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Building a Technology Team: Alpha, Beta and Beyond
By Peggy Thompson
Ask successful
technology VCs and they will say that the most
successful early stage technology companies are those
comprised of a great technology, ready market and
talented team of people.
The people component is
often the least understood and most intimidating part of
the equation. After all, people aren’t a technology
that can be designed, developed and released. They
aren’t a market waiting to be defined, penetrated and
dominated. Instead, people are a complex mix of
experience, emotions, intellect, creativity, thoughts
and interests.
Some of the mystery
around the people equation – around building a team of
talented executives – can be eliminated. Following a
solid, strategic hiring road map and proven game plan
for assessing and attracting great talent will empower
you to hire the right person at the right time for your
early-stage technology company.
Peggy Thompson
interviewed six of the country’s leading early stage
venture capitalists and service providers to further
remove the veil of mystery around the people equation.
Survey participants
included:
·
Mike
Ahearn, Recruiting Partner, Charles River Ventures
·
Laura
Capper, Founder & CEO, CAP Resources
·
Rich
D’Amore, General Partner, North Bridge Venture Partners
·
Bob
Davoli, Managing Director, Sigma Partners
·
Blair
Garrou, Principal, Genesis Park
·
Bob
Stearns, Managing Director, Sternhill Partners
The results of the
survey as well as insights we have gained by working
with many of the industry’s leading early stage
technology companies are included in the following
comments.
“But, I Once Owned An
Ice Cream Shop”: Experience Investors Seek in the
Founding Team
The founding team most
VCs ideally seek is a group of proven entrepreneurs with
deep domain expertise in the technical area they are
working coupled with previous experience scaling a
company and taking it public. Of course, that founding
team must also be willing to invest its own money and
work without cash compensation for the first two years!
The ideal rarely – if ever – happens.
Here’s the best that
reality usually offers in the form of a founding team at
the time of initial funding:
1.
A
technologist who has successfully built a commercial
product.
2.
A
marketing and/or business development person who has
previously brought a new product to market.
3.
Someone who is, at the time of funding, successfully
running the shop. This can be the technologist, the
marketing/business development person or another, third
person.
Experience sought by
initial investors include:
1.
Success in the niche or market to be addressed by the
start-up.
2.
Some
previous success as an entrepreneur.
3.
Previous failure as an entrepreneur provided that the
entrepreneur has learned valuable lessons and gained
applicable insights into the process.
4.
Previous experience raising capital.
5.
Some
successful corporate experience – not just a serial
entrepreneur of small, limited ventures.
“I’m Really Smart and I
Have a Good Idea”: Qualities Investors Seek in the
Founding Team
Being smart and having a
good idea aren’t enough. Here are some of the qualities
investors seek in a founding team:
1.
Strong
leadership skills.
2.
Integrity beyond reproach.
3.
Takes
a “matter of fact” approach to business devoid of hidden
agendas and volatile emotions.
4.
Maniacally driven and focused.
5.
Contained ego with a true sense of self and an accurate
awareness of personal limitations.
For investors, these
qualities indicate that the founding team will be:
1.
Easy
to work with.
2.
Successful in: a) recruiting top executives to the join
the team, and b) convincing others to invest in the
company.
3.
Willing to step aside at the right time in order to
bring in top, perhaps better qualified, talent to scale
the company.
One of the VCs who
participated in our survey put it this way:
Founders can be the most
brilliant people in the world, but if they are going
to be difficult to work with or can’t attract the
right talent above or below them, we will pass even if
the idea seemed great.
After Initial Funding:
The Only Constant is Change
It is safe to assume
that the founding team will not run the shop through
exit. (“Exit,” in today’s market, is generally defined
as the successful sale of the company or, when
conditions improve, an IPO.) Typically, over the three
to four year period from initial funding to exit as many
as three executives will manage the helm as CEO of the
company.
Top VCs will work with
the founders during the funding process to assess the
team’s strengths and weaknesses. Hiring road maps will
be developed as part of this process. Ideally, pending
changes to the founding team will be disclosed prior to
funding. Often funding is contingent upon the
acceptance by the founding team of this hiring road map.
Less scrupulous VCs –
none of which were involved with Peggy Thompson’s survey
- will hide their intentions until after funding. This
sets the stage for a painful, often contentious,
transition of power.
Funding to Product
Release: Getting Where You Need To Go
While no two hiring road
maps are identical, there are some common steps – some
basic blocking and tackling tactics – that can be
successfully taken by recently funded, early stage
technology companies working to bring a new product to
market.
Initial Funding to Alpha
Product engineers
Product managers
VP Business
Development/VP Marketing
Alpha to Beta
CEO (high profile,
“referencable” alpha/beta clients improve the odds of
attracting a proven, qualified CEO)
VP Sales
An “evangelist” (at this
point, someone on the senior management team must be
qualified and willing to serve as the official visionary
cheer leader for the company)
Beta to Generally Available
and Beyond
Sales executives
Other vacant executive
positions (e.g., CFO)
If you err in any
direction, err in the direction of ramping too quickly
with great, proven talent. Provided your budget and
burn rate will allow, a company full of great talent
will only increase your odds of attracting new investors
to the table.
Managing Titles: Never
Call a Pig a Duck
Paying attention now to
titles will make scaling your organization later an
easier task. Here are some general guidelines:
1.
During
the early stages, avoid using the title Senior VP or
Executive VP. This will make the transition smoother
when a more senior executive is recruited to your
organization.
2.
If
someone is unproven in a VP role, hire him or her as a
Director reporting directly to the CEO. Given them
room to grow into the VP title.
3.
If
feasible, do not offer the title of CEO until absolutely
merited or required. Instead, offer the title of
President & COO to the top executive – particularly
during the early days of an early-stage start-up.
4.
If the
individual managing the finances of the company is not
“bankable” through at least the third round of
financing, that person should hold the title VP Finance,
not CFO.
Combining Functions: Is
it Really Two for the Price of One?
Conventional wisdom may
suggest that hiring a single executive to fill two roles
on a management team will save the company money in the
form of decreased payroll expenses. There are at least
two instances when an early stage technology company
should challenge this conventional wisdom:
1.
VP
Sales & Marketing – Hire a sales executive to fill the
role of VP Sales & Marketing for an early stage company
and he or she will define marketing as lead generation
to the detriment of true product marketing. Hire a
marketing person to fill the role and chances are you
won’t get the skills or style necessary to drive
revenues during the critical early days.
2.
CTO &
VP Engineering – Although you can sometimes find a
product visionary and process-driven product development
team lead embodied in the same person, it is rare to
find those unique and highly diverse characteristics in
a single executive.
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