Section 4 Building the Team: Finding the Right Friends

1. Section 4 Building the Team: Finding the Right Friends  Intro: One of the more important -- some would say the most important -- part of your the new venture is the team you put together to make it all happen. We’ll spend the next few minutes talking about what we mean by “Team,” the various components of the Team, why it’s so important, and how and when to add different Team members. We’ll also be sure to leave time for your questions at the end. Note to speaker: Depending on your style and comfort level you may want to take questions during the presentation -- the choice is yours.Intro: One of the more important -- some would say the most important -- part of your the new venture is the team you put together to make it all happen. We’ll spend the next few minutes talking about what we mean by “Team,” the various components of the Team, why it’s so important, and how and when to add different Team members. We’ll also be sure to leave time for your questions at the end. Note to speaker: Depending on your style and comfort level you may want to take questions during the presentation -- the choice is yours.

2. Definition of a Team Group of individuals who have the SAME GOALS & OBJECTIVES and will work toward those ends.

3. Advantage of a Team A team brings more: Talent Resources Ideas Professional contacts Most importantly, it’s the psychological support each can offer one another.

4. Why Build a Team? What do investors invest in? “A” team and a “B” product vs. “B” team and an “A” product

5. Foundations for Building the Team Why are you doing this? Who are your partners? What motivates your partners? Who is managing the company? Exit strategy?

6. New Ventures Have a High Propensity to Fail Reason: The liability of newness The team can’t adjust quickly enough to their new roles and because the firm lacks a “track record”. A Solution: Assembling a talented and experienced team that can overcome these limitations.

7. The Founding Organization Founder(s) Their early decisions have a significant impact on the manner in which the new venture team takes shape. Size of the Founding Team 50% - 70% of all new ventures are started by more than one individual. As a result new ventures started by a team rather than a single entrepreneur have a greater probability of success.

8. Management team Board of directors/advisors Mentor(s) Service providers Investors Five major components of the team Most people tend to think of the word “Team” as synonymous with “Management Team.” As you can see, we take a broader view -- the Team, as we define it, has five major components, each with its own distinct contribution to make to the success of the venture. We’ll spend most of our time now talking about the first four, as you’ll meet with and discuss the different kinds of investors and their role later in the day. Most people tend to think of the word “Team” as synonymous with “Management Team.” As you can see, we take a broader view -- the Team, as we define it, has five major components, each with its own distinct contribution to make to the success of the venture. We’ll spend most of our time now talking about the first four, as you’ll meet with and discuss the different kinds of investors and their role later in the day.

9. Developing the management team Add skills to the mix as needed Outsourcing and/or part timers can work well at the beginning Your investors, boards, advisors, mentor can help you find the right people Bullet 1 -- This is often true with biotech startups where the early stages may be almost completely technical; however you will want people who can guide you with regard to things like IP, licensing, alliances, and regulatory affairs. Each venture needs to think through -- with help, if you are new to this -- what skills they need, when and whether they need to be full time or not. Bullet 3 -- Your non-management Team members are invaluable -- both in helping you decide what, when and how but also in identifying the right person or group. If they have nothing to offer, perhaps they are not right for your venture. More about this later. Bullet 1 -- This is often true with biotech startups where the early stages may be almost completely technical; however you will want people who can guide you with regard to things like IP, licensing, alliances, and regulatory affairs. Each venture needs to think through -- with help, if you are new to this -- what skills they need, when and whether they need to be full time or not. Bullet 3 -- Your non-management Team members are invaluable -- both in helping you decide what, when and how but also in identifying the right person or group. If they have nothing to offer, perhaps they are not right for your venture. More about this later.

