m:lab By John Kieti / March 24, 2014
How team composition matters for startups at PIVOT East
PIVOT East is emphasizing the need to regard the competition as a platform for organizational development and business model refinement among its participants. Inasmuch as few participants may still see it as one of the many competitions where they could “earn” prize money, there’s many that are getting the geist of the matter and are taking their businesses more seriously with the competition. Team composition is a key ingredient that helps to distinguish a startup that could achieve speedy market traction from others that will experience difficulties.
Market traction validates the idea
In the 2013 edition of the PIVOT East, market traction was emphasized in the criteria for all selection stages. This helped to minimize the so called “compe-preneur” effect. Market traction included earning or growing revenue, increased active user base, and other growth metrics. Having market traction differentiates a startup from the many others in the crowd that for various reasons can’t achieve milestones beyond the great idea.
While the selection criteria in PIVOT East will continue to emphasize market traction, team composition will play an increasingly important role. The likelihood of getting traction for a certain idea is improved by having the right kind of team in place. Its even arguable whether the team is more important than the idea for a startup.
The Team vs the Idea
Given a scenario where there’s no market traction for a startup, a question begs; “What is more likely to yield traction – the strength of the idea or the strength of the team?”
Many investors will tell you that a bad idea can be improved or killed altogether to take up another better idea. Ideas are cheap and generally worth nothing, unless they are executed into revenue-earning and growing businesses. Often times, especially among “Compe-preneurs”, the execution teams skills are shallow as focus is more on the idea and the all well elaborately planned business plan. For a startup, the “coolness” of the idea and the sticking to the initial elaborate plan A will not necessarily bring revenue and growth.The team has to speedily iterate from the plan A to a plan that works. As Ash Maurya would advise, 66% of successful companies reported drastic changes in their original plans.
From the above observation, the calibre of the team is important for execution of a great idea into a viable high growth business. If an investor bets on great idea with a bad team behind it, they are trapped in a suboptimal investment. Such a predicament is difficult for the investor to get out of without upsetting the founders. A badly set up team is a hindrance to the kind of efficient, focused activities that a startup has to undertake in the search for a repeatable and scalable business model.
When is team composition good?
From organizational development theory focussing on stable corporate environments to evolutionary lean startup, growth hacking thinking, perspectives on the ideal team structure varies. In a pitch about a startup team, at least three aspects are important though and should be clearly articulated :-
Sheer depth of skills and experience
Founders need to avoid teaming up without screening out each other for mediocrity of skills among each other. This is to mean; If one is the developer, hacker or CTO in the team, a question should be asked of; How well grounded are their technical skills? Whats their experience as a developer? Of course ability to learn new platforms and concepts in their area is important as well. The same applies to the designer, the business development guys or other member in the team.
Complementarity of skills to refine the business model
While the focus of enterprises established on known business models is optimization for execution, the focus of startups is speed towards arriving at repeatability and scalability of a business model for a new product. A team of five computer science graduates is more likely to form a software consultancy, and not quite a startup. They would otherwise be all CTO’s assigning each other CEO, CMO, CFO, CXO roles that don’t quite fit their strengths. The generally recommended complement of skills for internet startups is for the founding team to have a developer (hacker), a business savvy guy (hustler), and more recently, a designer (hipster). Its also useful to have a domain expert in the founding team if a startup’s customers and problem areas are in a specialized domain such as health, education, agriculture and engineering.
Collective Passion and Commitment
A key team member that is not committed enough to the mission and course of the startup is a loose canon, even if they are the city’s super-star developer or designer. Founding team members should share the same passion for success of the startup. This is easy when the same vision has been sold to each other. Since there’s never a guarantee that everyone will sustain the same level of motivation over the ups and downs of the startup journey, there’s always the chance that one cofounder or key employee will abandon ship. This could be for validly greener pastures or greater missions. Vesting agreements, though seldom executed among startups in East Africa may be one powerful instrument to solve such team dynamics.
More on complementarity of skills, passion and commitment and vesting agreements may be found in the author’s longer article here.
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