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WHY DO FOUNDERS HAVE A DIFFICULT TIME RAISING CAPITAL (Part 2 of 10 Series)
By:
Sara Rauchwerger
Managing Director
Geron Vanderfeesten
Founder, Investor, Consultant
One of the key challenges that founders face in securing capital stems from the lack of perspective and misunderstanding of the importance of demonstrating the ability to execute on a defined goal with an experienced team addressing a real market opportunity (as described in the introduction). It is crucial for founders to recognize that products/services must reach their target market by the dedicated team driving development behind the scenes. Part 1 emphasized the significance of showcasing your team’s capacity to execute at scale in alignment with a clear and set vision to captivate investors’ interest. In this section, Part 2 of the series, we will explain how to demonstrate that you have the capability to build a team that works well together, fostering productivity, continuous innovation, adept problem-solving, and have the flexibility to adopt to change. Fostering a positive culture and overall organizational structure is paramount to demonstrate you can succeed.
PART 2 – Build a realistic organizational structure
Introduction
It is a given that early-stage companies consist of small teams, typically averaging from 2-5 people. The primary focus of the team in most cases is to develop a product/service that can be brought to the market based on an interest/focus/customer need that the founders/team believe presents a market opportunity. Consequently, much of the time is dedicated to development – without a product/service, there is nothing to sell. The era of funding mere ideas has long passed, and investors now expect to see that the idea has merit and has been tested in the market as a Minimal Viable Product (MVP), through a prototype, or a Proof of Concept (POC). Hence, building a product/service at an early stage while simultaneously building a company requires having both short- and long-term visions on how to secure sufficient resources to meet targeted milestones. In a small team environment with limited funding, building a team becomes a creative endeavor.
In this article, we will provide a comprehensive perspective on what needs to be considered as part of building your organizational structure from the ground up.
1. Flexibility in role definition
An early-stage company efficiency is not only desirable, but it is also imperative for the survival of the startup. With a small team and limited resources, founders often find themselves wearing multiple hats, juggling diverse responsibilities contributing to driving the company forward. While each team member has their own strengths and weaknesses, it is crucial during the initial discovery phase to share tasks, to allow you to find the optimal structure that will pave the way to determining the key required resources needed for growth.
To facilitate this process, it is beneficial to establish clear roles and responsibilities early, including appointing a leader. Collaboratively decide on the appropriate titles for each team member (such as CEO, CTO, founder, innovator, developer, etc.) based on each person’s strength understanding that flexibility is equally essential where individuals will step up to fulfill necessary tasks for the company’s advancement. This approach will foster an environment of empowerment, encouraging everyone to contribute beyond their designated roles.
As the company scales, these multitasking individuals can then transition into more specialized roles, hiring additional support as needed. Moreover, by combining various tasks internally, startups can minimize expenses and optimize resource allocation—a critical consideration in the early phases of business development.
2. Recruitment
It is evident that early-stage companies do not have the funding to build a dream team. Using creative resources such as equity-based hiring, part time talent, interns and more can help push your company to an initial level that meets your goal. Plan ahead to acquire/steal talent while focusing on generating revenue (dependent on product/service stage) in order to be able to bring in the talent since seeking funding takes time.
Don’t spend money at this early stage on supporting talent (i.e. HR, Finance, Legal), there are plenty of free/deferred services available that you can tap from your own and team personal networks to LinkedIn and more.
Establish effective processes and procedures early to help you with the hiring and retention of top talent. (Learn about additional processes and procedures that will impact your recruitment discussed in Part 3.)
Learn how to write a clear and comprehensive job description that clearly defines responsibilities, expectations, job offer and vision for the company. Describing the vision of the company in a job description is an opportunity to promote the company’s product/service offering and your company’s culture. Your mission is to hire true believers that will be there to resonate with the company’s mission and culture supporting growth and success.
It is always difficult to provide competitive compensation packages and attractive benefits in the early stage of a company. One effective strategy to address this hurdle is to offer equity and/or options in the company. By implementing an equity/options benefits structure from the outset, you can make these offerings and position yourself to attract and retain skilled talent. However, it’s essential to align your company’s structure with your future funding needs and targeted investor portfolio to ensure investor support.
3. Employee Development Programs
A dream team is achievable if the company can foster a positive culture particularly when your business starts to take some roots. There are simple ways to start and can be elaborated based on growth and financial means. Here are a few basic ideas:
• Encourage social gatherings such as simple outings to a Friday afternoon social activity. Allow your team to get to know each other at a business level where you can enjoy time together and build comradery.
• Offer training, mentorship, or skills enhancement that can benefit individual growth and company growth.
• Foster a culture of continuous learning and growth within the organization.
Investing in the professional development of employees early-on demonstrates the company’s commitment to nurturing talent and fostering a supportive work environment.
4. Communication and Collaborative Tools
Cultivate a culture of transparent communication and constructive feedback within the organization to promote team engagement and satisfaction. Encourage open dialogue, regular performance evaluations, and opportunities to seek out input to foster a collaborative work environment that values the contributions and well-being of the team.
Have regular meetings to discuss each team member’s work activity. Evaluate what is going well and where improvements are necessary.
Encourage out-of-the-box thinking to encourage innovation and problem solving.
Find communication tools that allow you to easily work together to facilitate effective communication. Starting with free tools can be a cost-effective approach, allowing you to get started without breaking the budget, with the option to upgrade later as needed. When selecting these tools, it is important to consider factors such as ease of use, scalability, integration capabilities, security, and cost to align with the company’s needs and objectives. This ensures that making wise choices in platform selection can prevent the need for frequent changes, avoiding the disruption of having your team transfer data and relearn new tools. Here are some widely recognized tools examples as a reference (not all available tools are included in this list):
- Messaging platform like Slack/Microsoft Teams/Discord;
- Project management software like Trello/Monday;
- Video conferencing tools like Zoom, Google/Meet/Microsoft teams;
- File sharing and collaboration tools like Google drive/Dropbox/Microsoft OneDrive;
- Internal social Networks like Facebook Workplace/Yammer;
- E-mail like Gmail/Outlook;
- Intranet like Confluence/SharePoint.
Conclusion
One of the key slides in a pitch presentation for an investor is promoting the team and its ability to execute on a vision/mission for the company. Based on the above recommendations, the success of early-stage startups hinges on their ability to demonstrate the expertise of the team and its ability to build a sound organization that can adapt and innovate in a rapidly evolving landscape. Embracing multitasking and flexible roles empowers teams to navigate challenges with agility and resilience, fostering a culture of collaboration and resourcefulness. Startups can position themselves for sustainable growth and long-term success in the competitive startup ecosystem.