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Tip of the Week: Recession Startups Need Customer "Wow!"

In a recession, customers need extra motivation to make a purchase decision.

Street smart startup leaders achieve that something extra by finding what product message gets the ideal customer to exclaim "Wow!"

This is about stimulating emotions. That is something left brained engineers are short of. If you or your CEO are classical techies, you are strongly advised to find a right brained marketing mind ASAP. They have what you don't, what you need most to get out of the hole filled with dull "better" products.

Emotions move a customer from "Maybe" to "Gotta have it!"

Lists of features do not stir emotions.

Comparison sheets of you versus three competitors put customers to sleep.

Boring is your enemy. Exciting is your friend (if you have it in your message).

During a recession the magnitude of the "switching cost" is amplified. Market research studies show it takes at least a 25% reduction in the switching cost to get a potential customer motivated enough to consider purchasing your offering. In a recession that moves up to at least 33%.

So you have to offer enough extra value so the benefits of your product are at least a third greater in the mind of the customer. Those benefits can be hard cash savings, but are more often psychological benefits such as greater user experience or a sense of superior safety. The latter two are deeply part of the emotions of the customer.

The response you want is "Wow!" when the customer reads your message about your offering. That message contains what is called your "value proposition" and "compelling reason to buy."

If you are missing the "Wow!" in your product, immediately start talking to potential customers. Especially listen to why candidates said  "No, thank you" to your message. Modify your message accordingly and try again and again. Keep proceeding until you figure out what was missing.

When you "get it" you will be excited and so will your customers.

Here is a good example to think about: This week I watched Jeff Bezos tell television interviewers "And we added GPS to Kindle. That let a reader get a book in sixty seconds. That is a transforming experience." He did a live demonstration and the interviewers exclaimed simultaneously "Wow!"

BOTTOM LINE: During a recession, the bar is higher to get a potential customer to reach for their wallet. Your message must contain something that triggers so much emotion that the potential customer immediately exclaims "Wow!" You find that missing something by talking to a lot of candidates until you figure it out. When you do, you'll add the most powerful element needed during a recession to convert your hard work into an unfair competitive advantage.

How to Manage a Real Startup: Nr 19 in a series

Chapter 3 continued
(Draft of John's new book: Your comments are welcome)

Risk triggers emotions that fuel people determined to build and ride their startup bicycle.

Startup people respond in special ways to emotions. Giant corporate managers differently to the same emotions. Understanding the differences is central to life or death of a startup leader.

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Acceptance

Serial entrepreneurs accept what happens during the wild ride on the startup bicycle. No, they are not fatalists. Rather, such people realistically accept that the outcome of the startup is unknown. That is part of the adventure, one aspect that makes the ride worth doing. Veterans respond constructively to surprises, good and bad. They do not panic about how to gently bring the bad news to the board of directors. They jump into action to accept that the forecast was off by a factor of three and start tactical changes immediately to get the best out of the surprise.

I am often struck by how calmly I listen to a CEO say “We decided that route was death for us, a dead end. But I have some good news. Our technical staff has come up with a way to deliver the product in a fraction of the time via the major social networks. We’ll get more people that way sooner, get their attention and then migrate them to be more eager to download our larger high performance platform.” And so another business model is trashed on the spot and the new one immediately pursued. There is no screaming about missing forecasts or not delivering on plan (as would happen in large public corporations). The board discusses the major shift, recalls others they have seen succeed with similar moves, and then agree on the new route. Calm deliberation prevails.

The first time a founder realizes his plan needs to be abandoned he will feel terrible. Emotions such as failure and doubt will jump in, often paralyzing making the big decision. That gives his more experienced competitors an advantage. It is dubbed “flexibility” by professors of entrepreneurship. Practical observers call it “chaos”. Such conditions trigger waves of intense emotions to the inexperienced.

The experienced startup manager also accepts calmly inevitable events. For instance the leader realizes he is not going to be able to prevent his key engineer from leaving. First timers feel a sense of panic. Veterans know they have worked hard to try to save the valued employee but they can do no more. They accept the unfortunate situation and swing into action to find a solution for the soon-to-be missing talent.

