Building A Team in Sacramento
The unedited version of the article I wrote for the SARTA Technology Index supplement to the Sacramento Bee February 3, 2006 edition:
The day you first think about starting a company, you need to be laser-focused on building an exceptional team. You can never learn this lesson well enough, or soon enough – it’s always about the team. And most entrepreneurs never get it, and some get it but don’t get it right. And the ones who are successful are almost always those who get it right and get it right away and keep getting it right. Building and maintaining a great team is the hardest and most important work you will ever do.
And these days in Sacramento, building a team has gotten enormously easier. As experienced business people leave the Bay Area and move to the Sacramento region, they are a wonderful talent pool waiting to be tapped. Every week, I receive several calls or resumes from exceptionally talented and experienced executives who are looking to get involved in the local ecosystem. And every week, I am frustrated that local companies are not snapping them up. One by one, they decide not to move here or drift back to the Bay Area or move to other areas of the country, or move into areas in which they are completely inexperienced, and their talents are lost to Sacramento.
So let’s get smart about how we can bring these exceptional talents into our local companies and utilize them to move to higher levels. First, let’s define what a team is. It doesn’t have to be made up of permanent, full-time employees. If your company is struggling financially, you can often find well-qualified individuals who are willing to serve on your board or advisory board, or just simply as an adviser, for a small amount of stock options. And often the mere fact that these individuals have agreed to work with your company will immediately improve your financial position. Investors, for example, are very positively motivated towards companies that have surrounded themselves with experienced executives. In fact, the number one investment criterion of most investors is the quality of the team (which absolutely includes other than full-time employees). And these advisers often have large Rolodexes that they can access to help provide you with access to investors, customers, suppliers, manufacturers, and other potential ‘team’ members. And that’s not even mentioning the wealth of advice and experience they can provide you in terms of running a high-quality company.
Sometimes a potential adviser is in a position to invest his or her own funds into your company. Weigh this option carefully. Would you have wanted this individual as an adviser without the promise of money? If not, their involvement might be a negative and outweigh the investment they are making.
When evaluating potential advisers, consider whether an individual has relevant experience. If he or she has started a company in your exact field, gotten it funded, grown it to $50M or more, and sold it for an impressive multiple, and has the team that did it ready to move to your company, grab this person right away. If your great-uncle Marv said he met this guy at the casino and he acted like he knew something about ‘bizness’, run as fast as you can. And make sure that you check the references of your advisers as carefully as you would potential employees. If you can’t afford a full background check, it is easy to do some legwork yourself. For example, log onto the SEC website (www.sec.gov) and make sure that your candidate has never been fined by the SEC. Don’t laugh, it happened to me. Moments before I offered a guy a CEO position for a startup, I discovered he had been found guilty of lying to auditors and other crimes that you wouldn’t want someone involved with your company to have on their resume (or not on their resume in this case!).
What excuses are you using for not getting these amazing assets involved in your company?
- You don’t want to give away ownership in your company? So consider that you can own 100% of your company, that is currently valued at $5M, or you can give away 2% to someone who can double the valuation to $10M. That’s a no-brainer.
- How is an individual who was a CEO for a $50M company in Palo Alto going to help me? And does she have the fire in her belly anymore to give what it takes? Ask her, get a plan, agree on her part of making this plan work, monitor, assess, and measure. You have given her options that vest at some tiny percent per month, if it is doesn’t work out, what have you lost?
- They are going to be expecting Bay Area salaries and the company can’t afford them right now. I submit that the company can’t afford not to get them involved. If you have a compelling enough story, you will find a way to make it happen, including coming to terms on compensation. And most people worth getting involved in your company are going to expect some fair compensation, which can often be in the form of equity.
- Why would they want to work for my start-up? You better figure out why because it’s the same answer for why am I in business in the first place?
So, come on Sacramento. Let’s stop making excuses and figure out how to get these Bay area, and other area, transplants rooted in our local companies. We have a lingering reputation of only being an agricultural center of excellence. So, let’s go with this. The growing season is upon us and the harvest can be bountiful.
The Sacramento Executive