10. Management team Diversity is good business: technical, sales/marketing, and management/business Pick your team with great care Character, values, and commitment count Bullet 1 -- Many new entrepreneurs, particularly technology entrepreneurs, start out picking teammates who “look just like them.” They do this for many reasons: it’s comfortable; they are the people they’re likely to know anyway; they don’t see any value in having anybody on the Team who is not a true techie, etc. What can a marketing/sales type possibly bring to the table? And besides that stuff is easy and I’ll learn it if I have to. Remember, Bill Gates had Steve Ballmer -- a business/sales type -- right from the beginning. Steve Jobs and Steve Wozniak were the ying and yang of Apple at the start. Bullets 2 and 3 -- Make sure you trust, like, or at least respect, your teammates -- you’re going to be spending a lot of time together. Also, respect is more important than like. Will they have the guts to stick it through when the going gets tough? And it will get tough. Be sure to talk about values and ethics -- both moral ethics/values and work ethic. Don’t just assume that they feel/are the same as you. Make sure you can disagree with each other -- even loudly and often -- in a constructive manner. It is the key to superior products/services. Intel meetings were (still are?) notorious for candor and (mostly) constructive conflict.Bullet 1 -- Many new entrepreneurs, particularly technology entrepreneurs, start out picking teammates who “look just like them.” They do this for many reasons: it’s comfortable; they are the people they’re likely to know anyway; they don’t see any value in having anybody on the Team who is not a true techie, etc. What can a marketing/sales type possibly bring to the table? And besides that stuff is easy and I’ll learn it if I have to. Remember, Bill Gates had Steve Ballmer -- a business/sales type -- right from the beginning. Steve Jobs and Steve Wozniak were the ying and yang of Apple at the start. Bullets 2 and 3 -- Make sure you trust, like, or at least respect, your teammates -- you’re going to be spending a lot of time together. Also, respect is more important than like. Will they have the guts to stick it through when the going gets tough? And it will get tough. Be sure to talk about values and ethics -- both moral ethics/values and work ethic. Don’t just assume that they feel/are the same as you. Make sure you can disagree with each other -- even loudly and often -- in a constructive manner. It is the key to superior products/services. Intel meetings were (still are?) notorious for candor and (mostly) constructive conflict.

11. Dynamics of a team 4 Personality Types Drivers Influencers Steady Conservative

12. Characteristics of Founders Success factors for a founder’s success: Higher education Prior entrepreneurial experience Relevant industry experience A high level of drive, energy and establishes a clear vision Enough self-confidence to take carefully calculated risks - commitment - perseverance

13. Characteristics of Founders High tolerance for uncertainty - You are the change manager Belief that you can control your own destiny The ability to get other people to work with and for you Know what motivates yourself and people. Team builder Readiness to learn from your own mistakes and failures If it’s not your genius - it’s not your job

14. Characteristics of Founders Networking – personal and professionally Constant engagement Who you hang out with will determine your success Not who you know --- Who knows you Cultivate relationships

15. Board of Directors If a new venture organizes is a corporation, it is legally required to have a board of directors. A board of directors is a panel of individuals who are elected by a corporation’s shareholders to oversee the management of the firm. A board is typically made up of both inside directors and outside directors. Inside director is an officer of the firm Outside director is not employed by the firm Key points: Bullets #1 and #2 Make sure audience understands difference between the two Boards and that the types of people you want on them are usually different. In the early stages it is usually more important to have a top-notch Board of Advisors. The completed Board of Directors, which will usually have at least one representative from your major investors, can follow a bit later. Sometimes an individual might be on both Boards. Bullet #3 - The amounts vary but should be zero or quite modest in the early stages…. Options are still often used. Key points: Bullets #1 and #2 Make sure audience understands difference between the two Boards and that the types of people you want on them are usually different. In the early stages it is usually more important to have a top-notch Board of Advisors. The completed Board of Directors, which will usually have at least one representative from your major investors, can follow a bit later. Sometimes an individual might be on both Boards. Bullet #3 - The amounts vary but should be zero or quite modest in the early stages…. Options are still often used.

16. The Board of the Directors Five formal responsibility of the Board Set policy Set direction Appoint the officers of the firm Declare dividends Oversee the affairs of the corporation

17. The Board of the Directors Frequency of meetings and compensation Elected for a 1 year term Most boards meet 3 to 4 times a year New ventures are more likely to pay their boards in company stock or ask them to service on a voluntary basis, rather than pay a cash honorarium.

18. Board of Advisors Is a panel of experts asked by a firm’s managers to provide counsel and advice on an ongoing basis. Unlike a board of directors, an advisory board possesses no legal responsibility for the firm and gives nonbinding advice and requires less of their time.

19. Mentors Finding the right mentors for your venture requires perseverance and luck Mentors might be angel investors, successful entrepreneurs, faculty members Usually do it to “give something back” Mentors must walk a fine line between advising and running the show The speaker might want to emphasize how valuable a good mentor can be. For example: they can help the Team anticipate and avoid pitfalls, can be a wonderful sounding board who gives an honest, straightforward opinion to help keep the founders on track. The speaker might discuss ways to find a mentor -- particularly if the host school or partner schools have a venture club or other means to help find them. In fact some schools (e.g., MIT) have a formal mentor program/group that helps MIT students and alums with their ventures Mentors’ motives are usually to stay involved and give something back, but beware of the mentor who has nothing else to do, wants to be involved in everything you do; wants to “run your show.”The speaker might want to emphasize how valuable a good mentor can be. For example: they can help the Team anticipate and avoid pitfalls, can be a wonderful sounding board who gives an honest, straightforward opinion to help keep the founders on track. The speaker might discuss ways to find a mentor -- particularly if the host school or partner schools have a venture club or other means to help find them. In fact some schools (e.g., MIT) have a formal mentor program/group that helps MIT students and alums with their ventures Mentors’ motives are usually to stay involved and give something back, but beware of the mentor who has nothing else to do, wants to be involved in everything you do; wants to “run your show.”

