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How to Build a Powerful Team

Your staffing plan is the first step in building a powerful
team. Your next challenge is to identify the individuals to fill the gaps. How
do you identify the best candidates? The simple answer is to tap your personal
network and the network of your advisors, but you’ll want to go outside that
network to broaden the pool of quality candidates. Work with your professors to
make contacts with alumni. Search your college’s alumni database to find people
in the right industry and with the right kind of position. More often than not,
alumni are willing to speak with current stu- dents. Even if the alumnus isn’t
willing or able to join your team, she may be able to recommend someone from
her network. You should also check with your investors, accountant, lawyer, or
other people affiliated with your efforts (if you have these people lined up
already). Oftentimes, entrepreneurs will hire a lawyer or accountant earlier
than they might need that individual just to tap into his or her network.
Moreover, many law firms are willing to work for promising new ventures pro
bono, at reduced rates, or for deferred compensation. Thus, it may make sense
to hire your lawyer early in your launch process. The key to your success is
continually building your network. This will help you meet challenges beyond
filling out your team How to Build a Powerful Team

Your staffing plan is the first step in building a powerful
team. Your next challenge is to identify the individuals to fill the gaps. How
do you identify the best candidates? The simple answer is to tap your personal
network and the network of your advisors, but you’ll want to go outside that
network to broaden the pool of quality candidates. Work with your professors to
make contacts with alumni. Search your college’s alumni database to find people
in the right industry and with the right kind of position. More often than not,
alumni are willing to speak with current stu- dents. Even if the alumnus isn’t
willing or able to join your team, she may be able to recommend someone from
her network. You should also check with your investors, accountant, lawyer, or
other people affiliated with your efforts (if you have these people lined up
already). Oftentimes, entrepreneurs will hire a lawyer or accountant earlier
than they might need that individual just to tap into his or her network.
Moreover, many law firms are willing to work for promising new ventures pro
bono, at reduced rates, or for deferred compensation. Thus, it may make sense
to hire your By Invitation Only: How We
Built Gilt and Changed the Way Millions Shop documenting their story to inspire
entrepreneurship, especially in women.28

Another good source is working with family members. It can
be difficult, because you are mixing a professional relationship with an
already existing personal/familial relationship. John Earle, the founder of the
$3.8-million apparel company Johnny Cupcakes has found a happy medium with his
CFO/mom, “Momma Cupcakes.” Lorraine Earle, a former office manager at a big Boston
law firm, encouraged and bankrolled her son’s business venture. In the early
days of Johnny Cupcakes, she took on bookkeeping duties while John was the
creative CEO. As the orders came piling in from the Internet, Lorraine’s house
became overrun with boxes of shirts.30 With Johnny Cupcakes literally taking
over her life at home, Lorraine decided to quit her job and become CFO of her
son’s company. First on her agenda was to locate a warehouse. As polar
opposites, they operate under a system of checks and balances. Lorraine
explains their business relationship, “He doesn’t care about the money. He
doesn’t care about the bottom line. So I have to be extra diligent. I have to
say “no” more than when he was a kid.”31 Similar dynamics occur when you hire
friends. You need to relate to your friends in a different manner—a more
professional manner—and this can stress the friendship. Recognizing the
consequences of this new dynamic is the first step toward managing it, but
there is more that you can do.

Before entering into a team relationship with family or
friends (or anyone, for that matter), lay out as much as possible the previous
accomplishments, industry profile, and years of experience that person has and
the roles and responsibilities that person will fill in your organization going
forward. Define decision and reporting responsibilities. We are not saying you
need to have a highly formalized structure at an early stage of your venture’s
development, but you do need to clearly state expectations, tasks, and
objectives. We have seen more teams self-destruct because of personal conflicts
than because of lack of funding.lawyer early in your launch process. The key to
your success is continually building your network. This will help you meet
challenges beyond filling out your team shared a love for high fashion and
sample sales. The two reconnected at a HBS mixer for new students and they
found that their skills complemented each other’s very well and their
relationship added a level of trust that can only be found between friends.
After securing Double Click co-founders Kevin P. Ryan and Dwight Merriman as
early team members, they started Gilt Groupe—an online flash sale Web site
featuring today’s top designer labels. Gilt Groupe became wildly popular after being
featured on the daytime talk show The View and in May 2011 was valued at $1
billion after it raised $138 million from investors, including Goldman Sachs
Group and Softbank Group.27 In April 2012, the duo released a book titled
Although the circumstances surrounding the fallout between Facebook co-founders
Mark Zuckerberg and Eduardo Saverin remain mysterious, Zuckerberg forced
Saverin from the company. Saverin then sued Zuckerberg and Facebook.32 The
moral of the story is that founder conflict occurs and can escalate to the
point of endangering the company. Setting expectations and responsibilities in
advance of engaging in a relationship can help to mitigate damaging conflict.

It is not at all uncommon for friends to dive into starting
a business before they have really considered how it could affect their
relationship. An excellent example unfolds in the movie Startup.com. This
outstanding documentary follows two close friends through the rise and fall of
their company during the Internet boom and provides a dramatic example of how
working together can affect the relationship of two lifelong friends. Although
Kaleil Tuzman had to make the difficult and painful decision to fire his friend
and co-founder, Tom Herman, the two were ultimately able to piece their
friendship back together. This is just one example of the difficulties you may
face. Again, the key is to have clear expectations of each other and understand
that pitfalls will test your friendship.

