Entrepreneurship
WPMM: EPSH
Winter 2015
Sebastian Schäfer [email protected]
Thomas Funke [email protected]
Research: What entrepreneurs need
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• Leadership qualities, inspiration, enthusiasm
• Creativity, vision, openness
• Persistence
• Responsibility
• Experience
• Team player qualities
• Pragmatism
• Analytical skills
• Negotiation, presentation, “selling” skills
• Etc.
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Investors: What do they look at?
Business founders / management team: Does it cover technological and economic/market expertise?
Are they willing to take new members? Do they show growth orientation?
• “We look for a strong technical founder and a sales oriented entrepreneur … typically it is at least two people, sometimes three.“ (Siegelman)
• “I tend to invest behind an entrepreneur, not behind a professional managers as the CEO. Often the person who can professionally manage as CEO in the later stages is not as effective in the earlier stages. It requires a different skill set…“ (Siegelmann)
• “If we have a founder who is in it for the lifestyle or who is unwilling to upgrade the team, we have a conversation…“ (Hoel)
• “One thing we don’t do is back a wild eyed technologist…”(Wang)
• “We think about the CEO. One trait of all our successful companies is that the CEO we backed at funding was still the CEO at the sale of the company or IPO (…) We spent a lot of time focused in the CEO and the members of the management team: the quality of people they attract, their biases, their strong points and their overall depth.“ (Wang)
• “We want to keep the existing team if possible…we get a little concerned when the entrepreneur come in and says I‘m in this to flip it in a year (…) if they are not in it for the tough times, then it‘s definitely a problem.“ (Simon)
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How many ventures start in teams?
2014: Overall Founding Rates: 23% Team Founders
2014: High Tech Start-ups: 76% Team Founders
1980: High Tech Start-ups: 20 % Team Founders
How many Cofounders?
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0
5
10
15
20
25
30
35
40
1 2 3 4 5 6 7
Web & Software
Technology
Life Sciences
% o
f st
artu
ps
Sources: Data for Technology and Life Sciences adopted from Wassermann (2012: 74); data for Web and
Software taken from own dataset
# Founding members
How many Cofounders?
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Team vs. Solo
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Form a team if
• Lack of knowledge, social and financial capital
• Task preferences (delegation)
• Collaborative Style (share ideas)
• Support and Validation (get encouraged)
• Volatile industry context (bear together)
Otherwise stay solo
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1,908
1,668
1,742 1,779
Acquired Closed Operating All
ø education level within founding team
Education level
3,743
3,996
3,606
3,712
Acquired Closed Operating All
ø prior jobs within founding team
Prior jobs
1,458
1,636
1,492 1,506
Acquired Closed Operating All
ø industry-variety within founding team
Industry-variety
Education level: Average education level for founder team (1= Bachelor degree, 2= Master degree, 3= MBA, 4= PhD)
Prior work-experience: Average amount of total prior jobs of founders.
Industry variety: Average amount of previous jobs in different industries of founders.
Composition of Founding Teams (1/2)
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Composition of Founding Teams (2/2)
Serial Entrepreneurs: Percentage of ventures with at least one founding team member, who founded one or more ventures before
63%
59% 59%
60%
Acquired Closed Operating All
ø share of founding teams with serial
entrepreneur
Serial Entrepreneurs
72%
54%
65% 65%
Acquired Closed Operating All
ø share of founding teams with industry-specific experience
Industry-specific experience
37%
35%
40%
38%
Acquired Closed Operating All
ø share of founding teams with high executive
experience
Executive experience
Industry-specific experience: Percentage of ventures with at least one founding team member with previous jobs in the same industry.
Executive-experience: Percentage of ventures with at least one founding team member, who have been in more than 2 executive positions before.
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Founding Teams from an Investor’s
Perspective
„Always consider investing in a grade A man with a grade B idea.
Never invest in a grade B man with a grade A idea.“
Georges Doriot
„I invest in management, not ideas.“
Eugene Kleiner (Kleiner Perkins)
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Investors: What do they look at?
Team First time founder or serial entrepreneur?
Team or one-man show?
Indication, previous proofpoints of entrepreneurial spirit? Crisis resistant?
Fundraising skills? How much babysitting will they need strategically?
What HR gaps have we identified? What are the obvious weaknesses of the
team?
Are there any other red flags we could see?
Clear strenghts of the team, where are we sure that they will perform well?
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Why do startups fail?
35 %
65 %
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Importance of the Team
No business is so good that the wrong people can't mess it up. And no business is so bad that the right people can't fix it. […] So if you don't get the people part of the equation right, everything else is really immaterial.”
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Team: What is it really?
T E A M O L L
I N
N D E R E R
A C H T S
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Team: What is it really?
