Presentation 5 - Entrepreneurship Goethe

Entrepreneurship
WPMM: EPSH
Winter 2015
Sebastian Schfer
Sebastian.schaefer@wiwi.uni-frankfurt.de
Thomas Funke
funke@wiwi.uni-frankfurt.de
Start-up Teams
Entrepreneurship - WiSe 2015/2016
Research: What entrepreneurs need

Leadership qualities, inspiration, enthusiasm
Creativity, vision, openness
Persistence
Responsibility
Experience
Team player qualities
Pragmatism
Analytical skills
Negotiation, presentation, selling skills
Etc.
Investors: What do they look at?

Business founders / management team: Does it cover technological and economic/market expertise?
Are they willing to take new members? Do they show growth orientation?
We look for a strong technical founder and a sales oriented entrepreneur typically it is at least two
people, sometimes three. (Siegelman)
I tend to invest behind an entrepreneur, not behind a professional managers as the CEO. Often the
person who can professionally manage as CEO in the later stages is not as effective in the earlier stages.
It requires a different skill set (Siegelmann)
If we have a founder who is in it for the lifestyle or who is unwilling to upgrade the team, we have a
conversation (Hoel)
One thing we dont do is back a wild eyed technologist(Wang)
We think about the CEO. One trait of all our successful companies is that the CEO we backed at funding
was still the CEO at the sale of the company or IPO () We spent a lot of time focused in the CEO and
the members of the management team: the quality of people they attract, their biases, their strong points
and their overall depth. (Wang)
We want to keep the existing team if possiblewe get a little concerned when the entrepreneur come in
and says Im in this to flip it in a year () if they are not in it for the tough times, then its definitely a
problem. (Simon)
How many ventures start in teams?
1980: High Tech Start-ups: 20 % Team Founders

2014: Overall Founding Rates: 23% Team Founders
2014: High Tech Start-ups: 76% Team Founders
How many Cofounders?

40
35
% of startups
30
25
Web & Software

20
Technology
Life Sciences
15
10
0
1
# Founding members
Sources: Data for Technology and Life Sciences adopted from Wassermann (2012: 74); data for Web and
Software taken from own dataset
How many Cofounders?
Team vs. Solo

Form a team if
Lack of knowledge, social and financial capital

Task preferences (delegation)
Collaborative Style (share ideas)
Support and Validation (get encouraged)
Volatile industry context (bear together)
Otherwise stay solo
Composition of Founding Teams (1/2)
prior jobs within

founding team
education level within

founding team
Prior jobs
1,636
1,908
3,743
1,742
3,712
Operating
All
Prior work-experience: Average

amount of total prior jobs of
founders.
1,779
1,492
1,668
3,606
Closed
Industry-variety
Education level
3,996
Acquired
industry-variety within
founding team
Acquired
Closed
1,506
1,458
Operating
All
Education level:
Average education level for founder team
(1= Bachelor degree, 2= Master degree, 3=
MBA, 4= PhD)
Acquired
Closed
Operating
All
Industry variety:
Average amount of previous jobs in
different industries of founders.
Composition of Founding Teams (2/2)
share of founding
teams with serial
entrepreneur
share of founding
teams with industryspecific experience
Serial Entrepreneurs
share of founding teams

with high executive
experience
Executive experience
Industry-specific experience
72%
63%
65%
40%
65%
54%
38%
37%
60%
Acquired
59%
59%
Closed
Operating
35%
All
Serial Entrepreneurs: Percentage

of ventures with at least one founding
team member, who founded one or
more ventures before
Acquired
Closed
Operating
All
Industry-specific experience:
Percentage of ventures with at least one
founding team member with previous
jobs in the same industry.
Acquired
Closed
Operating
All
Executive-experience: Percentage
of ventures with at least one founding
team member, who have been in more
than 2 executive positions before.
10
Founding Teams from an Investors

Perspective
Always consider investing in a grade A man with a grade B idea.