Acceptance is managed by getting in touch with reality as soon as possible. When you realize the investors want a new CEO you do not fight that stinging reality even though your first emotion says you should. Great personal losses trigger huge emotions. That energy can be translated to a constructive response and useful action. Wise founders stand up to help recruit a new CEO. Denying reality just delays the inevitable and adds risk of failure to the new enterprise.

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More tomorrow.

How to Manage a Real Startup: Nr 18 in a series

Chapter 3 continued
(Draft of John's new book: Your comments are welcome)

Risk triggers emotions that fuel people determined to build and ride their startup bicycle.

Startup people respond in special ways to emotions. Giant corporate managers differently to the same emotions. Understanding the differences is central to life or death of a startup leader.

=====================================================

Loneliness

Most entrepreneurs experience intense periods of loneliness. “At last! I found a group that understands what I am going through.” That was an emotional exclamation from a founder of a startup who had just finished attending his first entrepreneurial event. Yes, it is also lonely at the top for startups.

There are several reasons for this sense of loneliness being pronounced in a startup.

·         You are exposed. The small number of employees and the flat organization structure give no place to hide. Everyone is watching you every day, examining the look on your face for signs of changes in the new enterprise. You will feel like you are walking through the street in your bathing suit with everyone staring at you.

·         You are The Motivator. Everyone expects you to be confident that you know where the company should be going and how to get it there. They respond to your every emotional direction. Signals from the vice presidents are not as powerful as from the CEO. In fact, only the CEO counts as The Motivator of the company personnel. You will feel that pressure day and night, 24x7.

·         You have investors watching closely. The money people want you to succeed but they are not where you go when you are scared or confused. Your tendency is to cover up your true feelings when talking with them.

·         Your family asks a lot of questions. From spouse to children to parents to relatives, they all are amazed at what you are doing. They see the risks very high. They want to know what is going to happen to your startup and what that will do to them. You will feel like telling then only the good news, until it is too late to mask the bad news.

·         The media is watching. Bloggers are eager for a juicy story. Reporters dig first for “poignant” stories (that is code for bad news about your company). You will try to present only the best of the best about your startup. That is a distortion of reality that your psychology will wrestle with.

Experienced entrepreneurs manage loneliness by finding people to talk to whom they can trust for secrecy and who will understand the emotional roller coaster the entrepreneur goes through week after week. The spiritual part of the human is challenged to find a contact to talk to and that ranges from God to Jesus to Buddha to your inner self. Friends become more appreciated at times of loneliness.

Startups are not places for solo heroes. They crash and burn. It is a place for people people. That breed that appreciates what humans go through in emotions, loneliness being one of the most powerful.

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More tomorrow.

How to Manage a Real Startup: Nr 17 in a series

Chapter 3 continued
(Draft of John's new book: Your comments are welcome)

Risk triggers emotions that fuel people determined to build and ride their startup bicycle.

Startup people respond in special ways to emotions. Giant corporate managers differently to the same emotions. Understanding the differences is central to life or death of a startup leader.

======================================================

Serendipity

Serendipity: “the faculty of making happy and unexpected discoveries by accident.” Coined in 1754 from a fairy tale about The Three Princes of Serendip.

I was speaking with Bill Mcaleer of Voyager Capital about what strong emotions he sees running in startups. I remember well him saying “And the excitement hits the ceiling when something great happens. Often that event creates a sense of serendipity in the people of the new enterprise. It is spawned from that bit of luck, the unexpected that happens, the special thing that makes the company. People are elated.”

Those special events are what the VC icon Dick Kramlich of New Enterprise Associates calls “company-makers”. That is the event that puts the company into a commanding competitive lead as it gains momentum and greatness at the expense of its competitors.

The good news is the company leaps ahead and into the lead. People leap and shout and are ecstatic.

The bad news is that often such people believe they deliberately caused this amazing event to happen. They actually think they can do it again and again. That is what psychologists call “magical thinking”. They believe they actually surfed a forty foot wave, standing all the way to the beach on their surfboard. But when they try to repeat the epic ride, they crash and burn. The first ride was just luck. Now sobered – if they survived – they go out to ride (mostly lesser waves) with more humility and respect for their limitations.

