What makes a startup team successful

When venture capitalists exercise due diligence, they carefully focus on the financial component of the business. Is the company an interesting business model? How big is its potential market? What are your company's growth plans? They hire expensive experts and use advanced data analysis tools to answer these questions and ensure that all financial details are taken into account.

However, when evaluating a startup team, intuition and inner instincts become the main tools of diligence. This is not a good approach. According to statistics, 60% of new enterprises fail due to problems with the team.
')
What makes a startup team successful?

The common answer is : experience, product knowledge, and business skills predict the success of a new venture. But is the experience gained enough for the team members to work well together? In a recent study of 95 startup teams from the Netherlands, we explored this issue.

All start-up teams participated in the accelerator program, worked on their products for at least three years, and were active in the high-tech sector. On average, the team had 2.3 members, 71% of the entrepreneurs were men, whose average age was 34 years. On average, the level of education was at the master's level, and 43% of the participants had experience in developing a startup.

We announced a study on the day of the start of the accelerator program, and contacted email teams, asking them to fill out questionnaires. The first questionnaire included questions about human capital, namely, the experience of previous start-ups, work experience in the industry, level of education and experience of previous work. We also asked questions about their entrepreneurial experience and the company's strategic vision. For example, we asked the teams whether they have agreement on the short-term and long-term goals of the enterprise.

One year after the first survey, we collected performance data when all startups were evaluated by experienced venture capital investors. They evaluated the written business plans and financial progress of companies by five parameters: innovation in products and services, customer satisfaction, cost control, and expected sales growth.

We found that experience alone was not enough for the team to flourish. Although the experience expands the resource base of the team, helps people see new opportunities , and positively correlates with its effectiveness, the team needs interaction skills between people for real prosperity. In particular, the study shows that for the excellent work of the team from the point of view of venture capitalists, a passion for entrepreneurship and a common strategic vision common to all its members is required.

Of the startups we reviewed, those teams that reported a rich previous experience of medium or low levels of passion and collective vision showed poor performance in innovation in products and services, customer satisfaction, cost control, and expected sales growth. Conversely, groups in which there was an average level of experience, but high levels of passion and collective vision, worked much more efficiently.

We also found that a lot of experience leads to greater work efficiency, only in the case of a common strategic vision of all team members. Therefore, if members do not share the overall development strategy of a firm, then their knowledge and skills will make only a minor contribution to efficiency.

The best teams have everything: professional skills and human interaction skills *

* hard and soft skills

Speaking about the balance between the experience of team members (skills in the professional field) and their passion and vision (relationship skills), you can find the most ideal place in which the best teams live. If team members are extremely intelligent and experienced, but they do not share their knowledge due to the lack of common views on the future of the company, their knowledge is useless for business. Instead, the difference in passion and vision leads to a deterioration in the performance of the team. For example, if the technical director has a lot of experience in the software industry that is useful for the current business, but he does not agree with the director about the company's development strategy, he is less likely to share his knowledge about software with the team.

To illustrate the importance of evaluating a team of entrepreneurs in terms of the balance between workers and human skills, let's look at the case of Emma, ​​an investor from a venture company (names and names have been changed). Emma recently told me about a potential investment in a software development company in Stockholm, from which she had strong positive emotions. Let's call the company Clocker. After reading about the company and receiving its documentation, she was looking forward to meeting the team with great impatience. Clocker had not only interesting financial indicators, but also serious achievements.

The CEO had extensive industry knowledge, participated in software development for many years, and led the product development department for Salesforce. CFO graduated from Harvard, worked for Bain & Company before joining Clocker, and he had excellent skills in financial and strategic areas. The vice president of sales was a great seller who worked with Microsoft’s key customers. Finally, the fourth member of the team was a very passionate, serial entrepreneur with successes in resumes and some experience in failed startups. On paper, it seemed that this team had everything to successfully scale Clocker and guarantee a good return on investment.

However, when the team members presented their presentation and talked about Clocker's growth strategy, Emma was disappointed. The story did not look whole. The CEO told Emma that he wanted to expand in the US and become the next Salesforce, but the technical director did not share these ambitions. He rejected his ideas and argued that the company would be too busy with other projects to engage in global expansion. It became clear that the Clocker team had very different ideas about the company's future. They also did not equally share a passion for work. The vice president of sales still managed his personal business on the side, and the technical director constantly monitored new jobs.

After talking with the CEO a few weeks later, Emma learned that the team had broken up. Due to different goals, team members could not communicate effectively and did not share knowledge, which led to poor teamwork and poor decision making.

Although experience is often cited as a key ingredient for entrepreneur success, our results show that experience alone will not lead you to success. Knowledge, skills and passion are equally important for success in a new venture. Experience and competence lead to improved performance only if team members share their knowledge and have a unified view of the company's future.

When investors evaluate start-up teams, they need to remember that just one excellent resume is not enough to achieve excellent performance. Creating a successful startup is a long and difficult path; without entrepreneurial passion and strategic vision, an excellent resume turns into a piece of paper.