We invest alongside of large institutional VCs and also Angel Investors. While VCs tend to write bigger cheques we know their strategy to scale a company can involve an in-depth analysis of the management team. In many instances, it is suggested, and at times baked into the term sheet, that changes need to be made to the senior leadership team (SLT). This is the cost of an exit to many successful founders raising a series A or B but our experience working with Angel Investors is a little different. While some may argue feelings and business do not mix well together, it cannot be denied that, after all, we are dealing with human beings who unequivocally feel at least six basic emotional states.
According to Dan Mothersill in Age of the Angel:
"At least 60% of an Angel's decision to invest is based on the strength of management.
A groundbreaking technology, no matter how potentially disruptive, created by a couple engineers with little business experience will die a death that is quick and costly.
More often than not we come across companies that look fantastic on paper but when we meet with the management team we quickly learn why we would not invest. First and foremost, no trust - no deal! How do you establish trust when you first meet any one? You make sure you have a 100% say:do ratio! That means you do 100% of the things you say you will do. For example, be respectful of each others time and on time for an appointment. I remember showing up to a first meeting with a founder who had made me wait 30 minutes because he was finishing up a photo shoot! I ended up speaking to another startup in the building for those 30 minutes and needless to say simply cancelled on our tardy friend and did not reschedule. The absence of trust within an organization creates cracks in the foundation of a highly functional team. Trust and support are absolutely necessary for building and sustaining a culture of excellence because they create the meaningful relationship people need to push each other to do great things! If you are faced with a decision to hire someone who is very trustworthy but perhaps lacks the experience as another candidate be sure to consult with your team to see if who would be a better culture fit.
"Most early-stage companies do not have well-rounded teams and often the teams will not have material previous experience. Sometimes too much experience is a bad thing. I would rather invest in fearlessness than experience. A company can always close the experience gap - and usually does with investment. But you can't fill the fearlessness gap. It has to be there from the start and at the top."
- Frank Erschen (Angel, Coach, Community Builder)
Building a startup is like embarking on a long journey through a jungle. On the outside the jungle looks like any jungle but within the jungle live many unexpected occurrences. These unexpected things can either deter or encourage your team members to progress forward. I have witnessed several implosions within organizations where the team completely dissipated because of fear. The fear of no pay off, the fear of too much work, the fear of keeping their job... - fear is not a quality you want in the person walking through the jungle with you. The worst kind of fear exists in teams where individuals avoid ideological conflicts in an effort to preserve artificial harmony. Building an environment which invites transparent discussions until you are in sync with each other is far more effective than stubbornly insisting only you are right. Draw on the talents and insights of all your team members to help solve the problems people are dealing with.
"Create an environment in which everyone has the right to understand what makes sense and no one has the right to hold a critical opinion without speaking up."
Speak up, own it, or get out.
-Principles, Ray Dalio
Employee retention is an extremely important topic for all organizations of all sizes. Commitment to the mission is absolutely necessary. There many things to consider when making such a decision so be crystal clear on who you are hiring for. Think twice before you hire a super skillful individual who is only interested in contract/part-time work. The lack of clarity or buy-in prevents team members from making decisions they will stick to. Remember, you want someone next to you that will stand with you as you navigate through the jungle.
As one of the organizers of Vancouver Startup Week, I work with hundreds of volunteers to help create a successful event. One of the most frustrating things to hear is "that's not my job". When dealing with volunteers it is almost always expected but every now and then we get someone who holds themselves truly accountable, even when it comes to specific tasks their department may not be responsible for. A startup team in its' early stages demands people to step outside of their comfort zone and bring forth a get shit done attitude. The need to avoid interpersonal discomfort prevents team members from holding one another accountable for their behaviors and performance. Bureaucracy and red tape simply cannot exist in a startup environment. Allowing yourself to be radically transparent and open with your team members will allow you to hold each other accountable and truly be performance based.
Lastly, for the sake of this blog post, recognize that most people will pretend to operate in your interest while operating in their own. The challenge with operating with a team where individuals focus on their own individual goals and personal status is that it can cannabalize the focus on the collective success for the team. Most people will operate in a way that maximizes the amount of money they will get and what minimizes the amount of work they have to do to get it. Don't be naive. Strive for the highest possible percentage of your population having meaningful work and meaningful relationships while recognizing that there will always be some percentage of the population who won't care for the community and/or will do it harm.