Yes, I know the word doesn’t exist, but teammanship is an all-encompassing term I use to describe the quality of a startup’s team identity and the relationships among its members. When I see teammanship in action, my checkbook comes out.
The right team led by the right leader can do the impossible and create truly breathtaking results. The critical thing is that the people behind the startup have a shared team identity and responsibility. I want teams I invest in to execute on their goals. I tend to invest in startups with a high level of teammanship, even if the initial idea is half-baked. There are no conditions under which I would invest in a startup with low teammanship. Teambuilding mistakes create bad blood, bad times, and bad products. They pull a team dangerously away from its goals.
Many qualities go into teammanship, but it’s mostly about attitudes and shared values in just the right balance. Teammanship means that founders believe the same thing together, that they rationalize and appreciate the value of the startup, and they are pulling as one to meet the customer’s needs. The team also recognizes its deficiencies and works hard to plug holes, adding talent where necessary. They represent an orchestration of effort, not a collection of egos trying to outdo one another.
The first element of teammanship is the leader. One of the first questions every angel wants answered is: Who is the leader of the startup? Who is the originator of the idea? Who owns the vision? It’s not always the person who gets up and leads the presentation … although it should be!
Every angel thinks of teammanship in his or her own way. I know some angels who insist that the leader have a degree from an Ivy League university. I don’t put that much stock in academic credentials. Highly educated leaders are good, but I’ve seen problems on teams where everyone came from places where they were the smartest kids in the school. Egos get in the way, and there’s more debate than decision.
I wrote my college thesis on group cohesion, the study of how people work together. When I look at a team, I focus on how well team members work together. How do I do that? I’m not sitting with them as they solve the thousands of day-to-day problems that every startup faces. At presentations, I usually see the CEO and perhaps one or two of the other team members. So that’s where I start.
Startups often make a fatal assumption when they attend presentations, business plan competitions, or demo days. They assume they are basically invisible until they take their place on the stage. Big mistake. The truth is, investors are observing you. We learn as much from watching your off-stage behavior as your canned presentation.
Here’s a good way to go. Resolve that your formal presentation starts the moment team members leave their homes or offices and ends only when the last team member returns. At all other times, you are “on.” Assume the microphones are always on and someone has a camera phone on you at all times. Act like a disciplined team at all times. Watch what you say in the elevator or in the bathroom. You can’t believe the damaging stuff I’ve heard in bathrooms. Wait to debrief until you get back to the privacy of your office.
Always be aware of how you interact with other team members during your presentation. I’m very sensitive to such exchanges, and I pay attention not only to what is said but also to tone of voice and nonverbal cues. If there are team members who aren’t at the presentation, I always ask to meet with them too so I can observe the whole team. If I’m interested, I always want to share a few meals with you, as I describe in Chapter 3, “Let’s Get to Know Each Other.”
I see some teams making extraordinary efforts to impress me. It pains me when this happens, because the efforts are almost always off the mark. They would be much better off relaxing and focusing their effort on indicators that really matter to me.
Here’s a checklist of 10 teammanship indicators that I look for. Most of the questions can be answered by a simple yes or no.
1. Does a team even exist?
2. Do I hear a consistent story?
3. Am I excited about how they work together?
4. Are the founders great leaders?
5. Is the team focused on building a great product?
6. Do they have technical and marketing competence?
7. Is the team fully invested in knowing the financial mechanics of the business?
8. Is the team focused on execution?
9. How strong is the team?
10. Is there a capacity for resolving conflicts?
By the way, these are not questions that I put to the team explicitly. These are the questions I have in the back of my mind as I’m listening. After about half an hour of conversation, I am generally satisfied I have most of the answers I need to make a decision. Founders who understand what unasked questions angel investors have in the backs of their minds will have a great advantage over those who don’t, because in their presentations, they can address the critical points.
After listening to the founders, if I’m unsure about one of the 10 items, I assume what I’m looking for is not present. If I get more than one “no,” I tend to move on. There’s always another team waiting to talk to me.
1. Does a team even exist? A group of founders working together does not necessarily mean a team exists. Let me be perfectly clear. A founder with all the equity who has hired a staff, even a world-class staff, does not represent a team. Team members must be peers, even if one member is taking leadership. To me, a team is a group of equals united by a vision who have come together to pursue a common outcome. Every member must contribute something critical without which the team probably cannot succeed. Every member must participate in the upside and downside of that outcome. In other words, they all must be “at risk” in the opportunity.