Serendipity is managed by startup veterans by letting the related joy and optimism run free while balancing those powerful emotions with realism: “Remember that we did not plan that amazing event, we just received amazing benefits from it. Now it’s up to us to take full advantage of those benefits. Now we can do amazing damage to our competitors and out-run them to dominate our market. It will still take a ton of additional hard work. But now we have gained a significant edge that our competitors do not have. Let’s make the most of it!”

 

Fear

Fear is good. It keeps children from touching red hot stoves. In startups it keeps people realistic. It causes action: it triggers adrenaline that triggers the emotional response “Fight or flight.” Sometimes it is wiser to retreat (and abandon a doomed business model). Sometimes it is better to dig in and fight (rallying the company to do amazing things).

Fear is bad. It can lead to paralysis (stick to the doomed marketing message; do not fire your incompetent vice president who is your best friend). It can push strong people over the brink of emotional control and into the pit of harmful behavioral compensation (marital affairs, drugs, gambling).

Managing fear and its related emotions begins with respecting what fear can do in a startup, the good and the bad. A good place to start is with yourself: acknowledging you feel fearful is a beginning. And then talk about how you feel to a close friend or mentor. Such people are highly recommended by serial entrepreneurs. Yet creative people have a pattern of solo behavior that lacks such ties. First-time entrepreneurs are wise to start their business plan drafting by finding a couple of people with whom they can share intimate emotions such as fear. Fearful people are not weak—the ones who do not admit they are fearful are the weak ones. Startup veterans are experts in managing the emotions triggered by fear.

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More tomorrow

How to Manage a Real Startup: Nr 16 in a series

Chapter 3 continued
(Draft of John's new book: your comments are welcome)

Risk triggers emotions that fuel people determined to build and ride their startup bicycle.

Startup people respond in special ways to emotions. Giant corporate managers differently to the same emotions. Understanding the differences is central to life or death of a startup leader.

=====================================================================================

Joy & Euphoria

Startup people are filled daily with a sense of joy and euphoria. Even during the gloomy times. The new enterprise people are free to take risks, to innovate, and to try new ways of working. Some get to manage people for the first time. Others get to make the big strategic decisions, at last, for the company. Those are things they were prohibited from doing in their last big corporate job that was imposing so many constraints and controls on them.

These people enjoy working with each other because they agree to hire the people they get along with. It is their culture. They look forward to going to work each day. When the time came to join this startup they were ready and now are very glad they signed up. Even when the inevitable dark days come, they prefer to be with the startup instead of the old giant. This fuels joy and in the best of days leads to euphoria.

The emotions of joy and euphoria are managed by startup leaders by using focus: focusing employees on executing on the ever-shifting plan of the company. People respond with positive emotions when they experience continuing growth of the business, delivering products customers get excited about, and celebrating with employees their mutual progress. As each month passes, they remind each other about how the startup has advanced toward the gold medal: building a great company that does something wonderful and goes IPO.

Optimism

Startups are filled with optimism. From day one, the future looks bright. Employees believe that the startup will deliver something that “wows” the world. From founder to most recent hire, their glass more than half full. In fact they see it flowing over. Adrenaline pumps go into action and people think startup 24x7. It is hard for them to stop working. Some go on into the night, often.  It is such a thrill compared with the last job each had.

Optimism is in the genes of startup people. It is such a part of their psychology that they are prone to go far beyond the limits of reality before realizing the glass in not more than half full. In fact, they will go down with the ship before conceding the startup is not going to survive. That is often referred to as “fire in the belly.” The bankruptcy lawyer has to push them out of the building after the auctioneer has sold the last of the remaining chairs.

Optimism is so engrained in startup people that it is hopeless to try to get rid of it. Veterans of startups have given up attempting to moderate optimism. Instead they live with it and have learned to make it work for them. When sales are forecast, serial entrepreneurs agree with the numbers and so do the investors. Yet the old hands silently cut the dollars in half and double the expenses and time to launch the product. Then they manage the cash burn rate expecting to have optimism meet realism in a few months when they once again adjust the optimism in the forecast. This accommodation process is understood by experienced startup board members and employees on their third startup. They read a psychological language that they understand, interpret and use to adjust their daily operating tasks. That is how optimism in a startup is managed.