Never invest in a grade B man with a grade A idea.
Georges Doriot
I invest in management, not ideas.
Eugene Kleiner (Kleiner Perkins)
11
Investors: What do they look at?
Team
First time founder or serial entrepreneur?

Team or one-man show?
Indication, previous proofpoints of entrepreneurial spirit? Crisis resistant?
Fundraising skills? How much babysitting will they need strategically?

What HR gaps have we identified? What are the obvious weaknesses of the
team?
Are there any other red flags we could see?

Clear strenghts of the team, where are we sure that they will perform well?
12
Why do startups fail?
35 %
65 %
13
14
Importance of the 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.
15
Team: What is it really?
O
L
L
I
N
N
D
E
R
E
R
A
C
H
T
S
16
Team: What is it really?

In 2014 we interviewed a 107 Startups in Austria and Germany about
their major challenges in team constellations (average age: 2,5 years)
(5=lowest; 1=highest)
4,08
Uncertainty about splitting the pie (equity splits)
1,96
Personal conflicts
1,87
Making strategic decisions
1,81
Clear goals all team members are working towards to
1,61
Clear responsibilities for team members
17
18
Who is the better Co-Founder?
19
Who is the better Co-Founder?

The No. 1 need when searching for a co-founder:
= highly qualified, like-minded (business wise) and motivated individuals!
Be honest! How many of your family and friends are this? Statistics say
Only 10 %!
The propbabilty that a team member will leave when the startup is founded
within a family is
28,6 % higher!
20
Clean Tech Teams: Relationships
21
How important is Communication?
No Communication
22
How important is Communication?
Perfect Communication
23
The 5 Problem Sets of Team Relationships
24
How can I test those problemsets?

- Gut Feeling: Do you trust your co-founder?
- Dealing with stressful situations
- Dealing with uncertainty
- Dealing with negotiations
- 360 Degree References
- "Spend a lot of time"
- Salaries
- Consistency in process
25
The answer: Find the right team

Finding the right partners to work with is a crucial
way to success!
Plan carefully whom you work with!!
Dont choose your partners because of comfort!

The No Asshole Rule by Robert Sutton
(http://ecorner.stanford.edu/authorMaterialInfo.
html?mid=2571)
26
The answer: Find the right team
27
28
Team Issues
Every success, every mishap, every

opportunity seized or missed is the result of a
decision that someone made or failed to make.
At many companies, decisions routinely get
stuck inside the organization like loose change.
But its more than loose change thats at stake,
of course; its the performance of the entire
organization
29
Challenges when making decisions
(1) Cognitive and Affective conflicts

(2) Consensus orientation
(3) Communication
(4) Formalization
(5) Intuition
(6) Including external people
30
Clean Tech Teams: When should the founding

team be complete?
31
Clean Tech Teams: CEO change
32
Team Issues
What is the difference between? Develop profiles and activities for each type.
1. Mentor
2. Advisor
3. Tutor
Time: 10 Min
33
Team Issues
Distiguish between
1. Mentor = helps with everything and cares about good feeling

2. Advisor = specific backgroud and network
3. Tutor = controls on a weekly basis
34
Team Composition
First, obvious reasoning:

Functional, skill related Roles
Lets play the game of finding a Chief

for everything!
(CEO, CFO, CSO, COO, CVO )
35
36
37
Team Composition
Functional, skill related Roles (CEO, CFO, CSO, )

What is better: Homogeneity or Heterogeneity?
Pro Heterogeneity: Better decisions, early detection of problems etc.

