How to form a founding team
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his post is one of six posts in our Entrepreneur’s Toolkit series – How to Secure Venture Capital. You can find our other posts discussing the following aspects of what we look for when evaluating potential candidates for venture capital: theme, terrain, technology, traction and terms.
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Our last blog post in the Entrepreneur Toolkit series explored how entrepreneurs should prepare and present the theme – or the problem they are setting out to solve – during a pitch with investors. In this post about raising capital for your business, we’ll dive into how to build and introduce your team. When establishing a founding team, the main consideration for entrepreneurs should be the number of founders. From an investor’s perspective, the ideal number of founding team members is three. This is because founding and running a startup can be extremely stressful and, in most cases, too difficult to do without an internal sounding board. Two founders are better than one when it comes to decision-making, but the risk of disagreements about the direction of the business is high. With three, the team will have a nice variety of skills in leadership, strategic thinking and operations. The Importance of Founding Team Dynamics in Venture Capital ConsiderationAdditionally, entrepreneurs should remember that as investors that fund early-stage businesses, we are really investing in the people themselves – you. The chemistry, relationships and spirit displayed by the team during a pitch is critical, as it can ultimately make or break the company. This translates into how you will build out the team beyond leadership roles, as well. At Blumberg Capital, we value teams highly and know the significance of bringing the right people on board as the business starts to grow. For that reason, we equip our venture capital portfolio company founders with HR and recruiting expertise to help them with resource planning, recruiting and retaining talent. HR strategy must go hand in hand with business strategy. Establishing Your Startup Founding Team Credibility When Pitching to InvestorsOnce the founding team is determined, the most important thing during a pitch with investors is to establish credibility. You must prove why you are the right people to solve the problem that you have identified. In doing so, make sure to answer three key questions:
For example, our portfolio company Authomize has three founders, two of whom had owned startups before and one who was coming from the military with no business experience but many transferrable skills. This was key in our understanding of the team and informing how they would allocate positions within the business. After an initial introduction, detail the distribution of roles and the complementary nature of the team. Who will be the CEO? Who will handle sales and marketing? What about R&D, engineering and customer service? If there are holes in the team’s experience, be upfront about it. We know how important it is to develop a strong team, which is why we provide our entrepreneurs with training in various functions as part of our HR resources.
At the same time, though, stay humble, modest and transparent. Be honest about what you don’t know and why you are seeking an investment. During the pitch, do your best to strike the delicate balance between proving you have the skills necessary while also explaining where and why you need help. The Importance of Trust Between Startup Founding Teams & InvestorsIn this business, trust is the ultimate currency and it starts from day one. Similarly to how investors need to develop trust with LPs, entrepreneurs must build trust with us and, vice versa, us with them. It’s a mutual responsibility and joint effort among all those involved. Transparency goes a long way. Check back in next week for our next blog in the series: knowing the terrain. This post is the latest in our Entrepreneur Toolkit series that explores what entrepreneurs need to successfully pitch their idea to investors to secure venture capital. Ready to take the next steps in securing venture capital for your business? Click here to contact us today. What is considered founding team?A founding team is a group of people who decide to start a business together. Not every business has a founding team. Many entrepreneurs start their businesses on their own to avoid disagreements. Even though it is possible to be a lone wolf in business, it is generally considered harder than doing it with a team.
Which elements a successful founding team should have?In addition to complementary skill sets, great founding teams have good chemistry. They all share the vision, complete each other's sentences, and exude more positive energy together than each founder alone.
How big is a founding team?From an investor's perspective, the ideal number of founding team members is three. This is because founding and running a startup can be extremely stressful and, in most cases, too difficult to do without an internal sounding board.
What makes a good start up team?The Vision
It starts with your vision. The teams that are self-aware have fared better than the teams with no clear thought process. Dedication and perseverance are great qualities to have, but if they were the only necessary ones, the failure rate of startups would be less.
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