1. Entrepreneurship Canadian Edition William D
Entrepreneurship Canadian Edition William D. Bygrave, Andrew Zacharakis, Sean Wise

2. BUILDING THE FOUNDING TEAM
Chapter 7

3. Learning Objectives The Talent Triangle
Learning Objective 7.1 Describe the three elements of the talent triangle.
Power of the Team
Learning Objective 7.2 List the benefits of teamwork to entrepreneurs.
Where Do You Fit?
Learning Objective 7.3 Explain the various roles entrepreneurs can take in their business.
How to Build a Powerful Team
Learning Objective 7.4 Explain how entrepreneurs build successful teams.

4. Learning Objectives
Bootstrapping: Building The Team Based On Stage-Of-Venture Life
Learning Objective 7.5 Explain how entrepreneurs build teams based on stage-of-venture life.
Compensation
Learning Objective 7.6 Describe the various forms of compensation entrepreneurs can offer their teams.
External Team Members
Learning Objective 7.7 Describe the external team members entrepreneurs may hire.
Keeping the Team Together
Learning Objective 7.8 Explain the issues entrepreneurs face in keeping their team together.

5. Today’s Key Concepts Talent Triangle Compensation for Founders
Why 2 > 1
Dilution
What to look for in cofounder
Premature Scaling
Boards of Advisors vs Boards of Directors
Bottom up vs Top Down Hiring
7 Advantages of a Team
6 or 9 theory
Finding Co Founders
Startup Hiring Mistakes
Bootstrapping

6. Entrepreneurship Is a Team Sport
Grow beyond self-employment with the support of a team
Team can include partners, employees, advisors, family, vendors, investors
Do more with others than you can alone

7. Higher social level of support
Seven Advantages of a Team
Feedback
Increased skill set
Moral support
Capacity innovation
Extended network
Higher social level of support

8. What Is a Well Rounded Management Team?

9. Get feedback on your actions
Considering Your Role
Evaluate your skills
Use your strengths
Get feedback on your actions
What position can you best fill? Don’t be crippled by your weaknesses, but also don’t be oblivious to them either.

10. Staffing Plan Role Primary Duties Person Filling Role When Needed
Talent Triangle
Product Development
Develop prototype
Lead entrepreneur
Now
Operational experience
Market Development
Customer research
Channel development
Founder
Domain knowledge
Finance
Raise outside capital
To be determined
Next month
Business acumen
Production
Identify manufacturing partners
Three months from now
Operational knowledge

11. Find people for positions
Building A Powerful Team
Create a staffing plan
Find people for positions
Your personal network
Family
Friends
Your advisor network
Your extended network
Professors
Alum

12. Resources For Creating A Team
Founders
Often little or no pay
in the beginning
Salary from another job or support from a spouse
Prepare for diminished personal cash flow
Employees
Raise capital to pay salaries
Offer stock incentives
Start positions as part-time until there’s enough cash to pay full-time

13. The Don’ts Of Double Employment
Do not use your employer’s resources
Do not build your venture while on the job
Do not expropriate intellectual property from your current employer
Do not solicit your employer’s customers
Do not conceal the fact that you are founding your own venture

14. Types of Compensation Founder Shares Option pool Restricted stock
Compensation name
Advantages
Disadvantages
Founder Shares
Attracts co-founders
Dilutes owner’s equity
Option pool
Ties employees goals to those of the company
Employees may leave the company if the price falls
Restricted stock
Vested over time, expensed at current share price
Expensed at current price
Stock appreciation rights
Low cost to the company
Phantom stock
Employees do not receive equity
Needs cash to be exercised

15. Quick Note of Valuation
An Art not a Science
50/50 Company / Investor
Set by Investor (value is in the eye of the beholder)
PostMV = PreMV + Cash Invested
PreMV = PostMV – Cash Invested
Founder % = PREMV
PostMV
Investor % = Cash Invested