Giant corporations work hard to kill optimism. Managers lose their jobs when their sales and expense forecasts are missed by three percent or more. Then no one gets a big cash bonus and everyone is angry. Then the profits reported for this public corporation for the quarter miss by a penny and the stock drops fifteen percent that day. Investors are mad and so are employees with stock options. The most accurate forecasters then get promoted into the jobs vacated by the optimist (now gone) executives who were too optimistic.

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More tomorrow.

How to Manage a Real Startup: Nr 15 in a series

Chapter 3 continued
(Draft of John's new book: your comments are welcome)

Risk triggers emotions that fuel people determined to build and ride their startup bicycle.

Startup people respond in special ways to emotions. Giant corporate managers differently to the same emotions. Understanding the differences is central to life or death of a startup leader.

 

“An emotion is a mental and physiological state associated with a wide variety of feelings, thoughts, and behavior. Emotions are subjective experiences, or experienced from an individual point of view. Emotion is often associated with mood, temperament, personality, and disposition. The English word 'emotion' is derived from the French word émouvoir. This is based on the Latin emovere, where e- (variant of ex-) means 'out' and movere means 'move'.^[1] The related term "motivation" is also derived from movere.+ Source: Wikipedia

 

Adventure

Startups are adventures filled with unknowns, risks, treasure and fun. The unknowns are not revealed until the startup is begun and its plan is executed. The risks are so high that nearly all startups go bankrupt sooner or later. The treasure is buried, hard to find, more psychological than physical, and when you find it you feel very rich. And the adventure is fun along the way – the opposite of work.

A startup adventure begins with people filled with enthusiasm and high energy. Their dreams take the first shape of reality as the new venture begins initial work. Not long after that, realism arrives and the optimism begins to decline and the first pangs of intimidation and a bit of fear start to creep in. That reverses direction as creativity and innovation trigger euphoria and joy. Then doubts arrive and more negative emotions must be dealt with. And so goes the emotional rollercoaster. Soon a cascade of emotions rushes into the startup’s people, from core team to the employees. How they manage those emotions will determine how well the startup succeeds in managing itself. That will be a primary determinate of the success or failure of the fledgling enterprise.

Freedom

The first emotion experienced by first time startup people is a sense of being “free at last!” You will hear them say “Now I can do things my way”, “This time I will be CEO and it won’t be all messed up” and “I can hardly wait to start coding/building it”.

These are people free from the constraints of school, office politics, rigid promotion policies and immovable social conventions. They are especially noticeable people in Asia. They have an inner sense of needing to break out, to express their opinions openly, and do something they have been prevented from doing for years, maybe decades.

From the roots branches of freedom come unusual benefits to the startup. One is the freedom to aggressively disagree with other employees about important issues. Engineers and Asians respond well to startup working conditions because of such freedom. This open forum culture encourages displays of high energy and behavior that to some people can be very intimidating. Others find such behavior ideal to attack issues central to the startup’s success. Serial entrepreneurs believe it is what adds a powerful element to the unfair advantage that the tiny startup has over the rich multi-national giant.

Another is the freedom to create and invent something useful. This is central to the waves of green startups and social entrepreneurship. New enterprises have been begun because the founders were passionate about solving a giant problem. Jeff Hawkin’s lifetime quest to understand the brain is a good example. Google him and you’ll see what I am talking about. Yet event the freedom to at last be in charge of a team to build something useful can trigger immense emotions of euphoria and joy.

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More tomorrow.

How to Manage a Real Startup: Nr 14 in a series

People are everything to a startup. They are the ones  you see peddling the startup bicycle for dear life.

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Picking Advisors

The most important advisor a founder can have is the fifth board member. That person is very important. The typical board consists of the founder CEO and one other company officer, plus two venture capital partners, and a fifth board member. Number five should be experienced with startups, know a lot about your new market, and especially have put in a lot of time as a prior board member for other startups. That is a tall order to fill. They are rare, especially outside the United States. Such people are compensated with a cash monthly retainer and sizable stock option. People like myself selective participate as the fifth board person. It is a challenging responsibility that I take quite seriously as others I know also do.

The role is not about breaking ties in voting on disputed issues. The good boards of directors decide the difficult decisions before the board meeting – on the phone and in person – to iron out thorny issues. By the time the board meeting takes place, there is one hundred percent agreement. Number five often negotiates sensitive issues and strong differences of opinion on the board of directors.

