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Chapter 8

Chapter 8. The Founding Team. Learning Objectives . Explain how to build a founding team effectively Understand how to work with professional advisers Discuss when to add a board of directors

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Chapter 8

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  1. Chapter 8 The Founding Team

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

  3. Building Effective Founding Teams • Why do teams lead to a better chance for success? • Shared intense effort required by a start-up • Loss of one member less likely to result in start-up abandonment • Team concept permits expertise across major functional areas: marketing, finance, operations • Skilled team lends credibility to the start-up

  4. Figure 8.1: The Entrepreneur’s Team

  5. Creating the Founding Team • Benchmark 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 solid credit ratings • Team members have the time and money to endure start-up constraints

  6. Table 8.2: A Founding Team Quiz

  7. Special Issues for High-tech Teams • 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. Unique Issues SurroundingVirtual Teams • Virtual teams function differently • Synchronous-asynchronous communication media alleviate physical distance issues • Trust is critical to effective virtual teamwork

  9. Founding Teams for International Ventures • 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

  10. Rules for Friends and Families • 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 in contractual terms.

  11. Seeking Professional Advisors • 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 • General information: • 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 for Choosing Board Members • Considerations: • Do board members possess the necessary technical skills relative to the business? • Have they had significant, successful industry experience? • What is their experience running a business at the level of the next step for the entrepreneurial venture? • Do they have any important industry contacts?

  14. Considerations for Choosing Board Members • Considerations (continued): • What is their expertise in finance, capital acquisition, or IPO’s? • Are their personalities compatible with the rest of the Board? • Do they possess good problem-solving skills? • Do they possess honesty and integrity which engenders mutual trust?

  15. Figure 8.2: Board Members and the Business Life Stage

  16. The Advisory Board • Consists of a panel of experts interested in the new venture’s success • Permits entrepreneur to overcome “tunnel vision” • Payment for services is through honorarium

  17. The Mentor Board • 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 • Consists of personal and professional mentors

  18. Outsourcing with Independent Contractors • Independent contractors (IC) own their own businesses • IC are hired by the entrepreneur to do a specific job • Hidden costs can affect the new venture’s business

  19. Outsourcing with Independent Contractors (continued) • The IRS and Independent Contractors • Ensure compliance with IRS regulations • Consult an attorney • Draw up a contract • Indicate only the desired result • Verify the IC’s workers’ compensation insurance • Verify the IC’s licenses to do business

  20. Table 8.3: The 20-Point Test for Independent Contractors

  21. Types of Independent Contractors • Consultants • Professional employer organizations (PEOs) • Manufacturing Support • Sales Support • Government Agencies

  22. Summary • Explain how to build a founding team effectively • 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

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