Once you have identified the right co-founders or team
members, there is still the hurdle of opportunity costs. The best candidates
often are already employed in good jobs, frequently in the industry where you
will be competing. That means at some point they will need to leave a
well-paying job to join your venture, and most new businesses can’t afford to
pay market rates during the cash-strapped startup phase. In addition, there is
much greater risk that a new business will fail, which compounds the personal
opportunity costs that co-founders and early team members face. As the lead
entrepreneur, you need to convince potential candidates that the job itself is
intrinsically rewarding and growth oriented (team members get to do something
they like and be part of creating something new and exciting) and that in the
long run the financial payoff will be much greater. A young company offers
potential team members opportunities to grow into higher management positions
(and therefore higher deferred tax–advantaged pay) than might be possible at
their current company and to have some ownership in the new venture (through
either options or founder stock). These are both powerful tools for convincing
talented candidates to take a risk with your company. The more successful the
targeted candidate, the harder it will be for you to successfully make these
arguments; yet our research indicates that many people are willing and eager to
jump into the entrepreneurial fray for the right opportunity. Make sure to
present your best case. Sell candidates on the vision and back that up by
showing them what you’ve accomplished to date, such as building and testing a
prototype or securing outside financing.

External Team Members

Although your core team is critical to your venture’s
success, you will leverage the team’s efforts by building a strong virtual
team—that is, all those who have a vested interest in your success, including
professionals you contract for special needs, such as lawyers, accountants, and
consultants. It also includes those who have invested in your business, especially
if they have valuable expertise. For instance, you’ll be well served if you
secure angel investors who are successful entrepreneurs in your industry. You
may also be able to gain help from those who haven’t financially invested in
your firm but are interested in helping new businesses succeed, perhaps by
serving on advisory boards for new companies. Finally, at some point you’ll
likely pull together a board of directors, which is required by law if you are
incorporated. Let’s examine each of these outside team members in more detail
Outside Investors

When you are considering bringing on outside investors,
whether in the form of angel investors or venture capitalists, never
underestimate the value these team members can bring with their experience and
wisdom. For many angel investors in particular, the experience of working with
a startup is as much about the satisfaction of mentoring a young entrepreneur
as it is about financial gain. Take, for example, the story of Norm Brodsky,
the long-time entrepreneur and contributor to Inc. magazine. In describing his
decision to invest in David Schneider’s New York City restaurant, he said,
“Yes, making money is important. I wouldn’t go into a deal unless I thought I
could get my capital back and earn a good return. But I don’t really do this
type of investing for the money anymore. I’m more interested in helping people
get started in business. Whatever I make is a bonus on top of the fun I have
being a part of it and the satisfaction I get from helping people like David
succeed.”

For an aspiring entrepreneur, finding an investor with that
kind of an attitude is invaluable. As David Schneider put it, “I really liked
the idea of having somebody I could go to who cared about this place as a
business . . . . It’s like he’s always pushing people to better themselves. He
wants you to move on, to expand, to grow.”42 In business, experience is the
greatest competitive advantage, and an investor can bring that asset to a
fledgling company. But Schneider’s comments also point to another key benefit
of having a strong investor on your side: You’ll have someone to hold you
accountable and keep you focused. Many entrepreneurs underestimate the
challenge being your own boss can pose. When the going gets tough or decisions
get complicated, it can be incredibly helpful to have someone prodding you
forward. For all these reasons, choose carefully if you decide to raise capital
through angel investors.

Board of Advisors

A board of advisors can be extremely beneficial to the
early-stage company. Unlike a board of directors, a board of advisors has no
fiduciary duty to shareholders. Instead, the goal is to offer a source of
expert guidance and feedback to the lead entrepreneur. In choosing a board, you
should look to enlist people with expertise in your field and a sincere
interest in mentoring an emerging business. Good sources are your professors,
current and former entrepreneurs, professional investors such as venture
capitalists and angels, suppliers for your firm, and individuals who may have
insight into your target customers. Beyond advice, this group can expand your
personal network and provide leads to new customers or investors. In fact,
board of advisor members will often become investors if your firm goes through
a private placement.

One final note on boards of advisors relates to
communication. Many first-time entrepreneurs struggle to strike the right
balance between too much and too little com- munication. Keep in mind that, if
you have developed a board of powerful advisors, they are busy individuals.
Don’t e-mail or phone them every time you have a question. Instead, accumulate
questions and think about which ones are most critical to your firm and where
the advisor can add the most value. Do some preliminary legwork to find
alternative answers to these questions and options you might be inclined to
pursue. If you are prepared, you will have a more productive conversation with
your advisors, and they will be even more supportive of your future efforts. The
flip side to overcommunicating with advisors is touching base with them
rarely—or only when you want help raising money. This type of communication
suggests the entrepreneur is interested only in the advisor’s network, but the
advisor is less inclined to open up that network unless he has a strong
understanding of the company’s progress. Produce a monthly or bimonthly email
newsletter that keeps all your important stakeholders, including your board of
advisors, informed about the company’s progress. This newsletter should be
short and concise so that it will get read. More often than not, the newsletter
will prompt an advisor to contact you with some useful input or connection to
someone in her network. Properly managing your board of advisors will pay
dividends, so don’t neglect it.

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