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Founders and New Employees

Founders with Complementary Skill Sets

The business team begins with the entrepreneur(s).  Earlier lectures in this library introduced the genesis and evaluation of the business idea.  In many cases the founding entrepreneurs consist of an inventor or the person generating the idea and another entrepreneur.  As we previously explained, the original entrepreneur is generally not the inventor.  The inventor spends so much time working on and developing the product or idea that he or she has little time or ability to work on the business.  The startup entrepreneur enters the picture as a cofounder and begins to build value (a business) around the product or idea through assembling resources.  So, it is quite common for the startup team to consist of the inventor (or sometimes multiple inventors) and a business-minded entrepreneur. A common theme among successful startups is the presence of two individuals as founders who match the entrepreneur-inventor (developer) dichotomy.

The reason that this entrepreneur – inventor relationship among founders is successful is because each member has a unique skillset and distinct purpose within the business. This is a very important situation. For a startup team member to be of value to the business, he or she should have skills that are complimentary of other members (rather than duplicative). This does not dismiss the fact that founders often have similar skills.  Just look at Steve Jobs and Steve Wozniak or Bill Gates and Paul Allen.  In both cases these individuals had a great deal of common skills. However, in each relationship, one individual assumed a greater role in product development while the other focused more heavily on the entrepreneurial tasks of developing the business. In many cases the founding team will consist of multiple individuals, all with complimentary skills

 

Early Employees as Owners

Early employees are critical to the business. Generally, the founders will have to make strategic hires to proceed along the intended growth path.  As a founder, you should exercise considerable diligence in evaluating potential employees. You will look for the same type of personal and professional fit as described in our previous lecture. The early employees often have skills that are far more valuable than you are able to pay them in salary. With this in mind, early employees are often incentivized with a combination of salary and ownership interest.  For example, a new software designer may receive a low salary, but have a vesting plan for ownership interest.  This serves two purposes. The new employee is incentivized to make the business a success (because it raises the value of their ownership interest) and the startup does not use up as much cash by paying a higher salary to the employee. We discuss Equity Grants and Options in greater detail in a Startup Financing Resources Library.

The concluding point to this introduction is that early members of the entrepreneurial team should have both personal fit and complimentary skill sets. These are individuals with whom you will have to work and collaborate extensively.  Personalities that strongly conflict or duplicative skills can cause conflicts or voids that hinder the startup’s progress.  Remember, the startup depends almost exclusively on high growth and productivity.  Without a strong fit among team members achieving this objective is very difficult.

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