Pro Homogeneity: less affective conflicts, more trust, sharing same interests
Attention: Birds of a feather flock together!
What most of the time nobody thinks of or evaluates
Personal, soft-skill related Roles
38
The Consultant
Short description: Constantly analyzes the current situation and

derives recommendations from the analysis
Strengths: ability to learn, empathy, apprehension

39
The Boss
Short description: Leads, gives orientation, keeps team together,

supports and motivates
Strengths: initiative, risk taking, ability to motivate, ability to make
decisions
40
The Artist
Short description: asks non-conventional questions, helps to have

different viewpoints, impulsive
Strengths: creativity, ability to communicate, open, risk Initiative, risk
taking, ability to motivate, ability to make decisions
41
The Maker
Short description: focus on execution, pushes others

Strengths: endurance, discpline, ability to motivate
42
The Enthusiast
Short description: brings the fun, is able to inspire

Strengths: team worker, optimist, ability to communicate and
motivate
43
The Organizer
Short description: plans and controls, has the overview
Strengthes: flexibility, team worker, structured, reliable

44
The Helper
Short description: always there

Strengthes: Initiative, Open, Empathy
45
46
Entrepreneurs Dilemma: Control vs.Money
47
Rewards: Equity Splits
48
49
50
51
52
53
Discuss: When to split?

73 % do it right away
54
Rewards: Employee Equity
ESOP = Employee Stock Option Plan

Based on this Plan Employers to get equity in the company
The Plan is really critical!
55
A couple more facts
56
Team size: What is the optimal size?
The team should be fed by two pizzas. If they are still hungry, the
team is too big.
57
Team size: What is the optimal size?
In the beginning its always too small and people are missing.
After a while there are always too many people!
58
Possible Exam Questions
- If you do want to start a business and you need a co-founder:

What would the steps you would make to find one? What would
you pay attention to while searching?
- What kind of roles are necessary in a startup team? What needs
to be done if certain roles are missing in the beginning?
- How can cofounders be rewareded? What do you need to take
care of if you do agree on certain equity splits?
59
3 Cases
60
61
62
63
Thank You!
64

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Entrepreneurship

Entrepreneurship - WiSe 2015/2016

Research: What entrepreneurs need

Entrepreneurship - WiSe 2015/2016

Investors: What do they look at?

One thing we dont do is back a wild eyed technologist(Wang)

How many ventures start in teams?

1980: High Tech Start-ups: 20 % Team Founders

Entrepreneurship - WiSe 2015/2016

How many Cofounders?

Web & Software

How many Cofounders?

Entrepreneurship - WiSe 2015/2016

Team vs. Solo

Lack of knowledge, social and financial capital

Otherwise stay solo

Entrepreneurship - WiSe 2015/2016

Composition of Founding Teams (1/2)

prior jobs within

education level within

Prior work-experience: Average

Entrepreneurship - WiSe 2015/2016

Composition of Founding Teams (2/2)

share of founding teams

Serial Entrepreneurs: Percentage

Entrepreneurship - WiSe 2015/2016

Founding Teams from an Investors

Always consider investing in a grade A man with a grade B idea.

Entrepreneurship - WiSe 2015/2016

Investors: What do they look at?

First time founder or serial entrepreneur?

Fundraising skills? How much babysitting will they need strategically?

Are there any other red flags we could see?

Entrepreneurship - WiSe 2015/2016

Why do startups fail?

Entrepreneurship - WiSe 2015/2016

Entrepreneurship - WiSe 2015/2016

Importance of the Team

No business is so good that the wrong

Entrepreneurship - WiSe 2015/2016

Team: What is it really?

Entrepreneurship - WiSe 2015/2016

Team: What is it really?

Uncertainty about splitting the pie (equity splits)

Making strategic decisions

Clear goals all team members are working towards to

Clear responsibilities for team members

Entrepreneurship - WiSe 2015/2016

Entrepreneurship - WiSe 2015/2016

Who is the better Co-Founder?

Entrepreneurship - WiSe 2015/2016

Who is the better Co-Founder?

Entrepreneurship - WiSe 2015/2016

Clean Tech Teams: Relationships

Entrepreneurship - WiSe 2015/2016

How important is Communication?

Entrepreneurship - WiSe 2015/2016

How important is Communication?

Entrepreneurship - WiSe 2015/2016

The 5 Problem Sets of Team Relationships

Entrepreneurship - WiSe 2015/2016

How can I test those problemsets?

Entrepreneurship - WiSe 2015/2016

The answer: Find the right team