co-founders and startups: what makes a successful team?
Post on 18-Oct-2014
779 views
DESCRIPTION
This is a presentation from NYU Stern Professor Jason Greenberg about what makes for a successful startup founding team. He highlights the necessary mix of relationships, roles, and rewards that lead to company viability.TRANSCRIPT
![Page 1: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/1.jpg)
CO-FOUNDERS & START-UPS: WHAT MAKES A SUCCESSFUL
TEAM?
Jason Greenberg, MA, MPP, PhD
New York University
© 2013 Jason Greenberg, PhD
NYU Stern Office of Development & Alumni Relations
![Page 2: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/2.jpg)
Entrepreneurship at NYU: Statistics and superlatives
• 100+ entrepreneurship-related courses
• 845 patents issued to faculty/students – 82 startups launched based on NYU IP
• 3 NYU Incubators (partnership with NYC EDCo.) – 106 companies since ‘09
• $65 million raised
• 5 companies acquired
• 900 jobs created
• $250 million in local economic impact
• NYU Innovation Venture Fund – Seed-stage fund
• MadeByNYU.org
*As of June 2013
2
![Page 3: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/3.jpg)
Wharton alumni entrepreneurship rate
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7 8 9 10
Jobs post graduation 3
![Page 4: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/4.jpg)
Founding team problems = greatest source of VC-funded startup failure
65
35
Founding team Product, marketing, function 4
Source: Gorman and Sahlman (1989)
![Page 5: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/5.jpg)
Fred Wilson of USV on the importance of the right team
“No business is so good that the wrong people can't mess it up. And no business is so bad that the right people can't fix it. […] So if you don't get the people part of the equation right, everything else is really immaterial.”
5
Source: http://www.usv.com/2007/01/founders-and-ma.php
![Page 6: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/6.jpg)
--SIR ISAAC NEWTON
I can calculate the motions of the heavenly bodies, but not the madness of people.
6
![Page 7: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/7.jpg)
Objective: Consider the “madness of people” in founding teams • Systematic assessment of “madness”
from
–A social science perspective
–Extensive first hand-experience
• Mike Chan, Founder & Principal, MWC Consulting
–B.S. (Lehigh); M.S. (Georgia Tech); MBA (NYU)
• Philip Rosenthal, Pres. & CEO, Fastcase
–B.S. (Yale); M.A., PhD (Cal. Tech); J.D. (Harvard)
7
![Page 8: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/8.jpg)
Three Rs and team issues
8
Team
Tensions
Roles
Relationships
Rewards Division of labor, positions, skills Decision making
Model for how business should be
organized
Splitting the pie Compensation
Found with friends? With strangers? Co-workers? Family?
Source: Noam Wasserman
![Page 9: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/9.jpg)
Who should you start a business with?
• Two key types of questions – Functional considerations (specific skills,
experience, education, time)
– Social relationships
• An important mechanism of team formation
• Lots of received wisdom on the matter
9
![Page 10: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/10.jpg)
10
“Going into business
with friends or family?
Prepare for disaster.”
Source: Boston Globe (12/14/03)
![Page 11: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/11.jpg)
11
Source: Entrepreneur.com (10/05)
![Page 12: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/12.jpg)
Lots of examples of family members or friends on founding teams
Robert James Edward
Sources: The Guardian; designhistory.com; http://www.kilmerhouse.com/2009/04/how-much-do-you-really-know-about-our-annual-meeting/
Sergey Brin Larry Page
12
![Page 13: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/13.jpg)
Generally speaking, is it a good idea to start a business with…
1. Family members
2. Friends
3. Co-workers
4. Strangers
13
![Page 14: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/14.jpg)
Technological startups often include co-workers and friends
0
5
10
15
20
25
30
35
40
45
50
Co-workers Friends Family 14
% of founding teams including …
![Page 15: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/15.jpg)
Predicted probability venture achieved viability
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Strangers Friends who never worked together
Co-workers Family
15 Note: Transparent bars are not statistically significant; dashed line denotes overall avg.
Significant coefficients differ from each other and all other coefficients. Model includes extensive controls. Source: Greenberg (2013)
![Page 16: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/16.jpg)
EVIDENCE FROM THE FIELD: 1. How do you identify, evaluate and “date” potential co-founders? 2. How do you deal with “lost in translation” issues—tech/business or business/tech?
16
![Page 17: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/17.jpg)
Three Rs and team issues
17
Team
Tensions
Roles
Relationships
Rewards Division of labor, positions, skills Decision making
Model for how business should be
organized
Splitting the pie Compensation
Found with friends? With strangers? Co-workers? Family?
Source: Noam Wasserman
![Page 18: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/18.jpg)
What is the most important criterion when determining which co-founder will be CEO?
