The Startup Team is Crucial for Achieving Success with your Tech Startup
The management team is very important for your startup, so look at it as an investor would
It's often joked about, but it's really true: when presenting a business idea for a startup, investors, aside from the necessary capital and technology, first look at three things: (1) who is the entrepreneur, (2) who is the entrepreneur, and (3) who is the entrepreneur? In other words, "better a bad plan with a good entrepreneur than a good plan with a bad entrepreneur". As an entrepreneur, you don't need to know and be able to do everything. That's why a good business idea cannot do without a good Startup Team. For investors, the team is therefore possibly even more important than the idea itself. Who are the people behind the idea and what are ther competencies? Do they, for example, have experience as an entrepreneur? This also helps to minimize the risk of failure. So, after concluding from the list of questions to test your business idea that your are going to start a tech company, it is important to begin thinking about the members of your management team.
Professional investors are presented with many business plans for evaluation on a weekly basis, but only a few plans are interesting enough and make it to "the next round". One of the main aspects considered during evaluation is your Management Team (MT). Elsewhere, we had already concluded that it's very difficult to sell an idea, hence it's necessary to establish a company (mostly a limited liability company) with a good team to work on the idea. If an investor isn't convinced that there is a Management Team at the helm capable of making the business a success, they will back out. Relevant experience is very important in this regard. Perhaps you should reconsider whether you should include that nice cousin in the team...
The Management Team in a Tech Startup
A Management Team in a tech startup is often composed of the group of people involved from the beginning in the development of the business idea and the company. This group may be supplemented with one or two people who are added due to specific experience. This startup team must launch the company and plan and manage all day-to-day activities. This includes achieving the set goals. If necessary, the team must be able to reassess and adjust these goals. It's clear that this is not easy even in the case of a larger company, and much more challenging for a startup. Therefore, investors assess a potential MT from several different perspectives:
1. Operations, Marketing & Sales
Firstly, attention is paid to demonstrable professional experience based on a track record (Resume). The most important role is, of course, that of the CEO. This is the person who must lead the company and function as its figurehead and driver. If things go wrong, the CEO is the first to be held accountable, and if things go completely wrong, he or she suffers significant damage to their reputation. Do not underestimate this. Additionally, important activities in a startup include daily Operations (COO), responsibility for Finance (CFO), and Marketing & Sales.
Because you may be good in technology, but the management team must also be able to manage the business and financial aspects of the startup. So, who is responsible for finances, marketing, sales, etc., and can they be held accountable? How are these roles divided within the startup team, and do the members know this about each other? Keep in mind that you will be asked about this. In the case of a true tech startup where a significant period of technology development is required initially, it's also possible that, for example, a Marketing & Sales Manager joins later.
For a tech startup, it's important to includ someone in the team from the beginning who has the technical expertise and qualities to lead the development and management of the technology (the so-called Tech Lead). And it's too risky if the technological knowledge is only present in one of the founders of the company. Often, this knowledge is not even documented but resides mostly in the head of the Tech Lead.
The continuity and success of the entire company then depend on this one person, and if that person falls ill, passes away, or simply loses interest, the remaining members are left with no choice but to shut down the company. Gone is the dream. Try to minimize this risk and ensure a Tech Lead in training as soon as possible. Investors will also pay attention to this. So, critically assess your team and think about what skills you need when.
2. Personal Characteristics and Credibility of the Management
Secondly, attention is paid to the personal characteristics combined in the Management Team that actually make the MT function as a team. Think of characteristics such as reliability, practical action, and reputation. Additionally, the directors of a company must be credible in their role in the expertise field in which the company will operate. For example, a non-academically trained former manager of a furniture factory will not be credible as the CEO of a startup developing a new medicine in close collaboration with several academic hospitals. This sounds quite strange, but we have experienced this exact scenario in our startup once. A group of investors wanted to invest in our medtech startup, but they had to provide the CEO. And then they came up with this (indeed very friendly and also smart) CEO who used to be the CEO of a wood pallet manufacturing plant. But no, sorry, that won't work. Additionally, the declared reputations must be verifiable.
3. Entrepreneurial Skills
Thirdly, investors look at the entrepreneurial skills in the team. Bringing a startup to success is generally much harder than fulfilling the role of manager in a large, established company. In any case, it requires completely different skills, such as a more practical hands-on mentality. This is mainly because startups by definition have limited resources. Bringing a startup to success is mainly about managing risks, and the team members must be willing to pursue the great ideal for at least a number of years. The team must not only be willing to take risks but must also be able to calculate, minimize, and if possible, eliminate them. It goes without saying that they must get along well with each other. Remember, being friends is something else...
Legal Expertise and Accountancy
In addition to the composition of the MT, there must also be easy access to more generic skills needed to run a company. Think, for example, of legal and accounting knowledge. A good lawyer can help you draft and review new contracts you encounter. After all, for a company, having a set of good agreements with business partners is vital. An accountant can help you generate monthly financial statements and also maintains your relationship with the tax authorities. Hire these people for their specific expertise so that you can focus on what you are really good at.
You can read about how to properly document agreements within the Management team on the page about what agreements you need when setting up a company.
The Microsoft Team
Recognizing a good idea and a good startup team is the challenge for every investor.... Above is the Microsoft team
from the early days with Bill Gates at the bottom left.