Is There a Secret Sauce for Founding Teams?
Attracting the strongest possible startup team is a top priority for every entrepreneur, and for good reasons. Founding team performance is a make-or-break issue for new ventures. It’s well known that startup team quality is a major factor for potential investors. On the negative side, research points to team misalignment as one of the top reasons for startup failure. An article in the Journal of Management estimated that founding team problems are involved in 60% of business failures.
At the day-to-day, operational level, a purpose-focused, highly committed team dramatically increases the odds that founders will stay optimistic, agile, and committed in the face of the inevitable setbacks and hair-raising challenges of launching a new business. What Makes a Successful Startup Team, a 2019 Harvard Business Review article, reports that startup teams with high levels of passion and collective vision achieve significantly better results than teams whose members have more highly rated experience and skills but lower levels of passion and vision.
My first experience at a venture-funded startup underscores this reality. In the late 1990s, Mainspring’s co-founders invited me to join the management team. It seemed that this venture was destined for success. The co-founders had profitably exited their previous startup and they attracted leading VC investors to support their vision of building a scalable digital information business. The entire founding team had impressive skills and experience. But our well-laid business plans imploded. Within a year, when the expected customer base failed to materialize, the Mainspring team went through much soul-searching, prolonged strategy sessions, and painful layoffs. The company pivoted into a different sector, found new customers, pivoted once again, and ultimately thrived with an IPO followed by acquisition by IBM Global Services. I can still remember CEO and co-founder John Connolly saying during strategy sessions, “this company will shut down only over my dead body.” The importance of founder commitment was one of many invaluable lessons I learned at Mainspring.
What do you value the most in startup team members?
My own thinking the ideal founding team has been honed in multiple startups over the past two decades. Here are the key ingredients I always look for:
- Shared values and strong social impact vision
- Passion and commitment to the venture’s long-term goals
- Eagerness to learn, with a desire to teach and mentor
- Diverse and well-balanced skills and experience
- Agility and resilience in the face of setbacks
- Mutual trust, and a sense of humor
Even though there isn’t any fool-proof secret sauce for a successful founding team, a key starting point is to understand your own values and priorities. Beyond that essential, it’s well worth following proven best practices based on research and entrepreneurial experience.