In the world of early-stage startups, your team is the most valuable asset you have. It doesn’t matter if you’re in the world’s sexiest market with the freshest product on the block. Ultimately, your investors are investing in you and your team. When they are considering whether to invest or not, the main question they are asking themselves is whether the people at the top of the food chain at your company have what it takes to walk the perilous and meandering path of startups. The way you tell the story of your team is crucial. It will mean the difference between raising money and not raising money.
Every day of the week, a venture capitalist will sit in a meeting room and see pitches from some of the best people in the world at what they do—people who have perfect “founder-market fit.”
To understand how to tell the story of your team, you need to know what investors look for in teams. What it boils down to is risk reduction. Startup teams—and in particular, the founding teams—have several skills and attributes. Some of them will go in your favor, and others will count against you. It is worth mentioning that different investors have varying opinions on what makes a good founding team. Some investors prefer to invest in teams that have deep startup experience, while others are happy to invest in teams that are fresh out of college. It is worth doing a little bit of research before you do your pitching to see what your investors prefer.
Attributes of winning teams
If your team has previous startup experience, it is worth highlighting that. Founders who have had multiple exits and who have made venture capital firms a lot of money in the past often have an easier time raising money than teams who have never founded a startup before.
Non-successful startups are worth mentioning, too. Even if you didn’t have a massive exit, there’s no shame in having started a company and failed. Remember that most VCs have invested in dozens, if not hundreds, of companies before. The model for venture capital dictates that a lot of these companies fail—and that is okay. You can learn a lot of useful things even from running a “failed” startup—I should know, most of the companies I founded turned out to be complete and utter failures, financially. The critical thing to be able to formulate is why you think the company failed. If it was the market, then you should be prepared to outline what your initial assumptions were, what changed, and what you learned. If it was your fault, take ownership and explain how you’ve changed so that it can’t happen again.
Even if you weren’t a startup founder yourself, if you were part of an early-stage (30 or fewer staff) company, you could learn a lot of the startup magic by osmosis. Weave those experiences into your team slide as well.
Have you never been at a startup? No problem—what other work experiences do you have that’s relevant? What skills, knowledge, and attributes do you have that nobody else has? One example of this that comes up often is people transitioning out of academia. You may have a PhD in a particular topic, and you could be the world’s foremost expert on something. That has incredible value—make sure to highlight it as part of your team narrative.
The team slide typically only includes the founding team for a startup; these are the people who have committed to building this company together, and the thread that will keep the company together as it grows and develops. Image Sources: [Master1305]/stock.adobe.com; [Lightfield Studios]/stock.adobe.com; [Volodymyr]/stock.adobe.com
Another angle you can take is that of the “expert customer.” When I started my first company, Triggertrap, I had never done a real startup before, and I hadn’t created photography equipment or a hardware product previously. But the one advantage I did have is that I had written over fifteen books about photography at that point. I was a legitimate “expert customer,” which means that our company had an unfair advantage: I deeply understood the problem space I was entering into. Some of the best companies in the world are started by people who “scratch their own itch.” They are the founders who experienced a problem at work or in their personal life, time and time again—and they are so tired of the issue that they are motivated to find a solution.
Why are you starting this company?
I do occasionally work with founders who have none of the above: They might have some work experience, but it isn’t directly relevant to the company they are starting. They don’t have patents or direct expertise in the problem space. And they aren’t an “expert customer.” The hardest question I ever ask a founding team is this: “So, why are you the right people to start this company right now?” It would be best if you had an excellent answer to this question—because, ultimately, everything in this chapter is about answering that exact question.
In the course of my pitch coaching, I have talked several people out of starting companies. The reason was almost always the “founder-market-fit” question. If the founder doesn’t have a real, deep, reliable connection with the market, the question that won’t melt away is, “why is this founder even trying to start this company?” If the founder can’t come up with the right answer, there’s a fundamental problem with this company. In my opinion, only one thing can help: phenomenal amounts of traction. Traction—whether that materializes as subscribers, sales, monthly active users, or what have you—proves that no matter what the founding team looks like on paper, they know how to execute and can turn into a profitable business. If you don’t have a team with a strong founder-market fit, and you didn’t have traction to overcome that, nobody will invest: it would simply be too high-risk a proposition.
For your team slide, at the early stages of your company, you’ll want to focus on your founding team, as they are the ones who are “locked into” the business. Your broader team of staff and contractors also tell part of the story, but ultimately it is possible for them to leave; their value isn’t tied to the company itself in the same way. The individual members of the junior team are generally not relevant to the pitch. It would be best if you showed the team sizes of your different teams. If you have 90% developers, 10% customer support, and zero sales or marketing people, for example, you may have some explaining to do as to how your business is growing.
As your company starts growing, your senior team is there to fill in the gaps of the founding team. Here, you will be judged on your skill in attracting, hiring, and retaining key members of your organization. This is as important as the founders themselves. As a founder, know what your shortcomings and weaknesses are. If marketing makes you cringe, surround yourself with proven marketeers. If spreadsheets make your eyes glaze over, hire a great operations person or a finance person to help cover that side of the business. The story of the team you have in place and the people you are planning to hire soon is the story of how you can build a team that can stand the test of time.
Finding the narrative
Your team should be good enough to warrant telling a story about; all you have to do is to find the narrative. Some groups I work with are so good and so impressive that I advise them to lead the whole pitch with the team slide. Others are less impressive, but they still end up successfully raising money. The main message you need to get across is why the group of people going on this adventure together has a fighting chance at building a valuable company in the market they are entering.