16. Founder’s Dilution over time

17. The Dilution Effect: An Example
Event
Entr. Share
Co-Founder
Family/Friends
Angels
Option Pool
CEO
CFO
VP Sales
VC Rnd 1
VC Rnd 2
Total
Valuation (000)
Ent’s. Value
Founder
60%
40%
100%
F+F
48%
32%
20%
$1,000
$480
Angel
22%
14% 9%
15%
$2,500
$540
Series A 8% 5% 3% 6%
10% 7%
43%
$7,000
$562
Series B 4% 2%
29%
$30,000
$1,605
Sold to F500
$100,000
$5,349
Payout
$3,566
$2,229
$9,905
$3,714
$6,667
$2,000
$4,667
$28,571
$33,332

18. External Team Members Virtual Team Accountant Outside investors
Board of directors
Lawyers
Board of advisors

19. Board of Directors vs. Board of Advisors
Both provide guidance to senior management
Both can fill holes in the Talent Triangle
Both can facilitate client introductions
Both generate “signal” to investors
But one comes with liability, regulatory compliance and requires insurance
BoD is elected by Shareholders
BoA are appointed by CEO

20. Bootstrapping
Bootstrapping refers to the starting of a self-sustaining process that is supposed to proceed without external input.
Running your startup without out investor money.

21. Bootstrapping Ideas Defer legal fees Take your product to a festival
Use QuickBooks
One nice suit
Look for shared office space
Use customers not models
Don't use a PR firm
At first, use WordPress for your website
Write a white paper
Think from your customer backwards
Network

22. Jack Welch’s 6 or 9 Theory RANK and YANK
Let everyone know where they stand, and on what basis
Fire the bottom 10%
Promote the top 10%

23. Bottom up vs. Top down Hiring
Bottom Up is hiring from within
Top Down is brining in top execs from the outside
Bottom Up Pros
Bottom Up Cons
Top Down Pros
Top Down Cons
Rewards Effort
Group think
Brings in fresh vantage points
Headhunter costs
Less turnover, less misfits
No new ideas
Steals competitors leaders
May not fit culturally
Secures Corp Culture
Hire for the Role
Secures IP
Proven commodities
Encourages others
No recruiter costs
Hire for the person

24. 5 Big Mistakes When It Comes to Hiring
Hiring someone just because you know them.
Hiring someone to "help them out.“
Taking someone on as a partner because you can't afford to hire him.
Hiring someone to do a bit of everything.
Hiring for the job you hate.
Brad Sugars, Entrepreneur Magazine

25. What is the advantage to strong corporate culture?
Less Turnover
Easier to attract future employees
Evangelical employees
Leads to more 9s, less 6s
Higher Efficiency
Requires less oversight
Less sick days

26. Strong vs. Weak Culture
Aaltio-Marjosola, I. (1994). From a “grand story” to multiple narratives? Studying an organizational change project. Journal of Organizational Change Management, 7(5),

27. Interpersonal conflicts
Problems Faced by Startup Teams
Burn out
Interpersonal conflicts
Family pressure

28. Premature Scaling #1 Cause of Startup Death? Premature Scaling
“Spending money beyond the essentials on growing the business (e.g., hiring sales personnel, expensive marketing, perfecting the product, leasing offices, etc.) before nailing the product/market fit.”  Nathan Furr
Why?
uses up your precious cash more quickly, which means you have less runway to discover product / market fit
makes you less agile, harder to move a larger ship than a small boat
Match growth to life cycle

29. Case: Zeo, Inc.
What are the advantages/disadvantages of founding a company with your friends?
How did the founders identify and entice stakeholders to join their board of advisors?
Why did the founders seek a new CEO? Would you do that or would you want to run the business yourself? What was the process they used to select the CEO?
How did the role of each founder change as the business grew?
How do you maintain the culture when the company is professionalizing with a large top management team?

30. Recap Entrepreneurship is a team sport
Determine who should be on the team
Create a culture so that team can flourish
Maintaining a team is an ongoing effort
Hire 9s, fire 6s
Bootstrap as long as you can
Don’t scale prematurely

31. COPYRIGHT
Copyright © 2015 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.