1. CHAPTER 5

2.  Explain how to effectively build a founding team.  Understand how to work with professional advisers.  Discuss when to add a board of directors.  Compare and contrast the pros and cons of outsourcing with independent contractors versus hiring employees.

3.  Why do teams lead to a better chance for success? ◦ Shared intense effort required by a startup ◦ Loss of one member less likely to result in startup abandonment ◦ Team concept permits expertise across major functional areas: marketing, finance, operations ◦ Skilled team lends legitimacy to the startup in the eyes of lenders, investors, etc. ◦ Diverse experience of the team allows entrepreneur to make better decisions

4. Figure 7.1

5.  Benchmarks for an effective team: ◦ Shared vision between lead entrepreneur and the team ◦ Shared passion leads to shared hard work ◦ Industry experience relevant to the new venture ◦ Solid industry contacts with sources of capital ◦ Functional areas of the business are represented ◦ Team members have good credit ratings ◦ Team members have the time and money to endure startup constraints

6. Table 7.2

7.  Funding is through angel and venture capital.  Founding team consists of scientists-engineers with little market or business experience.  The venture requires professional management outside of the founding team.  The investors help with forming this team.

8.  Virtual teams function differently and affect how the team interacts.  Synchronous-asynchronous communication media alleviate physical distance issues.  Trust is critical to effective virtual teamwork.

9.  Success in the international market depends on the skills and knowledge of the team.  Successful characteristics include: ◦ Extent to which founding team members have traveled or worked abroad ◦ The number of languages they speak  Experienced founding teams likely to form partnerships to facilitate entering the foreign market.

10.  Friends/family members must possess real skills and expertise required by the venture.  They need to share the same work ethic as the entrepreneur.  The advisory board must include outsiders to balance input objectivity.  All relationships are business oriented and must be stated clearly spelled out.

11.  Outsourcing solutions for professional help: ◦ Attorneys ◦ Accountants ◦ Bankers ◦ Insurance agents  “As-needed” assistance for information, assistance in reviewing business concept, and reality checks

12.  Building a board of directors ◦ Legal form of the business influences the decision to have a Board of Directors. ◦ Boards provide beneficial expertise in establishing corporate strategy and philosophy. ◦ Boards of publicly traded companies are elected by shareholders and represent their interests. ◦ Members assist with business development, act as arbitrators for dispute resolution, and give credibility to the new company’s image.

13.  Considerations when choosing board members: ◦ The necessary technical skill related to the business ◦ Significant, successful experience in the industry ◦ Experience running a company at the level the entrepreneur wants to grow to next ◦ Important contacts in the industry ◦ Experience in finance, capital acquisition, or IPOs ◦ A personality compatible with the rest of the Board ◦ Good problem-solving skills ◦ Honesty and integrity, to engender a sense of mutual trust

14. Figure 7.2

15.  Consists of a panel of experts interested in the new venture’s success  Ranges from infrequent meetings and no pay to frequent meetings and provided equity stake in company  Often used when board of directors is not required or in the startup phase  Helps the entrepreneur to overcome “tunnel vision”

16.  The entrepreneur’s personal board who serve as a sounding board, coach, advisor  A safe haven for entrepreneur’s to air their fears, concerns, hopes, dreams  Generally role models and individuals who have businesses and lifestyles like the one the entrepreneur wants to create

17.  All team members should have the required experience and qualifications, and the same goals for the business.  Avoid using only family and friends.  Only give stock incentives after an individual has proven him or herself.

18.  Equity distribution: it is important to clearly understand what each team member is contributing and value it appropriately.  Buy-sell agreement: used to prevent an owner from selling his/her interests in company without consent of the other owners and to determine what happens should owner leave the business.

19.  Independent contractors (ICs) own their own businesses and are hired by the entrepreneur to do a specific job. ◦ Including: consultants, manufacturers, distributors, employee leasing firms, and professional advisers. ◦ Hidden costs:  Searching and contracting ICs  Transferring activities to ICs  Managing IC  Bringing activity in-house

20.  Consultants  Professional employer organizations (PEOs)  Manufacturing support  Sales support