Here’s a deal breaker of a statement: “It’s easy to build a team. Once we have the money, a team will come together.” First of all, this statement exhibits a fundamental misunderstanding of teamwork. Who is the “we” in that statement? Second, this passive approach to building a team is simply not what I am looking for, and I don’t know any investor who is. Cash can buy a staff but not a team. A team must evolve and prove itself worthy of funding. I need to see a team that has been tested and shown itself to be cohesive before I open my checkbook. One positive sign of a team is that its members have a long history, ideally having worked together on other startups, even if they didn’t work out.
2. Do I hear a story? When an investor considers a startup, there is not much to judge but the story and how it is told. The question is, “Am I interested in how this story ends?” If not, that’s not a good sign. What, after all, is a story but the way we explain the world to ourselves? A story is a learning tool and a teaching tool. I am impressed by teams who grasp the power of story as a mechanism to understand and address the business needs of customers.
The delivery of the story is as important as its content. Of course, the founders have to be credible and interesting, and being articulate helps. At least one member of the team should be able to articulate the vision and purpose of the startup. It’s wise for a startup to put enormous resources into developing the presentation. Doing so, of course, requires a good understanding of the product, the market, and the customers. But I can’t overstate the value of a team finding the story, metaphor, or narrative to frame the information quickly. That’s the leap of imagination that incubators such as Y Combinator and TechStars relentlessly promote.
I have previously introduced readers to Keen IO. The thinking behind Keen IO is not complicated. Developers of mobile applications need to track everything from page views and clicks to more subtle user behavior, such as where users came from, where they went, and how many times the app was opened and closed. Keen IO built a cloud-based analytics infrastructure that’s easy to plug in and use on a pay-as-you-go basis so developers don’t have to build their own.
How do you talk about aggregating and analyzing massive amounts of data in a way that is compelling, memorable, and even enchanting? That’s the task the three founders of Keen IO set for themselves during their tenure at the TechStars Cloud, the fifth iteration of the TechStars franchise. Cofounder and CTO Dan Kador (whose father is the coauthor of this book) has written an excellent blog post about the evolution of the presentation, with video of the final product as well as some earlier iterations. The differences between the 2-week, 6-week, and 13-week efforts are staggering, representing the evolution of the product under guidance of the TechStars mentors. It’s revealing to see the deeper way the team was challenged to think about the business during its 13-week incubation.
3. How enchanted am I? I think every successful enterprise enchants its customers in some way, big or small. Think about the first time you picked up a Rubik’s Cube, listened to Michael Jackson’s Thriller, or handled any Apple product. Enchantment may be hard to define, but we know it when we see it.
Before he became a celebrated VC, Guy Kawasaki was Apple’s original marketing evangelist. For Kawasaki, the three pillars of enchantment are likability, trustworthiness, and quality. Those are the elements I want to see in a startup. It’s a high standard, and not every startup can deliver enchantment. But every startup without exception should aspire to enchantment, and if the founders can’t enchant me, someone who has agreed to give them my undivided attention, then what chance do they have when it comes time to prospective customers?
4. Do the founders describe a calling? Some founders describe their startup as a job. In general, I don’t think founders with that attitude get very far. There are lots of jobs that are easier and more certain than going the startup route. Jobs are good, but they are usually a path to something else that the worker finds fulfilling. A startup must be intrinsically fulfilling. It’s almost impossible to sustain the dedication and intensity required for startup success if you think of it as a job. Other founders—sometimes called serial entrepreneurs—describe the startup route as a career. They can often be good bets for angel investors because they tend to cash out early and plunge back in again. But if I have my druthers, I prefer to invest in founders who describe their startup as a calling.
When I hear founders describe the startup path as a calling, I smile because I know they will find the work intrinsically fulfilling. Such founders are not going the startup route as a means to something else; they see their work as the end in itself, with the effort playing a role in some larger enterprise.
That’s the kind of team I want to bet on, because when they think of their efforts as a calling, such founders will have frequent experiences of effortless innovation during the work day and will neither watch the clock nor look forward to knocking off early on Friday to pursue their hobbies. In fact, many such founders live where they work, the better to integrate every aspect of their lives for the success of the startup. When a startup team laboring under the influence of a common vision sprints toward their authentic calling with reckless abandon, obstacles melt away and their startup often blossoms into prosperity.
I suppose I’m drawn to founders who describe their enterprise as a calling because I like to think I have a calling, too. I pursue my own calling by passionately backing passionate entrepreneurs who have big ideas for distributing ideas on creativity and innovation throughout the world. I am committed to deploying early stage investing to maximize human capital through my investments as well as through mentoring, lecturing, and stewardship. I do these things to contribute, not just to receive, and I know it’s a calling because I’d probably do it even if I didn’t receive.
