FOR ENTREPRENEURS AND INVESTORS
Building an Investable Founding Team
Put the right people, in the right role, at the right time.
In today’s complex business environment, it’s nearly impossible to build a high-growth company as a solopreneur — eventually, leading a high-growth company will require a team. The success or failure of a company, therefore, relies on the collective capabilities of the founding team.
It’s not surprising, then, that when you ask any venture capitalist what the most important criterion for making a decision of whether or not to invest is, they will tell you that the founding (or executive leadership) team is the most important factor.
But what makes a team investable?
This is an important question for both founders and investors. Knowing what makes the team investable can help founders build the optimal team and help investors understand how to evaluate a prospective team during due diligence.
People often talk about needing a “balanced” or “well-rounded” team, but what does that even mean? We define balance as having a team of people who collectively have all the KSAOs needed to achieve high performance. So then, is a well-balanced team the way to identify which startups will succeed?
Not necessarily. Being balanced is a necessary but not sufficient condition for high-performing teams. A team needs to be balanced with the right people who can collectively tackle all the tasks and responsibilities required for the startup to grow. However, startup teams rarely start fully formed, so balance isn’t always possible for early-stage startups. Below I define and explain five steps critical to building an investable team before addressing whether or not the team is balanced.
Defining Investable Teams
The short answer is that an investable team is composed of highly talented individuals who collectively can achieve high performance and meet the following basic conditions:
- A shared understanding of the mission, purpose, and direction of the company
- Shared values and principles
- A collection of highly talented, interdisciplinary members
- Finally, a balanced team or plan to develop a balanced team
Step 1: Define Mission Purpose
It’s critical for your team members to have a shared understanding of the mission and purpose of the company so you can all move in the same direction. If each founder has a different understanding of the startup’s purpose, you will all move in different directions. You will be unlikely to accomplish goals because there is little clarity or agreement on what needs to be accomplished. This may seem obvious, but I’ve worked with startups where each founder believes something different about the mission and purpose. It ends badly.
Step 2: Identify Core Values
It’s also critical that your members have shared values and principles that provide decision-making parameters. For example, at Blackhawke, we value science. We say no to opportunities or collaborations if we do not feel they will align and amplify our commitment to rigorous science. If my co-founders did not value science as much as I did, they might make decisions antithetical to our identity and mission. Clearly-articulated values and guiding principles serve as decision boundaries so that you can trust the other founders to make decisions that are in the best interest of the company. Think about what you value most in your work (e.g., open and honest communication, authenticity, integrity, speed) and imagine working with someone who does not share that value. Friction and conflict are bound to arise. It would be difficult to build a strong culture and brand.
Step 3: Gain Self-Awareness
Startups rarely start with a full team. Instead, it’s usually 1–3 founders in the beginning who bring on other members once they have grown and have a need. For this reason, it is critical for you, as a founder, to gain self-awareness to map your team's needs.
First, you can identify which of their knowledge, skills, abilities, and other characteristics (KSAOs) are assets and which may be a liability for the team. For example, if you know you are really great at executing, taking action, and making things happen but also know you find it difficult to create a long-term vision, you can make it a priority to bring someone onto the team who can help you with visioning and long-term planning, not another member to help execute. You need team members who will bring complementary KSAOs, not redundancy.
Second, you can better understand yourself and figure out what you need in other team members to make a cohesive team that fits well together. For example, I wanted to build a highly-motivated team that made working together fun. Building a startup is a grueling process. I knew that if I wanted to stay motivated and focused, I would need other people who loved showing up to work every day and were excited to improve the rate of startup success and DEI in the entrepreneurial ecosystem. Everybody has different needs and conditions that will open a path to high performance; it’s important for you to understand your needs if you want to build a strong team.
Step 4: Identify the Assets and Liabilities
After you gain a strong sense of self-awareness, conduct a needs analysis. What are the highest-level priorities that need to be addressed, and what kind of skills and knowledge do you need (that you or existing team members don’t already possess)? If there is no one on your team who is good at managing collaborative processes and building psychological safety on your team, it’s going to be difficult to achieve smooth and effective coordination among members. To build a strong team, you need to understand your collective liabilities. Where are there blindspots on your team? Any new member of your team should bring unique value and contribute to filling the team’s collective gaps.
Identifying gaps or liabilities can be difficult if you don’t know what a balanced team looks like. That’s where we have you covered. Blackhawke scientists (including myself) spent years doing research to identify the critical performance dimensions that every founding team needs to master in order to succeed. We identified Twelve Pillars of Entrepreneurship Performance that are predictive of startup success. These pillars offer a framework for you to understand where you can add the most value to your team and what your team is missing. Take a look at the graphic below that maps a founding team’s human capital capabilities to each pillar. Each colored line represents a person:
There are a lot of insights that can be drawn from the data on this graph, but I want to focus on understanding gaps. If you look at this chart, the team members collectively lack a member who is good at providing direction. I wouldn’t be surprised if members of this team have difficulty knowing where to focus, have a misaligned understanding of priorities, or lack clarity about the goals needed to be accomplished in the next year.
This doesn’t necessarily mean the team is not investable; it just points to where there is a potential risk for ineffective teamwork or dysfunction. If this were your team, you should be open and honest about your current state and what you need to reach your desired state. Identifying the gaps on your team can help you communicate them to investors. Then together, you can make a plan to mitigate and reduce the risk over time. When investing in people, risk is inevitable. There will never be a risk-free team. However, if you can define the risks, then you are better equipped to constrain them.
Now, You Can Address Team Balance By …
Recruiting the Right People for the Right Role at the Right Time
Filling the gaps and mitigating liabilities on your team is more complex than identifying someone with the skills and knowledge you need. You should recruit the most talented and qualified person who shares values and believes in the mission. That is not an easy task, and it won’t happen quickly. That’s why it’s important to go through Steps 1–4 now, even though you might not be ready to hire. Knowing what you need can enable you to start expanding your social capital, building relationships, and grooming future members for when the time is right.
The right timing means you have an immediate need and that the person you are recruiting will address the need. If you hire too soon, it could lead to disengagement, lost productivity, and be costly. For example, if you know you need someone to manage your social media, but you don’t have all the content and ideas fully formed, a new hire might feel like they are not contributing or are not valuable to the team because they have nothing to do at the moment since they need to wait on your decisions about content and overall strategy. I’m sure you have been in a position where you felt that you didn’t have anything to contribute or that your expertise was not valuable; it’s a miserable feeling. Don’t put someone in that position. Align your hiring priorities with your business strategy so that when you do find the right people, you can make sure it’s the right time to put them in the right role.
Conclusion
Only after you develop a shared purpose and values can you begin to think about who will be a good fit for your team and desired organizational culture. From there, it’s important to identify your team’s collective assets and liabilities so you know what you need (and what you don’t need) for your team to reach a balanced state.
Then, and this is vital, find the most exceptional, talented person that will enable your team to reach apex performance. To be investable, you need a balanced team of megastars — aligned on the purpose and values — that will enable you to soar far beyond the competition.
I’d love to hear about the challenges you face in building your team. Reply in the comment section below.
Need Advice or Have Questions?
Blackhawke helps investors and founders put the right people in the right seat at the right time. In other words, we help those in the entrepreneurial ecosystem leverage human capital data from our assessments for growth and success. Schedule a free 15-minute consultation with a Blackhawke I-O psychologist. We’ll happily provide advice or answer your questions, no strings attached!
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