Top-heavy teams

I met with a 10 person company the other day and once I got to Slide 2, I immediately started having questions about the opportunity.  What struck me was a company that had a CEO, COO, and a VP of Marketing and a VP of Sales.  You have probably heard this many times before but I will reemphasize the point - companies have different personnel needs at different stages of development (start-up, first customer sales, rapid growth, maturity).  It is also more costly to bring in the wrong hire then to wait to bring in the right hire.  The entrepreneur was obviously quite proud of his team thinking that he would get over some major objections from investors.  I, on the other hand, saw a startup that had too many chiefs and not enough indians.  I also saw a team that probably did not have enough discipline to ask the tough questions and make difficult decisions.  I mean why does a 10 person company need a CEO and a COO?  As an early stage investor, I would rather have a company with a clean slate that we can build a team around rather than a fully-baked team when we don't necessarily know if the market is the right one to go after and if the product is the right product.  When I fund an early stage company, I would typically rather have an entrepreneur that has product vision, a development team to execute around that, and the openness to build a team around him as the company grows.  It can be death to have a top-heavy organization from Day 1 because startups change and change frequently during the early days.  Don't lock yourself in with big salaries, big options, and big egos until you really know what market you are going after, the skills and experience you will need to win that market, and the product is ready for prime-time.  In a future post, I will walk you through one of the biggest and costliest mistakes I have seen early stage companies make - hiring a VP of Sales too early.

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This post was written by who has written 358 posts on BeyondVC.

13 Responses to “Top-heavy teams”

  1. Thomas Anglero Jun 25, 2006 at 5:56 pm #

    There is a another side to this story. I am currently building a development team for my startup and the potential team members are already asking for large titles and significant equity. This seems to reflect upon the mentality of people and how they appear to still be holding onto their disappointment from the past bubble. It has made the process of finding excellent qualified people that much more complicated.

  2. Kelly Smith Jun 26, 2006 at 12:04 am #

    This is an observation I make all the time. To put it even more succinctly, it shows the naivety of some start-up CEOs. It doesn’t mean they won’t succeed but it does mean they are role playing based on what they think VC’s want to see.

    Great post. A practical matter than few talk about.

  3. Todd Jackson Jun 26, 2006 at 2:34 am #

    on the other hand, when my start up was getting funded, the issue was that I didn’t have a top team.

    Frankly,
    dude,
    it’s all about the sales. If your shitty team delivers, then fuck it, that team ought to be funded.

  4. Todd Jackson Jun 26, 2006 at 2:36 am #

    i just realized this guy has never been in a start up. wtf?

  5. Marcelo Jun 27, 2006 at 10:50 pm #

    When we went for capital in the “hot” times, the VCs were looking for the C*Os, not for products, visions or whatever you see today as “rational”. They rejected us because we had a lack of a “management” team, altough we already had a software product that was deployed in a couple of big customers and we were making real money at that moment.
    We were looking for an increase in the zeroes to the right in our profits by going global, but was not possible.

    So no big jumps, but we are selling anyway.

    In some way, i understand the guys that presented you a full team of C*O’s.
    We dealt with potential short term financial partners as long as potential long term strategic technology partners, and every potential founder had a unique vision of the opportunity.
    The company (or startup) cannot adapt their face every time, so they must choose one. They cannot support multiple faces and long due diligences. Maybe you saw the face that dont go with you.

    In particular, I agree with your post and vision of the topic.

  6. Kris Tuttle Jun 28, 2006 at 7:07 am #

    I think most companies, even larger ones just have too many titles and not enough doers. I’m biased because I do advisory work now and if on Monday you need to do PR, you do it. Maybe Tuesday you are product planning, Wednesday meeting customers, Thursday doing a deal with SI partners, and on Friday you’re writing some documentation.

    The worst thing is when the idea is you need to hire some person to do every job that comes up and just “manage” the process.

    Management is important but so is getting work done efficiently.

  7. Jason Gorham Jul 6, 2006 at 6:42 pm #

    I found this post at the right time as I’m getting ready to hire my first person after 3 years. I completely agree even to the point of being successful by myself with just using contractors and mentors. The main reason for the hiring of the person is I’m spread to thin, we have a new client that needs a person dedicated to the account and I feel the timing, product, infrastructure is enough for this person to hit the ground running and to build our sales methodology based on what has been put in place. Without this, I would have hired someone and we both would have spent a lot of time developing this, now he has everything he needs and can get customers in the door. Oh yeah my title by the way is: Chief Cook & Bottle Washer.

  8. rita Jul 19, 2006 at 2:03 pm #

    It is all about Balance, like old Zen.

    Our startup has no choice, VC put it into termsheet to find a CEO. We had to do it. Finding one by ourselves are better than waiting for VC to assign one. I know other startups were assigned C*O by their VC’s and every “doers” are crying now.

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