Startup Success: People, Money and Opportunity (Part 1)

Date: 2006-11-23 | Tags: entrepreneur, leadership, start-up

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At many of the venture forums and investor meetings that have I attended, one the most common questions is "What should come first, People or Money?" The answer of course can be either, depending on the context of the conversation and the situation at the company. But at an early stage, without the right people, the startup will not be able to raise the money it needs.. Without money there are no people, no product, which of course leads to no revenue money! Simple, eh?

I have been involved in 4 early stage companies, or start-ups. One marginally successful, one very successful, and two near-failures. I've also been involved in small business units in large corporations that acted like start-ups. Through this experience I have come to understand that success heavily depends on the quality and caliber of the PEOPLE involved in the endeavor.

Startup success doesn't have to be that complicated and it can be simplified to the following recipe:

SUCCESS = PEOPLE + MONEY + OPPORTUNITY

Let's talk about PEOPLE first as it is the most important. I'll hold off talking about MONEY and OPPORTUNITY to future articles.

People are by far the most important ingredient to a successful start-up recipe. Whether you are putting together a founding team, your board of directors or advisors, or your employees, these people will make or break your success.

Team Balance

When building a founding team (or any team), balance is crucial. If you hire everyone with the exact same background, you will only get one point of view (aka group-think). Some leaders may think that is a good thing as it means consensus (and that they get their way), but it also means that your path of success is limited.

I have seen leaders hire people that think exactly like them. They are basically trying to duplicate themselves as they believe that they are the best. I have never read about or met a leader that is so experienced and well-rounded in all aspects of business, that they could do it all (if they only had 10 more hours a day to work).

Even though Donald Trump makes it seem as he is making all the decisions, he is not. While his external brand image is that he is 'All-Knowing', he really relies on hundreds of trusted professional top-level managers to run his businesses. This brand image is the work of his public relations and marketing departments and should not be misunderstood for reality.

A balanced team has point of views from different backgrounds and different organizations. You want a diverse team that has been successful in other endeavours because success breeds success. As a leader building a startup, you want a diverse collection of people with enough difference in points of view and experience that can work together constructively. When problems arise, the more points of view you have, the better chance you have at fixing the problem quickly and effectively.

Quality Over Quantity

Guy Kawasaki mentions the importance of people in his book 'The Art of the Start'. To sum it up, he says:

'A' players hire 'A+' players,

'B' players hire 'C' players, who hire 'D' players, who hire 'E' players...

The lack of success is directly attributed to the quality of people involved in the operation. Sacrificing experience and talent for quantity is a bad mistake that will stunt or out-right kill the possibility of success.

Cisco Systems has a hiring ideology that states that they will hire the top 10% for a specific salary range.They try and hire A or A+ players only.

'A' players aren't afraid of hiring people that are smarter and better than them for the job. They understand that the role that they are hiring for isn't theirs and that they need to hire the best person for that role. The best person will also help the company's success which in turn will make the manager look good.

Relevant experience helps a lot in smoothing out potential future speeding bumps. Your CTO should be well respected in the core technology and your VP of Sales and VP of Marketing should have some success in the target markets.

Also don't underestimate how presentable a person is if their role has anything to do with investors, customers, or media. This can be the hidden reason for continued failure. While no one will tell you that someone looks bad, or that they smell, or that they can't talk well, the results are always the same; failure and frustration. Anyone who is a public face of the company to the outside world needs to be presentable, including, and especially the leader.

Of course, without sufficient people in the organization, not much can be accomplished. There has to be a balance between growing the employee base and hiring experienced (and expensive) employees, but the later should also be the priority.

The Storm before the Sunshine

So, you are in a startup and you are going to be the next Google, YouTube, Flickr, and you are going to make $100M and retire on your own private island.

Those are great goals. Everyone needs goals to achieve success. But, before you fly off on one of your personal helicopters for your private island, there are some personal hardships that you will need to understand when involved in a startup.

Running or just being involved in a startup is hard work and not only for yourself. Your family is going to miss you during dinners and weekends. Startups don't operate between 9am and 5pm and if you are interested in leaving at 5:01pm, startups aren't for you.

Your family is also not going to enjoy the small salary (if any) that you will be contributing. Your spouse isn't going to like the sound of 'Sweat Equity' in exchange for zillions of stock options. Stock options don't pay the mortgage nor pay for the kid's Christmas gifts.

Many, many times this will lead to the brink of divorce and depending on your marriage, actual divorce.You will need to balance home life with your startup ambitious to get out with a life that is intact.

Luck has nothing to do with it

So, where are LUCK, CONNECTIONS, and TIMING? They are really part of the PEOPLE ingredient. Let me explain:

1. I believe that people make their own LUCK (bad or good). Their experience, attitude and actions often dictate how events turn out. Overall, experienced people will maneuver towards positive outcomes and away from trouble.
2. Knowledgeable people have a better understanding of when the TIMING is right and when it is wrong. A great opportunity in the wrong time still leads to no revenue.
3. Experienced people know the right CONNECTIONS that they need to be successful and they keep track of them. They aren't just LUCKY to be in the right time and right place (see #1), their connections give them insight to be there.

Execution

What about EXECUTION? To me execution is the linchpin of success. Without it, nothing gets accomplished. Many people have ideas, but without execution they are all worthless neurons spinning around their brain.

At one corporation that I worked at, promotions were granted to those who finished projects, not to those who started them. That says it all.

Final Thoughts

Here is some advice that I have found useful and have seen to be successful in the startup world.

1. Don't think that people are widgets. Hire the best for that role, treat them with respect and pay them what they are worth. Most business books will talk about revenue and market share growth, but will fail to mention that a leader should spend most of their time hiring the best talent to achieve those goals.
2. Balanced teams outperform 'group-think' teams. More points of view and different experiences mean a greater ability to move in the 'right' direction.
3. Everyone needs to understand the personal risks involved in a startup. Living in denial or lying about it to the team will backfire with inside the company and in your family life as well.
4. People make the company successful. A leader needs to focus on recruiting the best people possible. Everything else will come in place if the right people are there to make it happen.
5. Shut up and execute.

People are the most important element for a startup to achieve success.

Next time, I will discuss funding and revenue and how important they are to a startup.

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