Startups: Building Your Peripheral Team
When talking about different elements of starting a company, there are many important factors that come together to make a success such as the product, market size, industry trends, capital, competitive advantage and other attributes. But the element most revered is the team.
When you think of the team, first you think of management — CEO, COO, CTO and other essential figures. Venture Capital often banks heavily on these individuals. After that, there are key hires that can greatly help the company rapidly progress. But there is another integral part of team building that can help move a company forward but is not often talked about, and that is the peripheral team.
The peripheral team consisted of people that have a vested stake in your company and are strategically impactful to the success of the venture but are removed day to day operations. They include advisors, mentors, board members, and even investors. Their vested stake is generally in the form of equity, making the success of your company worth their time.
A Unique Trend
For me, noticing this trend came to light because of a diversity report released by Harlem Capital Partners, where out of 250+ companies started by black and Latino founders, only 13 were over 250k+ in yearly revenue. The quest became why was this number so low and how can it be raised?
I have a certain privilege and unique position that helped me come up with a hypothesis to the question. I’m a developer that has the opportunity to interview and question some of the hottest companies when they are young. Given my career has been in fast-moving young startups, companies from accelerators like Y-Combinator or TechStars often reach out, and I began to notice a pattern.
During the interview process, I ask questions such as how much traction do you have, who are your first investors and why did they invest, what schools did you attend and what was your major, what experience do you have running a company, etc. Not all them had traction, experience or other factors you’d think you would find. The pattern many of these companies had in common was the makeup of their peripheral team, and how that team helped drive them forward to success. I’ve separated their growth and trajectory into stages below.
Stages To Success
The definition of success can vary depending on the perspective of different parties. Some companies define success as becoming profitable and sustainable, some view success as being acquired, and others view success as raising capital. In this case, we are defining success as the ability to have rapid growth and earning 250k+ in revenue. For high growth companies, this tends to have a pattern.
Stage 1 — High Profile Backer: The first step many successful companies have is getting someone in their industry to join their peripheral team, and potentially provide financial backing. When considering this person, one should keep in mind that they should be able not only to provide sound advice but also give you access to customers and investors.
For example, if your start-up is going to disrupt advertising, consider getting backing from an executive of companies like AppNexus. Or if you are a Fintech company, support from executives from companies like American Express can be pivotal to your success.I’ve seen executives fill roles on start-ups ranging from advisors to board members.
The value of having these people on your team has several advantages:
- They give a strong indication that corporations are watching and are interested in what you are doing
- They are knowledgeable of insights, trends and insider information that can help you make decisions on how to position and develop your company, especially building towards an acquisition
- They can initiate conversations between you and venture capitalists to further grow your business
- They can make introductions to key customers that can be first be used to validate your offering
Stage 2 — Corporate Customer: With the right peripheral team in place, it’s now time to leverage them and land your first corporate customer. By corporate, I mean one within the Fortune 500 ranking. Thinking from my own experience in start-ups, one of our first customers at a previous company was a huge corporation that we acquired through a personal relationship. Many of the successful companies I had the opportunity to interview with had the same pattern.
Landing a large corporation has 2 big advantages for your startup. The first it is great for PR that can be used in many ways. Having a big name customer in your portfolio can be used to attract top talent, investors, and similar customers that will take notice. It gives your company credibility.
The second advantage is that corporate customers can pay, a lot. For B2B brands, your solution can be used by both big and small customers. Smaller customers are often more price sensitive and require a higher amount of customers to reach a scale of profitability. Big customers can easily write checks between 10k — 100k for solutions. One big customer and you can easily achieve 15k MRR, which is only 70k from our 250k ARR goal.
Stage 3 — Accelerators: The third stage is optional. I’ve noticed many companies that execute the prior two stages successfully are admitted into accelerator programs. There are many accelerators to join, and not all of them are valuable to your business. The right ones will provide additional mentors, advisors that will further help you hone your business and execution. They also will provide connections to investors.
Stage 4 — Venture Capital: The final addition to this peripheral team is venture capital. But it’s not just any venture firm that is important, it’s about strategic capital that comes advantages towards helping a company achieve its goals.
A Set Trajectory To Success
How likely are these companies not to make over 250k? Very hard given the trajectory they have amassed around them. To recap:
- High profile advisors, mentors or board members that come with a wealth of guidance and connections join the company.
- Closing of large corporate clients, generally in the Fortune 1000 or Fortune 500 range that can pay between 10k to 100k.
- Acceptance into programs such as accelerators, that help hone the startups positioning, value, execution along with more connections.
- Funding from strategic investors.
With a just few corporate customers and partnerships, and the ability to hire top talent, these companies have the capabilities and resources to easily surpass 250k in revenue. While diversity report released by Harlem Capital Partners indicates few companies able to make over a 250k in revenue, is this just a Black and Latino problem? No, not at all.
I’ve actually seen Black and Latino companies position themselves with the right people and have a similar trajectory to success. For example, one black-led company added a strategic member to their board and was introduced to one of the top accelerators in the United States. The problem many Black and Latino founders face is they do not have the network to connect with high profile figures.
To any startup looking to succeed, consider correctly building a peripheral team that is going to give you an extreme upward trajectory. This can be hard and time-consuming as building your internal team, but the long-term benefits are well worth it.