Monday, December 3, 2001

Courting investors? The best management team wins

By Barbara Finer

You have heard it before. Investors invest in teams more than they invest in ideas. Those who hang around the hallowed halls of MIT, Harvard, Stanford and others know that interesting, even brilliant, ideas are a dime a dozen.

Of tens of thousands of business plans submitted to venture capitalists, incubators, and business plan contests, most never get funded. That was true before the current economic turmoil.

Many a good or even great idea fails to be executed because of the lack of an experienced team. Note that I wrote experienced. Not just brilliant. Not just hard-working. Not filled with freshly minted MBAs. Experienced.

The best ideas often fail to turn into successful products or services because of poor execution. Professional capital sources know this. Failure could occur for myriad reasons: The product is late; it is shipped with too many bugs; it is mispriced; there is no customer support; its value is not communicated clearly to the market; the sales cycles are longer than planned; or the market is unaware of you.

A company with an untested team can easily get caught up in lawsuits because it did not know about employment law or taxes.

Years of experience are directly proportional to probability of doing the things that lead to success. The days of companies conducting their IPOs with business models that do not even pretend to be realistic are over.

But because of the dot-com error, we have delivered many rich entrepreneurs who have never successfully built or sustained a company. As the typical market pendulum effect occurs, the only companies that will get noticed are those that can prove both their business models and probability of successful execution.

As you put together your company, surround yourself with voices of experience.

1. Your board of directors can supplement an untried management team. If your management team is less experienced than desired, an expert board of directors adds to the probability of funding. Find the gurus and stars in your industry. Get them engaged. Their buy-in and support will lend credibility even though financing sources may still replace your board or insist on replacing some of the management team.

2. Carefully choose your board of advisers. Choose people with business experience in areas where the founding team is weak. Choose members from your target market or those who have been involved in selling product to that market. Select members who think different than you do, who ask good questions and challenge the norm.

Add advisers who have depth of experience in hiring and managing people and in executing plans in a resource-limited environment. Make sure there are a few people with a large network to aid in funding and finding other resources.

3. Mix the experience of the management team. You need a combination of energy, raw talent and experience. Get professionals with deep experience in the areas that are most important to success.

If you have never been a CEO or president, hand over the reins of one of these. Being a brilliant technologist may make you a CTO, but it does not necessarily make you a great vice president of engineering. Hire someone with team management and project management experience. Get advice on what skills you need at what point in time.

4. Hire doers that can be hands-on and flexible. A vice president from Coca-Cola may look great, but can this person actually do the work himself? As the company grows, roles change. Hire for breadth and flexibility.

5. Align the vision, culture and values but avoid clones. Make sure if you expect employees to work 60-hour weeks that you hire those willing to do so.

Do you all want to go public? Be bought? Have a lifestyle company? What about location - would you lose key people in a move? Do you welcome newcomers, or are groups already formed?

You may not be surprised to learn that there are companies who start out delivering a product to a particular market only to find the market disappearing due to conditions beyond their control.

Are you surprised that those with deep and healthy teams were able to leverage their core competencies successfully into other markets? That's the true test of an excellent team.

Barbara Finer serves on the executive board of the MIT Forum of Cambridge and is interim marketing manager and founder of CxO Management Group in Boston.