20. Service providers Invaluable help, sometimes at a reduced rate for start-ups A sense of confidence for potential investors Can include: Attorneys (corporate, employment law, or IP) Accountants Consultants Investment bankers Each of these is discussed in the following slides, so you can just use this slide as an overview of the rest of the presentation.Each of these is discussed in the following slides, so you can just use this slide as an overview of the rest of the presentation.

21. Corporate Attorneys Early assistance in establishing legal form Later help with various needs Contracts of all kinds Alliances with other companies Employment law This is all discussed in a bit more detail in the IP and Licensing section of the workshop.This is all discussed in a bit more detail in the IP and Licensing section of the workshop.

22. IP Attorneys Early help in deciding what form of protection, if any, is appropriate Ongoing assistance obtaining and maintaining protection or negotiating licenses This is all discussed in a bit more detail in the IP and Licensing section of the workshop.This is all discussed in a bit more detail in the IP and Licensing section of the workshop.

23. Accountants can… Help with initial business plan financials Act as or recommend part-time CFO Introduce you to investors Produce audited statements needed to go public If the speaker has an interesting, short war story to help illustrate any problems associated with having or not having a “good” accountant, please tell it.If the speaker has an interesting, short war story to help illustrate any problems associated with having or not having a “good” accountant, please tell it.

24. Consultants can provide Market research Business plan preparation Technical assistance Business development/marketing/sales help Recruiting Value and leverage for founders Paying for consultants can often be a problem for start-ups. Look for a consultant or firm that is willing to defer part of the fees or to take a small piece of equity in return for some or all of their services. Make sure to check references and understand exactly what sort of tangible help and benefits the consultant provides. Ask direct questions and expect direct answers. If the consultant gives you a lot of gobbledygook, beware. If you have little experience hiring/working with consultants ask someone on your BoD or BoA to help with the selection process. Use consultants as a means of leveraging your time, and do not give up your right to manage. Use them as high-level staff people, not operating people. Have specific deliverables and milestones and put them in writing. Have frequent progress reviews (formal and informal) to make sure things are on track. Paying for consultants can often be a problem for start-ups. Look for a consultant or firm that is willing to defer part of the fees or to take a small piece of equity in return for some or all of their services. Make sure to check references and understand exactly what sort of tangible help and benefits the consultant provides. Ask direct questions and expect direct answers. If the consultant gives you a lot of gobbledygook, beware. If you have little experience hiring/working with consultants ask someone on your BoD or BoA to help with the selection process. Use consultants as a means of leveraging your time, and do not give up your right to manage. Use them as high-level staff people, not operating people. Have specific deliverables and milestones and put them in writing. Have frequent progress reviews (formal and informal) to make sure things are on track.

25. Getting the best people Finding and signing the best is one of your earliest and most important sales calls Be willing to share the rewards and power to get the right people But beware of people unwilling to share early risks Bullet 1 -- If you can’t sell your idea to potential Management Team members, how will you ever sell it to investors or customers? You must be able to convey your excitement and passion for the new venture as surely as its technical merits. Bullet 2 -- Successful entrepreneurs are generally those who are willing to share -- power, rewards, credit. The sharing does not have to be completely equal. Steve Ballmer is worth only about half as many billions as Bill Gates. Bullet 3 -- Unwillingness to share the early risks (e.g., take low pay to start) is usually an early warning sign that this is not the right person. Bullet 1 -- If you can’t sell your idea to potential Management Team members, how will you ever sell it to investors or customers? You must be able to convey your excitement and passion for the new venture as surely as its technical merits. Bullet 2 -- Successful entrepreneurs are generally those who are willing to share -- power, rewards, credit. The sharing does not have to be completely equal. Steve Ballmer is worth only about half as many billions as Bill Gates. Bullet 3 -- Unwillingness to share the early risks (e.g., take low pay to start) is usually an early warning sign that this is not the right person.