When you set out to build your business you are looking to build a team of people that all have the same vision or end goal. However, you need diverse skill sets.
Most companies are comprised of some or all of the following
- Board Members
- Executive Leadership Team
- Auxiliary teams
The importance of each part of your team
If you choose to start your business with a partner this will likely be the most important and lasting choice you make for your company.
What to look for- The most important trait in a cofounder is integrity. Without integrity, nothing else matters. You need to be working with someone that you can trust.
To quote Warren Buffett “you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you”
Beyond integrity look for someone who you enjoy being around, is smart, has skills that are highly complementary to your weakness and believes in you and the bigger picture.
Keep in mind you don’t need a Cofounder or business partner but most of the time the right person is incredibly helpful to have as a partner.
What to avoid- The most obvious things are poor ethics or character. However, you probably don’t want a cofounder who has the exact same skill set as you do. If you are amazing at coding and programming you don’t need another coder as a cofounder. You might be better off with a sales/marketing expert.
Think about Steve Jobs and Steve Wozniak. Jobs was master of sales and Wozniak was an amazing builder of computers
Not every company needs investors, but if your company does here are some basic tips.
What to look for- You want an investor group that shares your vision, believes in you and has experience investing in your type of business. Ideally, someone who is a “value add” investor that has connections in your industry that can help you with anything from hiring, to raising capital to important introductions.
Professional investors typically have investment classes that they like to invest in. Each class of investment has different pros, cons and expectations.
Examples: A professional early-stage venture capital investor expects that over 50% of her investments will fail and lose 100% of their value. They make a positive ROI on investing because 10% of their investments will yield extraordinary results of 10-1000x.
Thus, a VC investor is much more likely to be ok with taking high risks.
Inversely, a professional real estate investor typically has a much lower risk tolerance but typically can expect to make money on each deal.
Why this is important- A professional investor who invests in your type of business will typically understand your needs and be far more comfortable with the ups and downs of your business. They may be able to help you with specific problems like contractors for real estate or hiring for VC. You will have many challenges along the way building your company. In an ideal world you want to avoid unnecessary challenges associated with an investor who is not familiar with your style of investment.
However, if someone is open to investing but somewhat new to your class this isn’t necessarily fatal. The key is to give them a clear understanding of the risks and not give away too much power.
What to avoid- You want to avoid people who do not share your vision and people who have unrealistic expectations. You want to avoid giving up too much control, equity or power to people who don’t have your business’s best interests in mind. If you feel like an investor is grinding you down during the investment process, that is not likely to change once they are actually an investor. Remember this is a long term relationship not a one night stand. Choose accordingly.
3. Board Members
Your board will be a group of people who will functionally control your company. Not all businesses have board members or a board of directors. This is typically reserved for businesses that have investors
What to look for– Very similar to investors, look for many of the same things.
Composition of a board- There is no perfect way to build your board of directors, however there are certainly some “wrong” ways to build them. Try to keep your board to a reasonable number of people who are actively engaged in each meeting. Having too many people on your board can make decision making challenging. Typically a board will have an odd number of people for voting purposes, consist of investors, executive staff, and a potential outside party.
What to avoid- Avoid board members who don’t come prepared to meetings with valuable insight. Remember, even though the board is a form of a corporate governance, their job is to help your company be successful.
Investor and Board Relationships- Often times each class of investors will want at least one board seat. So your seed round, series A, Series B etc. each will likely want a place at the table to help the company grow and control their interests.
4. Executive leadership team
Your executive leadership team will directly relate to the size of your company. As your company grows you will look to add pieces to your executive team.
When a company first starts out a few people wear many hats. However, as your company grows you will hire more specific people. Additionally, as your company grows, you as the CEO should be more focused on managing your executive team and less focus on performing tasks.
When you look to add someone new to the executive team, typically look for what role can have the most positive impact on the overall business and also look at where the company might have a potential weakness.
Make sure each new person brings a divergent viewpoint and has a skillset that enhances the company while sharing the overall vision for the greater picture.
Let people grow- As a side note make sure that the people in your organization have room to grow if they want to do so and are proving the right value for your team. Don’t be overly romantic and put someone in a position that they cannot handle, however you don’t always need to hire someone outside of the company.
5. Auxiliary Services
Legal, accounting, design, etc.
Get good work and don’t get robbed.
Potentially easier said than done. Your legal team will be incredibly important. You will need to find a balance of a highly competent lawyer or lawyers to look over your documents but someone that isn’t going to charge you an unreasonable amount of money as a startup.
What to look for- A good lawyer should give you legal advice and some general good business advice as well. They should know best practices for your venture. Bonus points if they can make introductions to valuable people like investors.
The same holds true for the accountants graphic designers etc.
Remember that you are in charge, you run the company and trust your gut instincts to find people that are helping you achieve your goals. At the end of the day you are employing the services and they work for you.
In an ideal world pick people that you have either gotten as references or that have a great reputation.