15 Ways to Build a Winning Team and get Business Funding
Introduction:
Only 3% of companies that seek funding – get it. So far, 100% of companies that properly executed Intelliversity’s guidelines got funded. Why is that?
Entrepreneurs focus on the great ideas. Yet, the teams they build are often more important to investors than the idea. Many investors believe that it is easier to succeed with an “A” team and a “B” idea than an “A” idea and a “B” team. Interesting, yes?
In this article, I take a deep dive into building a winning team and share 15 ways to build your team to increase your odds of getting the funding you need to succeed.
At Intelliversity, our goal is to transform the rate at which innovation is funded. This article touches on one critical piece of the funding puzzle. If you know an innovator, entrepreneur or startup that is struggling, share this information. Robert Steven Kramarz
I’m frustrated. So many founders and investor think of business as an intellectual exercise: They imagine an original idea that solves a problem, get some intellectual property, make sure there’s a growing market, make sure they have legal freedom to operate and a profitable price level, make sure the competition is manageable, then they build a minimum viable product and start promoting. Oh yeah, and they assemble a team of executives with track records so they look good on a company backgrounder. True as far it goes, but if that were all it took, the failure level for venture funded and angel-funded companies wouldn’t be over 90%.
How are we going to get the failure rate of venture capital and angel funded companies down below 50%? That’s the question that haunts me every day. That’s the subject of today’s article and my upcoming book.
The problem’s worse than that because most good ideas never get funded at all. This is an incredible loss of opportunity to both the founders and society.
This is the most important question facing the business funding, venture capital and angel funding community today, because if the failure rate of early stage ventures and startups were significantly reduced, much more capital could be allocated! Can you see the benefit of much more capital for entrepreneurs and for society? Can you see the benefit especially for “impact investing” and “impact investment,” where companies seek to make intentional, measurable, positive impact?
So what’s the problem?
What’s not understood widely (even by investors) is just how critical the details of team composition really are. Every sport’s coach and owner knows it; why don’t business owners and even many investors?
Ask VC investors for the most important factor in business success, and they will almost always say the team. “An A team with a B product is a better investment than a B team with an A product.” Quoting Alan (Al) Davis, serial entrepreneur, investor and author of five books:
“Many aspiring entrepreneurs are in love with their business ideas and expect investors to fall in love with their ideas as well. When they receive a “no” from potential investors, they think the investors “just don’t get it.”
What don’t they get? The entrepreneurs think the investors don’t get how great the business idea is.
Unfortunately, most investors will pass on the opportunity to invest in what appears on the surface to be a terrific business idea led by a less-than-stellar team. On the other hand, seasoned investors will often invest in a “fairly good” idea led by a fantastic team.
Why should this be? The reason is that most startup businesses fail regardless of how terrific they seem at first glance. That is where a great team is essential.”
For the rest of this article which I agree with, see “A-Team and B-Product” Better Than “B-Team and A-Product”.
But this doesn’t go far enough, not by a longshot.
Google the phrase “A team with B idea” and then “B team with A idea” and you’ll get a slew of articles on this subject. Yet they disagree on the details of the composition of a company’s team. But’s the situation is worse than this.
Here’s how bad it really is. I go to lots of pitch-fests and have done so since the years I spent as a member of Tech Coast Angels. Here’s what I’ve always heard: “Our product is… Our market is… Our competition is … Our projected sales are … We’ll get acquired and generate an ROI of … Oh, by the way, the people that are going to do all this, here’s a list. Any questions?”
We usually hear the CEO/founder’s track record, which is, of course, important. Do we even get introduced to the COO, CTO, CFO, and CMO? Not often.
Do we hear about the real issues that make a winning teamwork? Never.
It’s not the entrepreneur’s fault
Here’s the reason why. Fault lies with the investors. And since investors know that team matters, I think the real problem is this:
Most investors DON’T KNOW HOW TO MEASURE A GOOD TEAM.” They just don’t. They don’t have degrees in psychology or organization development, and so don’t really know what to look for. They’re like a man looking at a house to buy with absolutely no training or experience in construction, so all they can judge is what they can see. Likewise, as investors, they are forced to spend most of their energy on aspects of a business (product, market, etc.) that they can understand intellectually.
The good news for entrepreneurs
But here’s the good news: If you come to an investor with a thorough analysis of the aspects of your team that really do matter, you’re going to impress them.
And this may win you investment even if there are flaws in your business plan. This is because investors know that ALL business plans are flawed. NO business succeeds eventually on the basis of its original business plan. There are ALWAYS one or more pivots before success. But only an A team can make the pivots quickly and accurately enough.
So here’s a checklist with which to analyze your team and what to present to investors. I’ve received these factors by interviewing many investors over the last six years, as well as through personal observation of winning and losing teams. Some of these factors are well documented in The Founder’s Dilemmas by Noam Wasserman following a ten-year study of entrepreneurial startups at Harvard Business School:
- Team members have aligned values, both personally and business-related
- Team members have complementary skill sets and leadership styles
- Team members have a passion for the mission, not just a job
- Financial rewards and compensation are clear
- The Vision Master or Execution Master has prior business success in the same sector
- The founder has majority of stock (not 50/50 split)
- The Vision Master is willing to trust and delegate operational details to team
- Team is open to being held accountable
- The team has fun (good chemistry) while working
- Work ethic is high
- Time-expectations of team members are aligned with liquidity prospects of the company
- Agreements and commitments are in writing
- Company standards-of-behavior (code of honor) are clear
- Team members are open to learn, coachable and hence pivot quickly
- Team members have support from the spouses/mates to pursue entrepreneurial goals
This is a lot to chew on in one blog article. And there’s more that are equally important. So I’ll return to this discussion in the coming weeks and give you ways to simplify this analysis.
For now, score your executive team on each of these factors (scoring each on a 1 to 4 scale, where 1 is “bad”, 2 is “caution”, 3 is “good” and 4 is “exceptional.”) If you have even one factor clearly at “1”, can you honestly say your company has good prospects for growth or getting business funding from a smart investor?
Key Take-Away
Get skilled at assessing and reporting the composition of your executive team and you’ll be much more likely to get business funding.
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