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FEATURED ARTICLES           Friday, July 30, 2010                                Email to a Friend

BUSINESS START-UP 101

Your crash course on becoming a successful entrepreneur

- Anne Swift

As a start-up entrepreneur, talent may be your most important asset. At the same time, you are likely cash-strapped and can’t afford to pay the most experienced (and expensive) managers.

In many cases, you might be able to negotiate an agreement under which you compensate your team with a combination of cash and shares. However, the times when top-talent would work only for shares are long gone. Now, you will likely have to pay in cash, as well as in aspirations. If you team up with other students at the outset of your venture, your group’s enthusiasm may be enough to carry you through to your first revenues.

Compensation is only one small component of building a team. Much more important is evaluating strengths and weaknesses on your team and choosing team members with the most appropriate and useful knowledge, talents, and networks of connections.

Assessing Strengths

First, take stock of the skills that you and your current colleagues might have. Generally, you will need business skills and technology/product/service skills. Business skills will assist you with building your venture and managing your business: identifying the right market to enter, making decisions about production and pricing, and raising funds, among other tasks. Technology/product/service skills will be helpful to constructing your product or service line. Most frequently, those with technology/product/service skills have experience in working with the technology or service line that you are building.

Assessing your team’s strengths and weaknesses, as well as your own, can be difficult. You may wish to do so by having each team member list what they feel are their strengths and weaknesses, and discussing specific achievements that demonstrate certain strengths.

After taking stock of the strengths and weaknesses, you should make a list of the skills that you still require on your team: communication, marketing, project management, engineering, or any other business or technical attributes. Once you know which skills you may still require, you can look for team members and Board members to supplement your existing team.

If you are uncertain about which skills you will need, you can seek the advice of others with more experience in building teams. Many successful entrepreneurs in your community may be willing to offer you advice. You can also ask faculty members, particularly those in the business school.

Building Your Core Team

As a student, the easiest way to build a team is with your fellow students. If your area of expertise is business, you might consider spending time at events at the engineering and science schools, or attending engineering events. If your area of expertise is in engineering, you might consider making your way to business school events. The more people you know the greater potential for finding team members within your network.

In some cases, you may be fortunate enough to have potential team members already within your networks of friends and associates. Keep in mind, however, that working with close friends or significant others can sometimes be challenging. Consider how you would feel about tensions in your work carrying over to your relationship. Make sure that you discuss how you will deal with conflicts and how you plan to separate your professional and personal lives. At the same time, keep in mind that some of the greatest companies – Microsoft and Hewlett-Packard, for instance – were started by friends. The bottom line is that you should enjoy working with your team, but realize that there can be potential for tensions.

Although the size of your team will vary with the complexity of your project, 3-5 team members is usually optimal. Smaller teams may have difficulty sharing the workload; larger teams may be difficult to manage. You can always expand your team as you need new skills and expertise.

Lastly, when recruiting new team members, you should be careful about the information that you share. You might consider working with a lawyer to draft a confidentiality or non-disclosure agreement to be signed by potential team members with whom you discuss your idea to ensure that they do not implement your idea themselves.

Strengthening Your Team

If your team is made up primarily of students and first-time entrepreneurs, you may not have sufficient expertise to build your business and may face difficulty in establishing credibility. You can overcome these obstacles by building recruiting Boards of Directors and Advisors, as well as mentors.

A Board of Directors is a legal body, which means that you specify the structure of the Board in your company’s Articles of Incorporation. Traditionally, the Board of Directors is responsible for making major decisions about the corporation and has a legal obligation to respond to the demands of shareholders. In start-up companies, the founders are usually on the Board, but you should also seek out external Directors. Directors can be of substantial assistance in raising funding and establishing connections, and many venture capitalists will ask for a seat on the Board of Directors if they provide funding for your start-up. A position on the Board of Directors requires a legal commitment and many potential Board of Directors members may prefer to join a less formal Board of Advisors or mentor individual members of your company.

Boards and mentors offer three valuable advantages: (1) advice and business expertise; (2) credibility associated with their own professional expertise and successes; (3) access to networks and useful contacts. You can thus use Boards as an extension to your core team. Sometimes, Board members may require that you compensate them with a stake in the ownership; in other cases, Board members are seeking publicity for their efforts. Be sure to discuss issues of compensation and reward with your Board members and mentors before engaging them. You may also ask potential members to sign nondisclosure agreements.

Steps for Building Your Team

1. Evaluate strengths and weaknesses of you and your team members.
2. Based on your evaluation of strengths and weaknesses, identify the skills that your team is currently missing and recruit team members.
3. Begin to search for Board members to build your credibility, networks, and knowledge base.

Anne Swift is the Founding President of Young Inventors International and is currently a student in the Doctoral program on Strategy, Entrepreneurship, and Technological Change at Carnegie Mellon University. She can be reached at anne@younginventors.org. Young Inventors International is a not-for-profit organization that offers more than 1,500 student members access to resources and networks to build their first ventures.
For more information, please visit www.younginventors.org. This article is not to be construed as legal advice.

© Anne Swift, 2006>

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