Startup Team That Adds the Steam

An age old question: Would you back an A-team with a B-idea or a B-team with an A-idea?

An A-team with an A-idea, of course! Duh.

In all seriousness, investors often bet more on the jockey than on the horse. If they had to choose, most would opt for an A-team with a B-idea than a weak team with an earth-shattering idea.

Quite simply, an A-team has proven industry experience with past success, whereas a B-team lacks business know-how and has nothing much more than an idea.

“The members of the NVCA considered management as the most heavily weighted factor when deciding to invest in a particular venture (i.e. management received over 35 per cent of the weight, compared with 25 per cent, 20 per cent and 15 per cent for the market opportunity/sector, business model and the actual technology/product respectively),” states Sean Wise, former director of Ernst & Young’s Venture Capital Advisory Group for Canada.

As they say, an A-team can turn a B-idea around and make something people want, but a B-team might go bust due to bad execution. It doesn’t matter how brilliant an idea is, if it isn’t executed by a team that has what it takes to make it a reality, it doesn’t worth a thing.

What Does an A–Team Look Like?

In Doing Due Diligence on Startup Team, we wrote that the management team is one of the most, if not the most, critical aspects of a deal. So with all ‘em talks about backing the team, what exactly does an A-team look like?

Wise issued a survey to 500 of the most successful high-growth companies during his tenure at Ernst & Young. “The results showed that more than 80 per cent of the successful high-growth companies had common management elements,” he recalls.

Based on this survey, the attributes of a successful management team included three key elements: business acumen, operational experience and domain knowledge. These elements form the corners of what we coined, the “Talent Triangle.” In addition, the survey revealed that having the right cogs in place was vital, but even more important was how those cogs interacted with each other.

Business acumen

Domain knowledge, vision, and passion are critical to a startup, but nothing is ever sold without a sales guy cementing a relationship or pushing for a close. Whether it’s selling product to end users, distribution relationships to channel partners, or stock to venture capitalists, the core of the team must include a communicator who can command unreasonable loyalty and close the deal. — Sam Znaimer of Ventures West

Operational experience

The most important part of management is operational experience. The ability to understand the issues, feel the pain and know in your gut what to do, often times will carry the day. — Rick Segal of JL Albright Ventures

Domain knowledge

Deep domain knowledge, specifically a strong network of contacts into potential target customers, is arguably THE most important component of a well-rounded management team. Securing that beachhead account is pivotal for any early stage company. One’s ability to accelerate that process by leaning on existing relationships, in my opinion, is invaluable. — Marc Faucher of BCE Capital

Although all 3 management elements must be present for the highest probability of success, it doesn’t mean that the company needs 3 people. An individual can take up several roles. Wise cites the founders of Dell, Google, and Microsoft as examples. But miss any 1 element and “the venture [will lack] the prerequisites for rapid growth.”

What Others Say

Other industry players say more or less the same thing about a fundable team:

At a minimum, you need an experienced and proven CEO. — Kathy Elliott of Renaissance Partners

Invest in teams of two to three founders. Five is unstable, one is too hard. The best combination is one founder who can sell and one founder who can build. The team matters more in enterprise deals, traction matters more in consumer deals. — Naval Ravikant of VentureHacks

Some might suggest that an A-Player would be requirement to have an A-Team. I would suggest that there is more to a high performance team than a group of A-Players. The dynamics between team members, getting the right person in the right role and leadership are also significant factors in building the A-Team. IMHO leadership and team dynamics will play a greater role in creating a successful A-team than a group of A-Players. In fact a group of A-Players could be detrimental to potential success. There is only room for so many strong willed A-Types on any team. — Ian Graham of TheCodeFactory

In one sentence: Leadership, team dynamics, and proven experience and complementary skills (i.e. business acumen, operational experience, and domain knowledge) are what you’ll find in an A-team.

Know an A-team? Keep in touch with the people on the team. They might be working on, or soon come up with, a brilliant idea that could make you multiple millions richer. And when they look for funding, it might be your doors they’ll come knocking.