Success Factors of Tech Startups (Part 1): The Team
Asking investors for the three most important success factors of high tech startups, they usually answer: Team, Team, Team.
Respecting the team’s important role for a startup’s success, I, however, would like to give a more differentiated answer to a tech startup’s key success factors, which are to my experience:
Team (this part 1) — Idea (part 2) — Resources (part 3)
(I appreciate articles that reveal their content right away instead of “what factor comes next will shock you!” kind of click through a picture album baiting)
Team
Starting with the team. The team is doubtlessly the most important success factor of a startup. I once caught the phrase:
Better invest in an excellent team with a bad idea, than in an excellent idea with a bad team.
Why? Because the excellent team will find a better idea or improve the business model (“pivot”) if necessary, whereas the bad team can even damage a great idea and carry it out poorly. That’s why I like an investment opportunity, if the team is truly convincing, even though the idea seems not to be completely.
What makes a team a great team to my experience is complementarity and competency. Each member should bring several years of expertise in a field of competence that is relevant for the startup’s business model. Considering a hardware startup (like medtech) we hence need to see a mechanical and/or electrical engineer as the one who delivers the product(-development). In case of a software company the deliverer comes from the computer science corner. She/he’s the CTO.
Secondly the team should consist of a member who is going to sell the product (often times the CEO), he/she acts like the foreign minister and deals with potential clients and business partners as well as is responsible for the company’s vision. This person is a great networker, outgoing, convincing and motivating.
Thirdly, there should be someone who takes care of the money and the internal processes. This position is usually called COO or CFO, the minister of the interior. The COO/CFO deals with finance and legal issues as well as HR, purchasing, IT infrastructure or business process management. All three roles together cover the core processes of a starting-up company: a product is delivered and sold successfully without exceeding the given resources.
Even though the above described team constellation indicates 3 roles, this does not mean we are always talking about 3 persons. In case of a software-hardware-combining business idea I’ve also seen two CTOs (one for hardware, one for software). Also the CEO and CTO roles or the CEO and CFO roles sometimes merge (i.e. two initial team members). Anyway, this picture of three roles gives a good framework of what competencies should be covered by a founding team (or maybe added with early employees).
On the other hand, too large founding teams (>4 people) should raise questions if all positions are necessary and if the initial resources are being used responsibly. Also be careful with homogeneous founding teams (like only engineers or a bunch of business grads) as they hardly can cover all necessary competencies inherently.
It’s quite ironic that so many investors claim the importance of the right founding team for a startup’s success, but almost nobody is using a structured way to evaluate one. Or do you know one? In the end, having the right startup team is furthermore a matter of gut instinct.
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