your team creates an environment of creative problem solving, bitch sessions can get personal and breed resentment. Resentment can lead to passive-aggressive tactics that can kill the flow of your team and chip away at the oxygen of high-performance teams—trust. Take time to discuss “issues” discretely and/or directly if needed. Mount Everest can only be climbed with an oxygen mask. Similarly, creative problem solving and shared learning can only be achieved with the aid of unemotional, straight-talk.
Stay Strategically Focused —It’s natural for entrepreneurs to see endless possibilities for their ideas—new revenue streams, applications, and customers. After all, the first person that must believe in an idea for it to be viable is the entrepreneur himself. However, the successful entrepreneur spends time identifying the right market penetration point...and then attacking. Other opportunities and paths identified along the way become data points, which may help paint a broader picture and/or influence later tactics and strategic shifts. Lack of focus and constantly changing strategies can have immediate and long-ranging negative impacts. Finite resources are used inefficiently, and valuable time is wasted as the market changes and opportunity windows shrink. Investors become confused as their capital is deployed differently than promised leading to unhappy owners and difficult future capital raises. This is not to say that strategy changes should not be undertaken. Quite the contrary. Market innovation is faster today than at any point in human history. Market conditions and dynamics change quickly. But, those strategy changes should be thoughtful—after assessing those data points and learnings collected over time. After communicating and consulting with investors. After validating with advisors. While we never eliminate risk, we can minimize the strategic risk presented by distraction from the ever-present “shiny objects.”
Focus on Roles First and People Second —Building and maintaining a high-performing team is one of the greatest challenges any entrepreneur faces. Companies’ needs evolve as they grow and products mature. People that are great at one stage are not always the right ones to take you to the next stage. How should founders balance institutional knowledge with loyalty and building the team, particularly with the reality that new skills will be required to continue to grow? When should founders find a way to get the most from the players they have versus hire new blood? What about managing transformations versus managing stable state operations?
Founders often assert that they don’t have time to stop and assess questions like these. They worry about the reaction to such processes. However, inaction can result in missing key milestones and festering morale problems from a feeling of “being set-up to fail” or teammates “not pulling their own weight.” Finding the best way to address these questions is a combination of art and science while managing emotions at the same time. By starting with assessing what roles and skills are needed for success, it is easier to be objective. From that, an evaluation of current team member capabilities and growth potential can be more readily performed as expectations and structures are set from the beginning.
In our experience guiding successful entrepreneurs, constructing the organization can find itself dangerously de-prioritized on the ever-growing “to-do list.” After all, it’s the brilliant idea that will win the day...and organization building to a certain degree requires doing the opposite of what got the entrepreneur this far—hard work, self-reliance, and so on. But, as any seasoned investor will tell you, an entrepreneur’s ability to scale their organization is one of the most critical aspects of due diligence. Keeping these simple principles in mind will go a long way toward making the organization build more successful and comfortable for the entrepreneur.
The good news is that there are experts out there that can help. Fractional experts understand what you are going through and can partner with you to navigate the organizational build process.