Your Startup "Core Team" is Critical
Startup veterans know that there is a special group of people who are critical to the success of your new enterprise. They are dubbed “the core team”.
I found that the abilities and teamwork of that handful of people will make the difference between winning and losing. They are central to building an unfair competitive advantage for your startup.
Venture investors eagerly seek startups with established core teams because the group significantly reduces the risk of things going wrong (due to poor people choices).
First-time founders rarely are able to recruit such a talented group on day one. Most of the time, they have to settle for assembling a group of strangers as their core team.
Gathering Your Core Team
I found that serial entrepreneurs have developed a clever solution to "gathering core teams". I’ve seen it happen time after time, it becomes a way of life for them. Here’s how they do it.
After moving on from their first startup (it was sold or went IPO or even shut down), the now-experienced founders and core team keep in close touch with a handful of former key employees, the special few whom they saw deliver remarkable results in their prior startup.
They stay in touch, communicate very privately about the possible date when the former founder CEO will be starting her next enterprise. Those individuals stand by, ready to make the next move with the now experienced founder. Meanwhile, some will be employed, while others enjoy a refreshing pause from the prior intensive work. Each is poised to join the founder’s next gig.
I’ve seen key techies do this for three and more startups in a row, enjoying the technology challenges and working with buddies they know well. They have no interest in shouldering the burdens of becoming a CEO. They put a lot of money in the bank over the years.
Easier Raising Capital
Founders with a talented core team find it much easier to raise capital. Here is an example about the founders of a fintech and their prior experience.
Founding Brazil’s New Fintech Startup: Cora
It didn’t take much for the founders of Cora, Brazil’s newest startup to tackle some aspect of the broken financial services industry in the country, to raise their first $10 million.
Igor Senra and Leo Mendes had worked together before — founding their first online payments company, MOIP, in 2005. That company sold to WireCard in 2016 and after three years the founders were able to strike out again.
They built their initial business servicing the small and medium-sized businesses that are roughly two-thirds of the Brazilian economy and represent some trillion dollars’ worth of transactions. But at WireCard, they increasingly were told to approach larger customers that didn’t have the same kind of demand for their services, according to Mendes.
So, they built Cora — a technology-enabled lender to the small and medium-sized businesses that they knew so well.
Core Team Mix
Those joining on the day of incorporation will be named co-founders, along with their originating leader. Joining shortly thereafter will be other early hires who will complete the handful of people who will begin to move the initial idea for the startup along the startup trail. That’s what is referred to as the core team.
I’ve found experienced founders and their venture backers look for this in the core team:
- The leader will be the solo founder or the strong personality among co-founders who will take the title and responsibilities of CEO, chief executive officer.
- Ideally, the CEO will have prior business experience, preferably being responsible for the results of a product as reflected in an income statement.
- Prior startup experience is a big bonus.
- Next come two more core employees: the CMO, chief marketing officer; and CTO, chief technology officer. One is experienced in converting an idea into a product with eager customers. The other is a veteran able to deliver such products. Both are can-do, make-it-happen people, as demonstrated by prior employment.
- Often there are a couple of additional key hires early, typically a key technologist or two who “work miracles” at what they do.
Those will compose the initial “core team”. They will be followed typically within a year or so by these:
- COO, chief operating officer, who ensures the product or service is delivered to customers.
- CRO, chief revenue officer, who gets a lot of sales from customers who enthusiastically buy a lot of the company’s offerings.
- Legal and accounting services are commonly rented with full-timers in those functions following much later.
If you don’t have a complete core team ready to go, there are some fallbacks you can try that I’ve seen get the job done.
One is to hire strangers who know others well, people they have been close to in college for years and possibly also in high school. They may be strangers to you, but they know each other personally, very well. That reduces your chances of food fights breaking out over key business issues.
The worst is for a founder to hire friends. I’ve seen that bring a lot of trouble. Most of such people lack business experience and are generally incompetent, unable to do what is needed on the job. They are friendly to the founder (“Yes, whatever you say!”) but cannot do the work they are hired to do. Avoid them.
Titles for jobs are tricky to manage. Vice President, Chief whatever, Director of this or that – all titles can be sources of startup trouble.
For some individuals, a startup is a perfect chance to glom onto the job title they’ve been seeking for years. They were unable to attain the title in other companies. Sadly, I’ve witnessed too often that such people take glory in their titles but lack the abilities required to deliver what the startup needs from a person with that title.
There is also a legal danger in giving out job titles. Except under special situations, Vice Presidents are legally able to represent the company and make financial and hiring commitments that the company is liable for and must fulfill. Not many fresh college graduates come equipped with the prudent wisdom needed to be responsible vice presidents making critical, often on-the-spot decisions. Nor are people who have never managed people or a business. That’s why serial entrepreneurs are careful before handing out titles.
Core Team Stock Options
Granting stock options to the core team is a related issue which, when done with care and deliberate planning can avoid tripping and getting into serious trouble.
I witnessed even experienced, serial entrepreneurs make unwise decisions when granting early stock options. There is strong pressure to grant large percentage stock ownership options to the early hires. I’ve heard many first-time founders say to me “But I have to give him an extra high percentage of the company, or he’ll not join me – I’m sure of that!” But later when the numbers leaked out, that resulted in losing key core team members (with a smaller stock option) who find out they were “unfairly treated.”
Emotional decision-making with stock options is filled with dangers, such as responding like the founder above did. I highly recommend founders take time to quantify a plan for the number of shares to be granted to each of the job openings planned to be filled for at least the next two or three years. That will help you make wise decisions on the size of the total stock option pool needed, as well as be your guide so you grant shares to the core team members and key early hires, uniformly and rationally, according to a plan.
Culture & Core Team
Your core team (and you) will lay the foundation for the culture that the values of the startup will be built on.
That will influence everything your startup does along the startup trail. It’s important for the founder to know the values of the core team. That will greatly influence who is attracted or repelled by the company – potential hires and venture investors.
Most experienced founders I know will tell first-timers that building the right company culture is the most important job the CEO has to do in the earliest stage of a startup.
I’ve been close to a few startups that struggled because the culture was created by a handful of strangers. Management wrestled intensely among themselves with what the values of the company should be.
In one consumer startup, I painfully watched as the company’s sales did poorly after the launch of their first product. People became depressed and soon were very testy, sensitive, and hostile toward one another. Blame began, and employees and management looked like a circular firing squad. After a few short months, intense arguments were popping up daily about what to do, with demands ranging wildly: abandon the founder, attack competitors with false accusations, make any claim about the effectiveness of the startup’s first product, and so on. In their desperate situation, their personal values emerged. Animal spirits broke out, people screamed and shoved each other. It was ugly. Investors headed for the exits, as did key employees. A year later the business was shut down.
Knowing well the values of your key early hires who form your core team is central to startup success.
BOTTOM LINE: Plan and create your Core Team, it will be the first major challenge you'll have as a sstartup leader. It will be worth all the time and trouble. It will be critical to your success.
I wish you The Best on your Adventure!