There are three types of team, according to management guru Peter Drucker. There’s the baseball team, which plays together but not as a team. There’s the football team, where everyone has a discrete role but they work in concert, like an orchestra. Then there is the doubles team, where players must both excel as individuals and cover each other as well. That’s the startup.
Just about everyone agrees that startup teams matter, but opinions differ as to how much. To some, the founding team is bound to be incomplete – that’s why lead investors or angels join the board. But for others, the founders are the best predictor of success.
‘The general view seems to be that the team factor ranges from “important” to “nearly everything”,’ says Christopher Haley, Head of Startups and New Technology Research at Nesta, the innovation charity. ‘I know some VCs who claim to make their investment decisions based solely on their impressions of the founder over lunch.’
Ricardo Schäfer of European accelerator Seedcamp says: ‘We’ve invested where we thought the business model was weak, but we really liked the people.’
“We’ve invested where we thought the business model was weak, but we really liked the people.“
Much can change during the earliest stages of a startup – the business plan will be revised, the product may change – but a strong team prevails.
So what does a strong team look like? ‘There is no magic formula, but there are some common qualities,’ says Haley.
Attitude vs aptitude
The ideal team will be made up of people with complementary skills who all pull their weight, so you’re looking for people who can (and will) turn their hands to whatever’s needed – ‘exceptional people’, Schäfer calls them. It’s rare to find everything you want in one person, which may be one of the reasons accelerators look askance at entrepreneurs pitching solo.
Technical prowess and detailed market knowledge are a baseline, and complementary skills will be useful if you want to cover all the bases, but it’s widely held that character and ‘soft skills’ matter more: ‘Determination without dogmatism, the imagination to envisage a new way of doing things, the skill to persuade and enthuse others, the ability to really focus on what matters, and a willingness to take well-judged risks,’ in Haley’s words.
Ideally, you need at least one ‘Pied Piper’, as Schäfer puts it – a natural leader to enthuse others to persevere against uncertain odds and in pursuit of an often nebulous goal. ‘You’ll face a ton of problems that may come up unexpectedly, so you need people who can handle this and inspire confidence,’ says Schäfer.
Great teams are generally made up of ‘do-ers’. Innovation is important, but execution is what indicates how capable your team is of following through. Past deeds will be a good indicator of future performance. Focus on those who have “done something out of the box, or worked in a place that has challenged their thinking,” says Schäfer.
‘You’ll face a ton of problems that may come up unexpectedly, so you need people who can handle this and inspire confidence.’
Investors often look favourably on serial entrepreneurs for this reason, even if their early ventures were failures. If they can demonstrate they’ve learned from past mistakes, this will enhance their skills as team leaders.
It also helps to have someone with ‘a beginner’s mind’. ‘A killer question is ‘what’s the latest thing you’ve learned? Any startup is a learning community, and therefore a culture of ambitious individuals who are empowered to learn and develop personally and professionally is crucial,’ says Charlie Osmond, co-founder of Fresh Minds and now on his second venture, travel SaaS business Triptease.
He also believes in the idea of ‘birds of a feather’: ‘Small companies are heavily impacted by each hire and Steve Jobs was right that A players hire A players, but B players hire Cs.’
Dynamic teams are more than just a collection of outstanding individuals – they need to gel. The best will have worked together for a while, or will have what investor and PayPal co-founder Peter Thiel calls ‘a pre-history’. This can make all the difference when the team faces inevitable setbacks.
‘Given that founders may spend more time together than with their partners, it’s crucial they get on,’ says Haley. ‘Team dynamics are very important, especially in the intense, intimate environment of a small startup. I’ve seen several otherwise great startups fall apart because of internal conflict.’
But they need to watch out that those shared values don’t curdle into ‘collective introspection’ and groupthink, argue organisational psychologists and authors Rob Goffee and Gareth Jones. A little volatility is no bad thing – it shows that teams care about what they are doing.
‘This is a tricky one to balance,’ admits Haley. ‘Innovative ideas typically need diverse thinking, which can be stimulated by people from varied backgrounds. Smart founders and VCs know this already.’ Having a group of ‘multi-culturals’ – people who have lived and worked in several countries – may give founding teams an innovative edge, according to INSEAD research.
‘Innovative ideas typically need diverse thinking, which can be stimulated by people from varied backgrounds. Smart founders and VCs know this already.’
But a room full of alphas is no good if they cannot work together. ‘We look for people who, when talking about their work or projects, talk about how they were part of a team. It’s not just, “I did this” or “I had the good idea”,’ says design consultancy and ace team-builders IDEO.
Many entrepreneurs believe founding teams need to work ‘shoulder to shoulder’ in the early stages in order to build a strong startup. But upside-down and ‘sharing economy’ business models are blurring the lines a bit.
Team dynamics are changing – looser groups may form in order to collaborate, then disband. This can raise practical questions about how equity is divided and roles allocated. Tackle equity and incentive questions early, and formally, before investors get involved, or your dream team might fall apart before you’ve even begun.
Furthermore, co-location is no longer an absolute necessity for teamwork, according to David Heinemeier, who helped to build software business Basecamp (formerly 37Signals) while working on a different continent to Co-founder Jason Fried. It was six months or so before they even spoke on the phone. (It’s worth bearing in mind that the business has neither investors nor a sales team.)
He’s a passionate advocate of remote working, calling offices ‘interruption factories’ that sap productivity.
For remote startups, teamwork is not so much a question of ‘culture’ or camaraderie: it’s the work itself that matters. So the best remote teams will be made up of self-managers who have a passion for what they are doing, but also a ‘fully formed life’ outside of work. Those for whom the office is their all – their social life, their dinner table – probably wouldn’t make the cut.