In addition, the fifth board member typically fills the role as a mentor to a younger, less experienced CEO. He helps interpret meaning and intent of investors and management. And he makes suggestions on plans and execution decisions based on his industry and managerial experience. He will also bring competitive insight and strategic wisdom.

Picking number five carefully will add a great deal to the quality of decisions and leadership of the startup, especially during difficult times.

It is now expected that startups have several advisors who are not on the board of directors. I expect it will grow as startups continue the trend to outsource as much as possible while focusing on perfecting their special expertise. Groups of advisors are common in new enterprises these days. Life science startups perfected their use and it has spread to information science and Internet startups. Scientists expert in their specialties are gathered monthly for working sessions to discuss progress of the work of the technical staff. Internet e-commerce and gaming companies have retained experts from industrial and entertainment domains such as Hollywood and television. Like the fifth person on the board, they are paid with a retainer and stock option.

Managing all those non-employees is a lot of work. That is one of the key jobs of the CEO. It is not for the vice presidents to do. The objective is to obtain scarce expertise from a few very special people. Executing to achieve that objective often leaves the CEO at the end of his day feeling like he has been herding cats.

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Tomorrow I'll start a series on the emotions of leading a startup.

How to Manage a Real Startup: Nr 13 in a series

People are everything to a startup. They are the ones  you see peddling the startup bicycle for dear life.

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Picking Boards of Directors

The scarcest pool of people for startups is men and women experienced with how a great board of directors works to promote success in a new enterprise. I first heard about that shortage as a young man listening to old guys tell the stories of how they succeeded. It was back in the 1980s in Silicon Valley when Dick Kramlich, the VC icon of New Enterprise Associates shared with me one of his biggest frustrations with startups: “We just don’t know how to manufacture the good board people fast enough!” Few first-time founders have served on a board of directors of any kind. They get thrown into the breach on day one of founding a startup. Sink or swim, learn on the job, that’s how it is done.

And few first-time VCs have any board experience. After joining a venture firm as a partner, they begin as an observer or stand-in for VC partners that must be absent. You can spot the inexperienced people at board meetings because they seem to focus on spending a lot of time in long discussions of small matters. And in moments of crisis they quickly begin to micro-manage the CEO. It is natural for them because they got to be a VC by being a great vice president in a great – often venture financed – company. They will learn from the veterans on the board. As the monthly meetings go on for years, the green VCs will learn to be better, perhaps even outstanding board members. But it is not advised to compose your board with first-time VCs. Life is too short. Pick VC partners with a lot of board experience and your life will be much more productive.

Experienced VCs on a board of directors of a new enterprise are worth their weight in gold. But they are scarce. They come with a lot more than money. Treat them as you would if you were hiring a vice president: very carefully. You will have to live with them for at least a half decade. There are not many VCs experienced with the wisdom you need. VCs aim to limit their board memberships to a maximum of seven. That is about the limit of sanity and logistics. The veterans have learned each startup takes large blocks of time at unpredictable future moments. This limits the number of experienced VCs and also the pool of experienced board members who are available. There are only so many VC partners available at one time in the world. The number is not large. And aiming to get one of the great ones on your board from one of the finest venture firms in the world is a significant goal. It is worth aiming for, but will not be easy. Your competition for the attention of that person will be intense. Plan on picking your targets carefully. Do your homework: talk to CEOs of the companies the VCs are financing and sit on their boards of directors. That will tell you who the VCs are and how good they are. Then make your decision.

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Tomorrow: Picking Advisors

How to Manage a Real Startup: Nr 12 in a series

People are everything to a startup. They are the ones  you see peddling the startup bicycle for dear life.

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Picking Investors

Did you know investors are people too? Sure, some have earned their deserved reputation as “vulture capitalist,” but most are actually humans: they have their good days and their bad ones. Like my father said about important people, “They put their pants on just like you and me, one leg at a time.” So add investors to your task of picking the best people. And like choosing people as employees, do not compromise. Go for outstanding investors, only.

Here are some traits to look for in your investors:

·         You would enjoy living with them a long time: Half a decade of endurance is required. That is how long you will face investors at monthly board meetings. Can you stand them that long?

