ENT 3003 Exam 3 Study Guide 04 19 2014 Chapter 7 Building the Founding Team Building Effective Founding Teams Why do teams lead to a better chance for success o Shared intense effort required by a startup o Loss of one member less likely to result in startup abandonment of the entrepreneurial idea o Team concept permits expertise across major functional areas such as marketing finance and operations o A skilled team tends legitimacy to the startup in the eyes of lenders and investors o Diverse experience of the team allows for better decisions o However there is still typically a lead entrepreneur and successful entrepreneurs take advantage of building social networks The Entrepreneur s Network o See the entrepreneur in the center of figure o The entrepreneur has extended networks that are critical to the entrepreneurial process o When an entrepreneurial firm interacts with other firms in its industry it creates additional extended networks o Always at the hub is the founding team o Involved in the entrepreneurial team is consultants personal advisors sales support manufacturing support governmental agencies and professional advisors Creating the Founding Team Benchmarks for an effective team Between lead entrepreneur and the entrepreneur s o Shared vision team o Shared passion Leads to shared hard work o Industry experience Relevant to the new venture o Solid industry contacts With sources of capital o Functional areas of the business are represented Accounting finance marketing management o Team members with good credit ratings o Team members have time and money to endure start up constraints Some research indicates that team heterogeneity may be a significant predictor to long term performance A Founding Team Quiz Important that a founding team agrees on a number of important issues before launching into a business together It is not only valuable but also important for team members to take this quiz to see where their expectations differ and discuss those differences Special Issues for High Tech Teams High tech teams suffer from a number of important issues that can slow or derail startup and early growth processes o Putting structure on the organization before it s time Entrepreneurial teams should operate as teams as long as possible particularly through early product development to avoid the weight of company bureaucracy and to assess whether the team is the right team to take this technology to the market o Pretending there are sales from beta customers Beta customers should not be confused with actual customers For beta customers the value is free Value proposition is not going to build a company The only bonafide customers are those who pay for entrepreneurs products and services o Suffocating under opportunity overload Tech entrepreneurs must focus their efforts and stick to their strategy for growth so that the opportunities they do take advantage of have a greater chance of success o Believing that engineers can do marketing Technology entrepreneurs must bring in critical business skills as early as possible to avoid slowing progress for lack of expertise o Licensing the technology too soon In an effort to speed the technology into the market entrepreneurs sometimes elect to enter into license agreements too soon and thereby give away significant upside potential or worse have to rely on a licensee that has chosen the wrong market or done a poor job of developing the market application An alternative is to pay a strategic partner to develop the applications and retain the rights in house Funding is through angel or venture capital Founding team consists of scientists engineers with little or no business or market experience The venture requires professional management typically outside the founding team The investors help with forming this team Unique Issues Surrounding Virtual Teams Virtual teams function differently and the distance effects how the Synchronous asynchronous communication media alleviate physical team interacts distance issues o Technologies such as videoconferencing phone and email Trust is critical to effective virtual teamwork o Lead entrepreneur needs to coordinate all the activities that fall within three major areas tactile collaboration usually what are we going to do for the first year strategic collaboration which is longer term from 1 5 years and task management o Typically through a virtual private network VPN these activities can be coordinated for security and confidentiality Advantages of virtual team o Enables the entrepreneur to access the most qualified individuals for a particular position regardless of location o Creates a more flexible organization Founding Teams for International Ventures Success in the international market depends on the skills and knowledge of the team o Traditionally the first entrepreneur establishes himself herself domestically and then may branch out internationally o However more and more firms are going international from startup and are generally founded by teams Successful characteristics of international ventures include o Extent to which founding team members have traveled and or worked abroad o The number of languages they speak o Research indicates that whether small firms succeed in the international market depends on skills and knowledge of the entrepreneurial team Experienced founding teams likely to form partnerships to facilitate entering the foreign market o International ventures are typically more vulnerable due to their operations being at a distance more care must be taken when moving to international markets o Usually seek partnerships to provide financial political and cultural resources and the contacts they will need to be successful Rules of Friends and Families Friends family members must possess real skills and expertise required by the venture They need to share the same work ethic as the entrepreneur The advisory board must include outsiders to balance the input All relationships are business oriented and must be stated clearly objectivity spelled out Seeking Professional Advisers Outsourcing solutions for professional help o Attorneys help set up a business look over legal documents malpractice insurance Advocate for the business and can offer an invaluable reality check Advise the entrepreneur in selecting the correct organizational structure sole proprietorship partnership LLC or corporation Advise about and prepare documents for acquisition of intellectual property rights