1. Who came up with the idea
2. Prior social relationships
3. Research/tech skills
4. Ability to raise funds
5. Business acumen
6. Social network – size and reach
7. Executing idea 18
![Page 19: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/19.jpg)
Positions taken by idea people
CEO 56%
Chair 7%
CTO 12%
CFO 1%
COO 3%
Other 9%
VP 12%
Source: Adapted from Noam Wasserman, “Idea People and Their Initial Roles within Founding Teams,” May 1, 2008, post on
research blog, “Founder Frustrations”
19
![Page 20: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/20.jpg)
Role agreement critical for founding team success
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Key predictors of viability (odds-ratios)
20
Source: Greenberg (2013); Note: Model includes extensive controls.
![Page 21: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/21.jpg)
What kind of company do you want? The importance of blueprints
Employment blueprint
Attachment Selection Coordination/ Control
Star Work Potential Professional
Engineering Work Skills Peer/ cultural
Commitment Love Fit Peer/ cultural
Bureaucracy Work Skills Formal
Autocracy Money Skills Direct 150%
-45%
-100%
-55%
5%
30%
200%
-40%
-200% -100% 0% 100% 200% 300%
Baseline
Pr(IPO) Pr(Failure)
21
Source: Baron and Hannan (2002)
![Page 22: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/22.jpg)
Three Rs and team issues
22
Team
Tensions
Roles
Relationships
Rewards Division of labor, positions, skills Decision making
Model for how business should be
organized
Splitting the pie Compensation
Found with friends? With strangers? Co-workers? Family?
Source: Noam Wasserman
![Page 23: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/23.jpg)
Generally speaking, do you believe that equity should be split equally among all co-founders?
1. Yes
2. No
23
![Page 24: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/24.jpg)
How important are the following criteria to you when determining how to split equity?
1. Who came up with the idea
2. Prior social relationships
3. Research/tech skills
4. Ability to raise funds
5. Business acumen
6. Social network – size and reach
7. Executing idea 24
![Page 25: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/25.jpg)
Equity stakes for idea versus non-idea people by position
0
10
20
30
40
50
60
70
CEO CFO Chair COO CTO Other VP
Eq
uit
y %
Premium for being
idea person
20.0 16.7 24.6 21.2 5.6 5.5 2.3
Equity % if not the
idea person
42.1 13.3 35.1 28.5 27.6 14.3 22.3
Source: Noam Wasserman, “The Idea Premium: How Much (Equity) is Your Idea Worth?” June 17, 2008, post on blog, “Founder Frustrations” 25
![Page 26: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/26.jpg)
Equity more likely to be split equally when…
• Initial financial capital investments are the same
• Founders have similar levels of industry experience
• All founders are first timers
• Equity is split early in the process
• Founders are friends
• Team is smaller 26
![Page 27: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/27.jpg)
Generally speaking, do you believe that “roles” and “rewards” need to be specified in a formal contract?
1. Yes
2. No
27
![Page 28: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/28.jpg)
Formal contractual agreements predict founding team success
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Key predictors of viability (odds-ratios)
28
Source: Greenberg (2011). Model includes extensive controls.
![Page 29: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/29.jpg)
Known-knowns, know-unknows, and unknown-unknowns and contracts
Know-knowns Known-unknowns Unknown-unknowns
Each founder’s financial contribution
to date
What the final business model will
be
?
Who came up with the original idea
What part of the idea can be monitized
?
29
“Because we know, there are known knowns; there are things we
know we know. We also know there are known unknowns; that is
to say we know there are some things we do not know. But there
are also unknown unknowns--the ones we don’t know we don’t
know.”
Static contractual
provisions
Dynamic contractual
provisions
Trust!
![Page 30: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/30.jpg)
Takeaways • Finding the right partner(s) may be the most
important step – Understand that it is a dynamic process
• Aligning the “three Rs” critical • Also ensure that you are “in sync” with respect to
role expectations
• Don’t wait too long to discuss – Contracts
• Always incomplete—consider as a process-defining tool for discussing rights/responsibilities
– Equity splits • Equal split not always the best
– Especially true if contributions not equal
30
![Page 32: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/32.jpg)
2
2.5
3
3.5
4
4.5
5
Consulting Finance Tech
Sati
sfac
tio
n
![Page 33: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/33.jpg)
2
2.5
3
3.5
4
4.5
5
Consulting Finance Tech
Sati
sfac
tio
n
![Page 34: Co-founders and Startups: What Makes a Successful Team?](https://reader030.vdocuments.net/reader030/viewer/2022020101/54430644afaf9f0e118b47fe/html5/thumbnails/34.jpg)
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
Consulting Finance Tech
Earn
ings