·         They come with more than money: You get people, not money, with a round of financing. Focus on people you want to give you advice and smarts, not just money. They should think the same way about teaming up with you.

·         They fit your way of behaving and thinking. Culture fit. Chemistry fit. That is what this trait is all about. Basically, how well will you get along with your investors during the dark times?

·         They understand what it means to be a manager of people: These are veterans of managing. They are not former consultants or bankers or lawyers. They are manager-wise. They know how to do RIFs, fire vice presidents, and tell bad news to employees. They know how your gut wrenches each bad day.

·         They know how to get out of trouble: These people are skilled at repairing bad finance deals, re-negotiate caustic contracts, persuade customers to continue buying and keep strategic partners optimistic.

·         Their character was shaped by very hard personal situations: They have made difficult choices when companies were nearing disaster. Their personal lives have often included near-death experiences (leukemia attacks a two year old, heart attack, auto crash, war wounds are some I have observed).

·         They see the world from a special perspective: They have a special view of business and people. It was formed by their experience. They observe and speak in ways that make you think differently.

·         They are deep in wisdom: In the real world, they have seen how people behave, what decisions work and do not, and how startups get into and out of trouble. They give you advice based on calculated thinking.

·         They are ethical beyond doubt: They will share with you their difficult ethical decisions. You will have no doubt about their ethical responses to the tough decisions.

·         They are startup clever: They know a lot about what makes a startup work and fail. They have formed strong opinions about what to do with new enterprises and their leaders to make them successes. They have outstanding startup records.

·         They understand your industry: Industry savvy is not in doubt. They do not have to learn about what makes it special. They know the people and jargon and technology, customers and suppliers.

·         They deliver: Be very careful what they promise compared with what they deliver. Most are well intentioned. Most fall short of the expectations of first-time founders.

EXAMPLE: When I serial entrepreneurs by asking “What made you successful?” they do not hesitate answering. This is a typical response: “I psych out the venture capitalists before I take their money. I dig into what their personality is, how honest they are, their quirks, their past history. I call everybody I can to find out who this person is that I will have to live with on my board of directors for the next three to five years.” Veterans say they live by that discipline. It was central to their string of outstanding new enterprises. Investors are people. Pick very carefully.

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Tomorrow: Picking boards of directors

How to Manage a Real Startup: Nr 11 in a series

CHAPTER 2 People (continued)

People are everything to a startup. They are the ones  you see peddling the startup bicycle for dear life.

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Dream Team Recruiting

Unfair advantage attracts the outstanding people. It is what they look for. When they hear it, they know it, intuitively. It is a story told by a person excited about a new company. The story is attractive because it is a combination of things that, together, are impossible to copy and are so powerful that the competition complains it is unfair.

Your core team will build your entry level unfair advantage during the pre-seed time of forming the new enterprise. That is during time spent around the kitchen table with no money, just ideas. That core team needs to be quick, innovative and stimulating. They need to work as a unit that trusts each other. Mutual trust is vital to keeping this core team adding to the unfair advantage plan for their new enterprise.

Prior to the big day “Let’s do it!” you will need to maintain enthusiasm of your Dream Team. Most founders will keep the core team increasingly engaged on a single good idea. It will take time for your core team to get ready to make the big move: resign from a job to work full time on your idea for a new enterprise. That takes courage and is risky. It when you know if you really have a core team committed or not.

You don’t get a Dream Team by starting recruiting a core team of strangers the day after you get some seed cash. Serial entrepreneurs start forming their core team years before that day. They find their small group of managers well in advance of the arrival of the first cash.

“When should I start to form my Dream Team?” is a question I am often asked. My answer is always the same: “Start right now.”

“Where do I find candidates for my Dream Team?” is the second question I get. Here are sources that have worked well for those who became serial entrepreneurs:

·         School friends. These are people you went to college and university with, spent social time with, and got to know well. You share important values about the purpose of life, what you want in a spouse and family, and a lot of things too intimate to write about. ENGAGEMENT: Typically this group consists of people you contact years after graduating, when you want to talk about an idea you have for a new enterprise. At least they can tell you that you are foolish without you responding by exploding or getting depressed. They can be trusted to keep your idea a secret. And they may even be interested in joining your Dream Team.

