How your start-up can entry priceless recommendation past the each day group
The last two columns I wrote were about showing investors that you have an irresistible team and then thinking about how to build a team when you fundraise. How about, at the end of this “team trilogy”, looking for specialist knowledge beyond the daily team?
Being an entrepreneur can feel lonely. Especially for someone starting their own business. But even for a couple or a threesome, discussions can soon stall.
Hence, it is very useful to use objective external input and assistance. But there are guards. As an investor, I often see a page of a pitch deck full of headshots and names, sometimes with a brief bio, under the title “Adviser”. I know that the entrepreneur hopes to impress with all the expertise and experience that he has gathered around him. But very often it is a shutdown as I cannot see any thoughts about what should be achieved by each individual and only the risk of:
- a pointless list of people with no commitment, time, or adequate understanding of the business (sometimes just on a vanity project to polish their own credentials)
- A minefield that slows down decision-making
- Confusion from random conflicting advice and directions.
There are a few questions that you need to ask yourself in order to avoid these common pitfalls and get the most benefits:
1. What do you need from external inputs?
Particularly at the beginning of a business, you may be looking for consumer and / or industry insights and expertise. The obvious hunting ground is someone who is currently or has recently retired from an established business. The observation here is their ability to adapt what they know about a large, mature company to the context of a resource-constrained, high-growth start-up.
A network is of great value to any start-up – connections lead to chance and it is remarkable how this “luck” translates into investors, customers and other help. Here, too, someone from the industry probably has a useful network.
Consider if this is a one-time need, e.g. B. the search for suppliers, or an ongoing requirement, e.g. B. the construction of a customer pipeline. If it is the later, it may be best to play an agreed and remunerated role.
2. What is the role – director, mentor or coach?
A director in a company is a formal role. Given the Director’s responsibilities, it should not be taken lightly by either party. A substantial investment is likely to require the supervision of an investor director. Do your due diligence and get references to make sure the proposed director has relevant skills and expertise, with moderation and judgment to make effective decisions, and is someone you have good chemistry with – you you should see a lot.
One that should be avoided is the “board observer” – someone who gives investors some control but is not committed to actually understanding or contributing to decisions. Without exception, this results in the board meeting becoming an extremely inefficient exchange of information rather than a strategic decision-making forum.
‘Mentor’ is a commonly used word – and often completely meaningless, or worse, positively destructive. Google believes that their team can “mentor” a start-up during a 30-minute conversation. Compete tosh. True mentoring requires longevity so that the mentor understands the business, the market context, and the strengths and weaknesses of the existing team.
While it may not be as broad as a director, mentoring is similarly hands-on – it brings in expertise, helps create and explore opportunity, helps research into decision-making, and ensures solid decision-making, ensuring that the Entrepreneur develops his own skills.
Coaching also requires a long-term relationship with the entrepreneur, but uses the general interviewing skills of the coach with no industry or functional knowledge to help the individual or team to identify their strengths and weaknesses and to develop their skills.
Specific ad hoc advice can be obtained from experts. I always value the advice of entrepreneurs who have been in a similar position to building a business more than an industry expert who climbed the greasy corporate ladder or an investor who is clearly great at making money and the beans counting, but with little real consumer or operational experience. For anyone delving into just one question, remember that, as haunting as they may be, it is their context that you think is most influential. And too many different views can confuse a problem. Ultimately, you need to adjust to sifting using others’ opinions as good insight and inspiration, but trusting your own instincts to make the right decisions for your business.
Sometimes an entrepreneur just needs moral support – a shoulder to cry on, someone who pays attention to their personal well-being and motivation. Friends and family can be good for that. On the other hand, the pressures of growing a business are sometimes best removed from the closest relationships.
3. What is the obligation?
To be effective, each director must commit to more than just attending board meetings. At least the preparation and intimacy to be up to date between board meetings. Ideally, however, they are also involved in the areas in which they contribute specialist knowledge, e.g. B. Finance, Marketing, Sales, Production or Financing.
While for Worth Capital we never make the operational decisions where we have expertise that can quickly fill a void, for our portfolio companies we really roll up our sleeves. Over the past few months we’ve been negotiating rents and contracts for a large fulfillment center in Bristol. Creating a forecasting and inventory tool for a direct to consumer e-commerce business for which demand was growing very quickly and whose major risk was product availability; and re-examine the customer offering and end up with a much stronger name and brand identity for a B2B SaaS product.
4. What should a board look like?
It is useful to ensure a very dense board in the early days. Nimble decision-making and execution agility are more important than strategic navel-gazing. The founders and one more are plentiful.
As a business grows, the board of directors may need more experience or additional investments may require representation. Any meeting with more than five or six people requires efficient moderation. So, at this stage, you can appoint a board member to lead the board or take on a formal chairman. A chairman role is useful when you have credibility to be a figurehead, especially with potential investors. But here too, the commitment and expectations must be clear.
5. What is the agreement between the parties?
Once you have decided on what and from whom, you need to formalize expectations.
If someone is contractually committed (either to pay in cash, in kind, or with equity or options) there must be a formalized bilateral agreement in which both parties can hold each other accountable to allow for the time and expertise who are bound.
Are you interested in participating?
The startup series, hosted by smallbusiness.co.uk, offers companies the opportunity to secure an equity stake of £ 150,000 to £ 250,000 each month. To learn more, click here.
Small Business and Worth Capital are partners in the relaunch of the start-up series – with £ 250,000 equity to be won every month!