In 2014 we interviewed a 107 Startups in Austria and Germany about
their major challenges in team constellations (average age: 2,5 years)
(5=lowest; 1=highest)
4,08 Uncertainty about splitting the pie (equity splits)
1,96 Personal conflicts
1,87 Making strategic decisions
1,81 Clear goals all team members are working towards to
1,61 Clear responsibilities for team members
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Who is the better Co-Founder?
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Who is the better Co-Founder?
The No. 1 need when searching for a co-founder:
= highly qualified, like-minded (business wise) and motivated individuals!
Be honest! How many of your family and friends are this? Statistics say…
Only 10 %!
The propbabilty that a team member will leave when the startup is founded
within a family is…
28,6 % higher!
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Clean Tech Teams: Relationships
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How important is Communication?
No Communication
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How important is Communication?
Perfect Communication
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The 5 Problem Sets of Team Relationships
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How can I test those problemsets?
- “Gut Feeling”: Do you trust your co-founder?
- Dealing with stressful situations
- Dealing with uncertainty
- Dealing with negotiations
- 360 Degree References
- "Spend a lot of time"
- Salaries
- Consistency in process
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The answer: Find the right team
Finding the right partners to work with is a crucial
way to success!
Plan carefully whom you work with…!!
Don’t choose your partners because of comfort!
The No Asshole Rule by Robert Sutton (http://ecorner.stanford.edu/authorMaterialInfo.
html?mid=2571)
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The answer: Find the right team
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Team Issues
„Every success, every mishap, every opportunity seized or missed is the result of a decision that someone made or failed to make. At many companies, decisions routinely get stuck inside the organization like loose change. But it’s more than loose change that’s at stake, of course; it’s the performance of the entire organization”
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Challenges when making decisions
(1) Cognitive and Affective conflicts (2) Consensus orientation (3) Communication (4) Formalization (5) Intuition (6) Including external people
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Clean Tech Teams: When should the founding
team be complete?
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Clean Tech Teams: CEO change
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Team Issues
What is the difference between? Develop profiles and activities for each type.
1. Mentor
2. Advisor
3. Tutor
Time: 10 Min
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Team Issues
Distiguish between
1. Mentor = helps with everything and cares about „good feeling“
2. Advisor = specific backgroud and network
3. Tutor = controls on a weekly basis
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Team Composition
First, obvious reasoning:
Functional, skill related Roles
Lets play the game of finding a Chief for everything!
(CEO, CFO, CSO, COO, CVO …)
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Team Composition
Functional, skill related Roles (CEO, CFO, CSO, …)
What is better: Homogeneity or Heterogeneity?
Pro Heterogeneity: Better decisions, early detection of problems etc.
Pro Homogeneity: less „affective“ conflicts, more trust, sharing same interests
Attention: Birds of a feather flock together!
What most of the time nobody thinks of or evaluates…
Personal, soft-skill related Roles
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The Consultant
Short description: Constantly analyzes the current situation and derives recommendations from the analysis
Strengths: ability to learn, empathy, apprehension
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The Boss
Short description: Leads, gives orientation, keeps team together, supports and motivates
Strengths: initiative, risk taking, ability to motivate, ability to make decisions
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The Artist
Short description: asks non-conventional questions, helps to have different viewpoints, impulsive
Strengths: creativity, ability to communicate, open, risk Initiative, risk taking, ability to motivate, ability to make decisions
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The Maker
Short description: focus on execution, pushes others
Strengths: endurance, discpline, ability to motivate
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The Enthusiast
Short description: brings the fun, is able to inspire
Strengths: team worker, optimist, ability to communicate and motivate
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The Organizer
Short description: plans and controls, has the overview
Strengthes: flexibility, team worker, structured, reliable
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The Helper
Short description: always there
Strengthes: Initiative, Open, Empathy
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Entrepreneur‘s Dilemma: Control vs.Money
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Rewards: Equity Splits
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Rewards: Equity Splits
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Rewards: Equity Splits
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Rewards: Equity Splits
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Rewards: Equity Splits
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Rewards: Equity Splits
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Rewards: Equity Splits
Discuss: When to split?
73 % do it right away
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Rewards: Employee Equity
ESOP = Employee Stock Option Plan
Based on this Plan Employers to get equity in the company
The Plan is really critical!
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A couple more facts…
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Team size: What is the optimal size?
The team should be fed by two pizzas. If they are still hungry, the team is too big.
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Team size: What is the optimal size?
In the beginning its always too small and people are missing.
After a while there are always too many people!
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Possible Exam Questions
- If you do want to start a business and you need a co-founder: What would the steps you would make to find one? What would you pay attention to while searching?
- What kind of roles are necessary in a startup team? What needs to be done if certain roles are missing in the beginning?
- How can cofounders be rewareded? What do you need to take care of if you do agree on certain equity splits?
3 Cases
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Thank You!
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