Chapter 7- Building the

Founding Team
Presented by:
Baccay, Myelen Grace Q.
Cabanglan, Agatha Julia L.
Cordez, Joanna
Dinao, Neil Richard S.
Paglinawan, Marcelino Jr. S.
Penarroyo, Nerwin R.
Rago, Chloie M.
Salamida, Jomel
Saplagio, Quennie Jane N.

LEARNING OBJECTIVES
Explain how to effectively build a
founding team.
Understand
how
to
work
with
professional advisers.
Discuss when to add a board of
directors.
Compare and contrast the pros and
cons of outsourcing with independent
contractors versus hiring employees.

Creating Effective Founding Teams

Team effort is much successful than solo
for variety of reasons:
Shared intense effort required by a startup
Loss of one member less likely to result in
startup abandonment
Team permits expertise across 4 major
functional areas: Marketing, Finance,
Operations, SCM.
Skilled team lends legitimacy to the new
venture in the eyes of lenders, investors,
etc.
Diverse experience and expertise of the
team members allows entrepreneur to make
better decisions.

Key Terms
Lead Entrepreneur
Extended Networks

The Entrepreneurs Network

Creating the Founding Team

Benchmarks for an effective team:
Shared vision between lead entrepreneur
and the team
Shared passion leads to shared hard work
Industry experience relevant to the new
venture
Solid industry contacts with sources of
capital
Functional areas of the business are
represented
Team members have good credit ratings
Team members have the time and money to
endure startup constraints

Table 7.2

A Founding Team Quiz

Special Issues for High-Tech

Teams
Putting structure on the organization before
its time.
Pretending there are sales form beta
customers.
- Beta customers - the value is free
- Bonafide customers - those who pay for
entrepreneurs products and services.
Suffocating under opportunity overload.
Believing that engineers can do marketing.
Licensing the technology too soon.

Unique Issues Surrounding

Virtual Teams

Virtual Teams - are distinctly different

from face-to-face teams in both spatial
distance and communication.
Synchronous-asynchronous
communication
media
alleviate
physical distance issues.
Trust is critical to effective virtual
teamwork.

Founding Teams for

International Ventures
Success in the international market
depends on the skills and knowledge of
the team.
Successful characteristics include:
Extent to which founding team members
have traveled or worked abroad
The number of languages they speak

Experienced founding teams likely to

form partnerships to facilitate entering
the foreign market.

Rules for Friends and

Families
Friends/family members must possess
real skills and expertise required by the
venture.
They need to share the same work
ethic as the entrepreneur.
If there are family members on the
start-up team, there should be
outsiders on the advisory board and/or
board of directors.
All relationships are business oriented
and must be stated clearly spelled out.

Seeking Professional
Advisers
Outsourcing solutions for professional
help:
Attorneys
Accountants
Bankers
Insurance agents
As-needed assistance for information,
assistance
in
reviewing
business
concept, and reality checks

Seeking Personal Advisors

Building a board of directors
Legal form of the business influences the
decision to have a Board of Directors.
Boards provide beneficial expertise in
establishing corporate strategy and
philosophy.
Boards of publicly traded companies are
elected by shareholders and represent their
interests.
Members assist with business development,
act as arbitrators for dispute resolution, and
give credibility to the new companys
image.

Building a Board of Directors

Considerations when choosing board
members:
The necessary technical skill related to the
business.
Significant, successful experience in the industry.
Experience running a company at the level the
entrepreneur wants to grow to next.
Important contacts in the industry.
Experience in finance, capital acquisition, or IPOs.
A personality compatible with the rest of the Board
Good problem-solving skills.
Honesty and integrity, to engender a sense of
mutual trust.

Figure 7.2

Board Members and the

Business Life Stage

Advisory Board
Consists of an informal panel of experts
and other people interested in the new
ventures success.
Less costly that meet once or twice a
year, no pay to frequent meetings and
provided equity stake in company.
Helps the entrepreneur to overcome
tunnel vision.
Advisory board is step in the direction
of creating a more professional
organization.

The Mentor Board

They are the entrepreneurs personal
board who serve as a sounding board,
coach, advisor
A safe haven for entrepreneurs to air
their fears, concerns, hopes, dreams
Serves as a sounding board for ideas
and act as coaches to raise
entrepreneurs spirit and warn them if
he/she is heading down a wrong path.

Mistakes to Avoid
All team members should have the
required experience and qualifications,
and the same goals for the business.
Avoid using only family and friends.
Only give stock incentives after an
individual has proven him or herself.

Mistakes to Avoid
Equity distribution: it is important to
clearly understand what each team
member is contributing and value it
appropriately.
Equity equates power
Founders may contribute

Patents
Viral connections
Reputation
Unique Business/ Technical expertise

Mistakes to Avoid
Buy-sell agreement: used to prevent an
owner from selling his/her interests in
company without consent of the other
owners and to determine what happens
should owner leave the business.
2 types:
Cross purchase agreement
Stock redemption agreement

Outsourcing with Independent

Contractors
Outsourcing a practice used by
different companies to reduce costs by
transferring portions of work to outside
suppliers rather than completing it
internally.
Independent contractors (ICs) own
their own businesses and are hired by
the entrepreneur to do a specific job.
Including:
consultants,
manufacturers,
distributors,
employee
leasing
firms,
and
professional advisers.

The IRS and Independent

Contractors
Law of Agency:
Defines the terms employee and
independent contractor.
While an employee acts under the
direction and control of the employer,
an independent contractor contracts
to produce a certain result and has full
control over the means and methods
that shall be used in producing the
result.

The IRS and Independent

Contractors
Ensure compliance with IRS (Internal
Revenue Services) regulations:
Consult an attorney
Draw up a contract
Indicate only the desired result
Verify the ICs workers compensation
insurance
Verify the ICs licenses to do business

Types of Independent
Contractors
Consultants
Professional employer organizations
(PEOs)
Manufacturing support
Sales support

New Venture Action Plan

Identify the members of the founding team or
at least the expertise needed to start the
venture.
Determine what expertise is missing from the
management team and how you will supply it.
Begin asking questions about potential
professional advisors, such as an attorney or
accountant.
Determine whether you will need a board of
directors, an advisor board, or a mentor
board.
Identify at least one type of independent
contractor that the new venture could use.