Choosing partners to start a new venture is one of the most critically important tasks that the entrepreneur must undertake. And it is a difficult task because it is often not possible to understand a person’s character until that person has spent some time working in the company. The stressful environment of a start-up may bring out traits and responses that were not apparent when the person was selected.
Everyone from investors to bankers to potential customers looks at the founding team of the new venture to determine whether its members have the ability to execute their plans.
Thus it is important to choose partners who have complementary skills and experience and who do not have a history that might be detrimental to the company.
Finding partners with complementary skills means making sure that the team is not overloaded with people who all have the same expertise. A team of three engineers or three financial analysts is generally less attractive than a team with more diverse skills.
Research has suggested that teams with diverse skills make better strategic choices that lead to better performance. In fact, some research has found team heterogeneity to be a significant predictor of long-term performance.
In terms of skills sets, heterogeneous teams also tend to handle the complexity of new ventures better than homogenous teams.
There is also another advantage to forming a multifunctional team. Because members of an entrepreneurial team often invest not only their time but also their money, the burden of gathering resources is shared. The lead entrepreneur also gains access to the network of contacts of other members. This vastly increases the information and resources available to the new venture and enables it to grow more rapidly.
A Benchmark for an Effective Team
Although there are no perfect founding teams and no fail-safe rules for forming them, effective founding teams have the following characteristics.
- The lead entrepreneur and the team share the same vision for the new venture.
- The team members are passionate about the business concept and will work as hard as the lead entrepreneur to make it happen.
- One or more members of the founding team have experience in the industry in which the venture is being launched.
- The team has solid industry contacts with sources of capital
- The team’s expertise covers the key functional areas of the business: finance, marketing, and operations.
- The team members have good industry ratings; this will be important when the team seeks financing.
- The team is free to spend the time a start-up demands and can endure the financial constraints of a typical start-up.
Of course, it isn’t always possible or necessary to put together the “perfect” team from the start. The right person to fill a particular need may not have been determined, or the right person may be too expensive to bring on board during start-up.
In the latter situation, it is important to talk to that person joining the team at a later date and to keep him or her apprised of the company’s progress. Many an aggressive start-up company has eventually wooed an experienced person away from a major corporation.