The best entrepreneurs are great at failing. After all, you must be prepared for it when 75% of venture-backed companies never make it.While this may sound like bad news, the silver lining is that entrepreneurs are also great at reflecting on their failures. This means there is tons of data available at your disposal, most of it coming from startup team post mortems.And according to an analysis of 101 failed startups, 23% blame it on having the wrong team. It is, shockingly, the third most common reason, after running out of cash (29%) and failing to meet market need (42%).Today we’ll see how to avoid the pitfall of launching with the wrong team. We’ll give tips on how to improve funding chances through the right hires, and how to create startup leadership that is, hopefully, successful for many years to come.
The first step to understanding how teams affect funding is to step into the shoes of a venture capitalist. There is no shortage of articles on what kind of key metrics, technological and competitive advantages you must demonstrate. But when it comes to proving your team is the right one, information is harder to come by.However, a good pointer is the resources provided by startup accelerators themselves. For Quake Capital, for instance, here are the traits that define an exceptional founding startup team:
VCs, in short, are looking for motivation, persistence and cohesion in a team made of diversely-skilled individuals. These are easier traits to break down at the individual level. For a whole startup, it is essentially down to one question: why is this team the right fit for the product?
Not all VCs are after the same thing. There are industry trends, but one persistent theme is the fact that founders should be in a unique position to deliver a meaningful product.In other words: personal stories matter. According to Stephanie Palmeri, partner at Uncork Capital, “Your personal story is paramount when raising money for the first time”. The startup idea must be one the founder has been preparing for their entire life. Ideally, the whole staff should follow the same vision. Stories from startup team members who communicate experience, perseverance and passion related to the project can go a long way in securing funding. And more than that, since 41% of US employers claim bad hires cost them at least $25,000, it’s also a good way to ensure your startup doesn’t start hemorrhaging money as soon as it’s secured it.
Circling back to the study of startup failures, Patrick henry, Founder of QuestFusion, breaks down the mistakes into the following key points:
The main takeaway here is that most of these failures stem from a lack of successful leadership. That is to say, hiring the right talent to form the right team isn’t necessarily something startup founders want to think about. But it’s something they must definitely address to secure funding and become viable.
Startup founders aren’t necessarily born leaders. Some are inventors, others are developing geniuses. But one thing they’ll all have to demonstrate, at some point, is strong leadership. Here’s why:
Becoming a great team leader isn’t easy. It takes practice, perseverance, and equanimity. But one thing is for certain, it is a skill that can go a long way in launching your startup with all the odds in your favour.
The final point to make here is about how creating a strong team is never wasted time. Even if the startup fails or doesn’t secure funding, you are building long-term relationships with team members, co-founders, managers and contractors from all walks of life.Just remember, Google acquired an app company called Bump in 2013 for $35 million. After spending $20 million in a few months to make it work, they closed the company. But they kept the whole team on their roster, because they understand that good teams are hard to come by. And if it’s good enough for Google, it’s surely good enough for your startup.Did you enjoy this read? Subscribe now to our Entrepreneur Self-Growth Guide!