1. Chapter 6 Successfully Building a New Venture Team
Entrepreneurship: Successfully Launching New Ventures
Modified from Barringer and Ireland (2006)

2. What is a New Venture Team?
Group of founders
Key employees
Advisers
They move new venture from an idea  functioning firm
The team is built as the firm can afford to hire people
The team involves more than employees
Also can include:
Boards of directors
Boards of advisers
Other professionals who provide direction and advice

3. Why is a New Venture Team Important?
Fundamental Problem for New Firms: Liabilities of Newness
The basic concept:
New ventures have a high likelihood of failing because the people who start the firm can’t adjust quickly enough to their new roles and because the firm lacks a “track record” with those in external environment
One way to overcome liabilities of newness is assembling a talented and experienced new venture team
They have a track record (e.g., via their experience)
They can provide legitimacy for external others

4. 7 Elements of a New Venture Team

5. Element 1: Founder(s) of the Firm

6. Element 1: Founder(s) of the Firm
Founders are the individual or team of individuals who initiate the start of the firm and who have equity stakes in the venture
Important factors about founder(s):
Founder(s) characteristics:
Characteristics (e.g., experience, background, personality, etc.) and early decisions have major impact on how new venture team takes shape
Issues associated with founding team size:
50% to 70% of all new ventures started by more than one person
Research suggests that new ventures started by a team have an advantage
More talent
More ideas
Psychological support
Faster firm growth
Better network quality

7. Element 1: Founder(s) of the Firm
Qualities of Successful Founders:
Higher education: important entrepreneurial skills enhanced via education
Prior entrepreneurial experience: helps to avoid costly mistakes; the corridor principle
Relevant industry experience: have more well established and appropriate network contacts; more applicable management and marketing expertise
The ability to “network” effectively: aids in gaining know-how; access to capital; more customer referrals

8. Element 2: Key Employees

9. Element 2: Key Employees
Recruiting Key Employees: When, how, why?
When and why?...it depends
Startups vary in how quickly they need to add personnel
Sometimes, founders work alone for a while and other times employees are hired immediately
These decisions are based on necessity, financial abilities, knowledge specialization, time issues
How?...depends on type of personnel needed
Networks
Placement offices (e.g., college placement)
Executive search firms (e.g., head-hunting firms)
Advertising the position

10. Element 3: BODs

11. Element 3: BODs What is a BOD? Why have a BOD?
Panel of individuals who are elected by a corporation’s shareholders to oversee the management of the firm
Why have a BOD?
Legally, if new venture is a corporation, it is required to have a BOD
The firm can gain legitimacy (and lessen the likelihood of succumbing to liabilities of newness) if the BOD consists of well-known and respected people
Most useful role is to provide guidance and support the firm’s managers
Who in on a BOD?...it depends
Typically made up of insiders and outsiders
An inside director is a person who is also an officer of the firm
An outside director is someone who is not employed by the firm
Often prior corporate officers
Corporate officers from other firms (which can sometimes become an interlock)
Community members
Much research suggests certain mixes of BODs is important for venture development

12. Element 3: BODs What do BODs Do?
BODs have three formal responsibilities.
Appoint the officers of the firm
Declare dividends
Oversee the affairs of the corporation
When do they meet and how are they paid?
How frequently?
Most BODs meet 3-4 times a year
How are they compensated?
More likely to pay BODs in company stock or ask them to serve voluntarily versus paying a cash honorarium
Why do you think that is?

13. Element 4: Other Professional Advisors—Board of Advisors

14. Element 4: Other Professional Advisors—Board of Advisors
What is a BOA?
Panel of experts who provide counsel and advice on an ongoing basis
Informal group with no legal responsibility for the firm and their advice is nonbinding
Easier to recruit due to fewer time requirements and no legal liability
Why have a BOA?
Can be for general purposes or to address a specific issues
Provide guidance
Lends credibility/legitimacy
Crotty Advisory Council
Black Inventor’s Club

15. Element 4: Other Professional Advisors—Board of Advisors
Guidelines to Consider when Organizing a BOA
Make sure they play a meaningful role in the firm’s development and growth
Without a meaningful role, advisors will become disillusioned
Look for BOA members who are compatible and complementary in terms of experience and expertise
When inviting people to be on BOA, be sure to carefully spell out the “rules”
What their role is
How to handle access to confidential information

16. Element 4: Other Professional Advisors—Lenders & Investors

17. Element 4: Other Professional Advisors—Lenders & Investors
Why do Lenders & Investors Act as Advisors?
They have a vested interest in the companies they finance, often causing them to become involved in helping
They help new firms by providing guidance & lending advice
They assume the natural role of providing financial oversight
Because of their financial interest, they are very helpful for recruiting customers
Important Considerations with Lenders & Investors
Their goals are sometimes not inline with entrepreneurs’
They often want a liquidity event
Often they require substantial controlling power and profit percentages per the lending/investment agreement

18. Element 4: Other Professional Advisors—Other Professionals

19. Element 4: Other Professional Advisors—Other Professionals
There are hosts of other professionals that can make up a firm’s new venture team
Attorneys for legal issues (in Chapter 8)
Accountants for financial issues (in Chapter 7 and in Dr. Janney’s class)
Business consultants
Business Consultants
A business consultant is an individual who gives professional or expert advice.
Business consultants fall into two categories:
Paid consultants
Consultants available for free or at a reduced rate via nonprofit or governmental agency
Small Business Administration (SBA) at national and local levels
National SBA:
Columbus SBA:
Small Business Development Centers (SBDC)
At UD:
At Wright State U:
In Springfield:
Business Incubators
University Entrepreneurship Centers