Chapter 7 - Building the founding team. This chapter takes the view that the process undertaken in developing a tight, well-written story is the most important thing. Furthermore, our research indicates that students who write a business plan, even if it is for an entrepreneurship class, are far more likely to become entrepreneurs than students who haven’t written a business plan. | BUILDING THE FOUNDING TEAM Chapter 7 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © 2 ENTREPRENEURSHIP IS A TEAM SPORT Grow beyond self-employment with the support of a team Team can include partners, employees, advisors, family, vendors, investors Accomplish more with others than you can alone The power of a team is its shared vision of success THE ADVANTAGES OF A TEAM 3 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © CONSIDERING YOUR ROLE 4 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © What position can you best fill? What is the best way for you to contribute to your venture’s success? Don’t be crippled by your weaknesses but also don’t be oblivious to them either. STAFFING PLAN 5 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © BUILDING A POWERFUL TEAM 6 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © RESOURCES FOR CREATING THE TEAM 7 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © THE DO NOTS OF DOUBLE EMPLOYMENT 8 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © Do not use your employer’s resources Do not expropriate intellectual property from your current employer Do not solicit your employer’s customers until you quit the job Do not conceal the fact that you are founding your own venture TYPES OF COMPENSATION 9 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © Compensation name Advantages Disadvantages Founder Shares Attracts co-founders Dilutes owner’s equity Option pool Ties employees goals to those of the company Employees may leave the company if the price falls Restricted stock Vested over time, expensed at current share price Issued regardless of company performance, exercised when price increases Stock appreciation rights Low cost to the company Dilutes owner’s equity Phantom stock Employees receive no equity Requires cash to be exercised 10 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © THE DILUTION EFFECT: AN EXAMPLE Event Entr. Share Co-Founder Family/ Friends Angels Option Pool CEO CFO VP Sales VC Rd 1 VC Rd 2 Total Valuation (000) Ent’s. Value 1 60% 40% 100% 2 48% 32% 20% 100% $1,000 $480 3 22% 14% 9% 40% 15% 100% $2,500 $540 4 8% 5% 3% 15% 6% 10% 3% 7% 43% 100% $7,000 $562 5 5% 4% 2% 10% 4% 7% 2% 5% 29% 32% 100% $30,000 $1,605 6 5% 4% 2% 10% 4% 7% 2% 5% 29% 32% 100% $100,000 $5,349 Harvest Value for All Stakeholders Harvest $5,349 $3,566 $2,229 $9,905 $3,714 $6,667 $2,000 $4,667 $28,571 $33,332 11 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © EXTERNAL TEAM MEMBERS 12 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © PROBLEMS FACED BY START-UP TEAMS 13 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, 2017 © RECAP Entrepreneurship is a team sport Determine who should be on the team Create a culture so that team can flourish Maintaining a team is an ongoing effort