·         Working friends. These are people you work with daily on the job. You meet them in meetings. You get assigned to work on the same project with them. They are doing things in the same division in the same large corporation that you are in. You spend time at lunch getting to know them on a personal basis. You observe them delivering what their bosses demand, note how they take risks, what they like to create and how they deal with surprises both good and bad. As years go by, you will spend weekends with them on the beach, skiing, at sporting events, concerts, and take a short vacation together. Your personal lives become open and shared. You understand the important values each has about religion, politics and sex. ENGAGEMENT: When you are ready, you will gather the two or three people you are keen on and inquire about what interest they have in doing a new enterprise. That will lead to the “Yes” or “No, thanks” that you need to take the next steps with them, or without them.

·         Your last startup. The people you respect in your last new enterprise are the most likely candidates for your Dream Team. Most experienced investors and serial entrepreneurs look for teams coming from prior startups. This will give you a chance to see people in real startup stress conditions and watch how they deliver. You will have ample opportunity to spend time over meals and social time getting to know each other. The camaraderie of shared startup emotions and results – good and poor – will give you outstanding insight to values, character and skill of each person on your short list. ENGAGEMENT: Entrepreneurs talk daily about other startups, from competitors to new enterprises. It is common for colleagues to discuss “When I get the chance, I’d like to do my own startup.” Talks begin with how to do a better startup (than the one they are employed at) and include vague ideas for a fresh business. Those discussions open the door to engaging candidates for your Dream Team (off company property is advised).

·         Strangers. Yes, strangers can be part of your Dream Team – but only under one condition: that you spend a lot of time over a year or more, getting to know each other. You need time to reduce the risks of hiring people you do not yet know. They can be full of bad surprises – and rarely good ones. Anything less than a year of intimate time together will be too short because you have to have time to get intimate on many levels to know the truth about these strangers. These people speak at industry panels, talk to your school alumni gatherings, and often blog weekly. They are written about by reporters for magazines and newspapers. You find them named in exciting new product launches. They are listed as CEOs and vice presidents of startups on the portfolios of venture capital firms’ web sites.  They are included in lists of Executives In Residence for venture capital firms. You see then named as officers of startups that have gone public recently. ENGAGEMENT: Most founders approach such strangers via an introduction (A lawyer, mutual friend, and CPA are examples). Cold contact is tried, but has few successes. These candidates will be immediately attentive to you if you have an idea for a startup. As they listen, they will be measuring you for fit into their next startup.

EXAMPLE: The best core teams are formed years before you do your start-up. Two Korean entrepreneurs contacted me about their newest enterprise. One was a former student of mine. Their idea involved creating an amazing platform for users doing a new generation of massive groups playing on-line games and new forms of social networking. The two young men had become close working friends during a half dozen years employed by a giant Korean electronics corporation. As we talked, I found two people each able to finish the sentences of the other. Their time together went back to days as friends during undergraduate work at Cornell University. After graduating, they returned to Korea. Outside company working hours they started meeting to quietly discuss ideas for a new enterprise. That led to a decision to get started using their own savings and lead a few years later to a business plan that attracted world-class employees and investors. The company is Nurien.

EXAMPLE: Another ace I have had the privilege to observe in action is Elizabeth Charnock. She did her second enterprise, Cataphora, with people who were outstanding in her prior startup. She formed her dream team from the ashes of the prior Internet company. She knew who would work well with her and others in the follow-on company. It was not an overnight recruiting rush.

Bottom Line: Serial entrepreneurs spend a lot of time looking for the best people to form a core team to do a great global new enterprise. It takes years of deliberate work. Their radar is constantly searching for top talent. At trade shows. At company meetings. At school alumni gatherings. During social gatherings of friends. They look for marketing and technical leaders. When they spot likely candidates, they ask for time with them, doing lunches, dinners and other things on the job and at home. If the chemistry is right, a small group will begin to dream together, contemplating things that might be turned into real startups. When one idea clicks, when it seems good enough to pursue, they will have a big advantage over a competing person who has to first get some money and then find the missing people of his core team. The founder with a core team ready to go will “hit the road running” and leave the competition in the dust (as they spend precious time recruiting risky strangers).

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Tomorrow: Picking Investors