5. Is the team also focused on significant wealth creation? I ask every team what it is they want to accomplish. Some teams want to perfect a piece of technology. Some want to change the world. Some want to build large organizations. All worthy goals. But if I don’t hear something explicit about creating significant wealth, I get concerned. That said, I also get concerned if money is the only thing I hear. I think a business needs to have a larger social purpose, but founders need to remember that, to be fundable, businesses must also be in the business of wealth creation.
6. Is there technical or commercial competence? I’m looking for evidence that the team has the minimal technical or commercial domain expertise to validate its approach. The ideal evidence, of course, is that the team has executed a startup before. If someone from the PayPal or Twitter development team comes to me, I’ll pull out my checkbook before they are finished with their spiel. They’ve already proven they can do a world-class startup. But since 98 percent of the opportunities angel investors consider involve first-time entrepreneurs, the investor must determine that the team has developed the appropriate skills necessary to execute on the stated vision of the company.
Technical skills count for a lot, but many founders make the mistake of overemphasizing how smart they are and lose the perspective of the guy on the other side of the table. That would be me, the investor, wondering, “Are these guys ever going to exit?”
7. Does the team know its numbers cold? I’m referring to the metrics that angels expect founders to present. Every successful team I’ve ever encountered deeply understood the metrics of their market and knew how to measure success from the customer’s point of view.
You must be data-driven and have an impeccable handle on your metrics. Do you understand the assumptions and metrics about your market or at least have a solid understanding of how to acquire this information quickly and economically?
I don’t require founders to know everything they need to know in advance. I respect a healthy degree of ignorance. When you drive a car at night, you can see only the couple of hundred feet of roadway illuminated by the headlights. But you can make the whole trip that way.
8. Is the team focused on execution? Talk is cheap and everyone has big ideas, but the ability to actually implement something in a world of constraints is actually pretty rare and is something I admire, even if the execution is flawed and the enterprise fails. Startups aren’t for everyone. People seem to think that startups are sexy and fun—and they can be!—but the reality is that for much of the time, they are a lot of frustration and unrelenting work. There is no place to hide in a startup.
9. How resilient is the team? Resilience isn’t a concept you hear mentioned by too many angels, but it’s a useful way to think about a team’s ability to persevere.
On the most basic level, resilience refers to an individual’s capacity to cope with stress and adversity. Teams can also be said to have resilience. A resilient team has a superior ability to survive major shocks and spontaneously generate new order afterwards. Given that it’s inevitable that every startup will face multiple setbacks, I wonder about the resilience of the startups I fund. Following a setback, will the team simply be defeated, will it bounce back to its previous state of functioning, or will it by some ineffable grace function better than it did before? What is it that allows some people to be knocked down by life and come back stronger than ever?
Rather than allowing setbacks to defeat them and exhaust their resolve, resilient people find a way to go from defeat to strength. A startup composed of individuals with this ability punches above its weight and will tend to do well.
10. Is there a capacity for resolving conflicts? It’s the nature of startups to be made up of headstrong Type A individuals. Conflict among such individuals is inevitable and perhaps even desirable. It’s in the collision of many ideas from superior intellects that radical innovation often flows. But not every opportunity for conflict is sublime. Every set of founders faces decisions bound to create conflict over issues that are more mundane though no less significant for the success of the business: raise or lower prices, hire or outsource, buy or lease, sell or refinance, pivot or persist, reduce costs or invest?
But one thing is certain: unresolved conflicts will distract, delay, derail, and sometimes destroy startups. As an investor, I need to have confidence that the founders have evolved healthy strategies for managing healthy conflict within the team. I look primarily for two things: a sense of humor and a willingness to deal with conflict openly.
A team that can laugh its way through conflict is a very hopeful sign. As long as it’s open and above board, most conflict is manageable. Such teams use their differences to build a stronger product or business. The ability of a founder to defuse a conflict with humor sometimes suggests how a dauntingly complex problem may be divided into smaller tasks. Even if a joke does nothing more than to signal when it’s time for the team to take a break, it will have done its work.
I certainly don’t want to see founders arguing with each during the pitch. That’s a sign you are not ready for prime time. But once the financing is out of the way, I expect the team to have disagreements and conflict. Successful teams figure out a way to openly address disagreements and resolve them. It’s only when conflict is hidden or denied that things explode into endless bickering or, worse, backbiting.