Technology Recruitment in an Early Startup

Daniel Tenner has a great post that is good reading for people looking to build early tech startups. I would just caveat his comments by suggesting that care is needed in understanding how you provide equity to those who help you out in those early steps. Daniel is completely right to suggest:

"You want them to feel that it’s their company, and to do that, you have to give them equity - not options, not promises of options, but actual founder’s equity. Don’t feel like you’re giving stuff away here. If you’ve got the right person for the job, ensuring that they feel ownership of the company will ensure that your share is worth something. It’s better to own 70 or 80 or even 51% of something than 100% of nothing."

However, bear in mind that there are two categories of people you might want to help out with a startup- and both can contribute a great deal

• Ideal hires- people who you would've hired to do the job at the full commercial rate if only you had the cash, and who you'd expect to continue to be perfect for the job in 3-12 months time.
• Opportunistic hires- people who are prepared to get involved early, before an ideal candidate would join, but who are probably not long-term management or key staff.

I would suggest that it is wise to think this through, and to talk it through openly with those involved, and make sure that the equity is allocated appropriately. I have seen many many founders who regretted having shared the company, often 50:50, with someone who ceased to be involved pretty quickly. I've seen founders who've been sweating to make the business work five years from the start, whilst their co-founder holds similar equity and has long since departed. Needless to say these founders tend to regret their decisions!

A global view of social networking

| View | Upload your own

Tim Langley pointed me to this intersting presentation.

The Collaboration Cycle

The Collaboration Cycle
Originally uploaded by Edward French

Three months into licensing or pursuing a market entry for a new technology everyone involved always feels like they're a few months away from a deal, and no more than a year from revenue. Time and time again we've found it always takes much longer. You can expect to see at least one change in the bigco's team, and if it's an international collaboration each cycle of meetings takes months. This graph tries to compile the wisdom from all our companies licensing and collaboration projects- the conclusion being that, even without any hiccups, it's likely to take around 3 years from first meeting to revenue. This is a real opportunity, in my view, for the largeco's to steal a march on their competitors- getting really quick and sharp about technology acquisition would buy them a great advantage.

Rahns law of investment propositions

Mark Rahn, the newest member of our technology team, is doing a great job and took to the job like a "duck to water". He came up with a real gem of an observation the other day, which I've taken the liberty of christening, "Rahn's Law".

"The quality of a proposition is inversely proportional to the amount of time the plan or team spends extoling its virtues."

In other words, propositions that tell you repeatedly how exciting the sector is, how transforming their stuff will be, that wax lyrical about the great qualities of the people are often compensating for the weakness of the product, opportunity or team. The very best plans are short, factual, and rely on evidence rather than weight of self-praise.
This links nicely to four tests for any business plan which I've always urged our investees employ:

Four tests for business plans

1. The superlative test

Have you obliterated all superlatives? Leave it to the judgement of the reader if something is really "exciting","superb", let alone is someone's track record is one of "success".

2. Have you used facts/numbers wherever you can?

It's a good discipline to try and replace each superlative with a number or fact instead: it makes writing much punchier! Don't say there's a "multi-billion dollar market for mobile software", try and say something like "there's a £n million market for GPS software on mobile devices". It's a great deal harder to write this stuff, but it helps convey real market knowledge and understanding.

3. Check that jargon is appropriate/necessary

If I was writing a plan associated with "WiMax", the I probably need to refer to "WiMax"; that's appropriate use of jargon. However, it doesn would a proposition really benefit from using "ARPU" when you're not talking about anything that's not encapsulated by the word "revenue".

4. Can a non-specialist reader tell what the company provides?

Include a laymans explanation of what your product or service is/does. A good case-in-point is a company I've been reading about tonight: they provided three documents in total describing the business, but after reading them, I have only the vaguest idea what the business does. Without this information all the stuff about the team, route to market and competitors is really hard to understand, relate or assess.
I'm sure there are some other great suggestions out there...?

Later ammendment

5. Did you really describe your competitors and their comparative attributes?

This is often one of the most revealing sections of a plan- it's amazing how often it's missing!

Updated: Role of Chairman in Pre-Revenue Tech companies

The role of the chairman in RisingStars companies is a little different from the standard in a small company due to the emphasis on growth and support of a growing team.

Updated version, also I've added the highlights to emphasise particular areas that are unusually important in a pre-revenue technology company.

Team Building	Contributing to the management development plan Mentoring and support for the CEO- acting as their private sounding-board Leading the process of recognising when there is a need to change CEO and to lead the search for the new CEO. Making sure that team changes get recognised early and supporting the CEO in taking quick and early action Monitoring the executive team's relationships and bringing action if conflicts arise Monitoring the performance of the executive team and actioning required change Providing discreet feedback and guidance for the CEO Conducts formal CEO appraisal/performance review Assists CEO in selection of exec board members
Financial Governance	Ensuring financial reporting is regular, clear and appropriate Taking a lead role in negotiating remuneration In the absence of a dedicated FD, having oversight of the accounting process Recognising future cash requirements and ensuring the board deals with cashflow planning well in advance
Strategy	Leading on the development of the company strategy Ensuring that investors interests are properly represented by the strategic options presented to the board Mentoring the CEO on the strategic development Being the first to spot a dead-end market entry strategy and to call time on it.
Fundraising	Spotting well in advance when fundraising is likely to be required; making sure there's always 3 months cash in the bank and that fundraising starts as soon as there's less than 12 months of visibility Attending many/most/all fundraising meetings and helping prevent it taking over the CEO's time and to improve the level of feedback. Providing a second voice in fundraising discussions Opening contacts for fundraising and corporate events Providing independent feedback to investors on fundraising comments Gathering feedback from investors on their view of the exec team
Representing Shareholders Interests	At all times to remain clearly focused on the interests of shareholders over management Providing independent feedback to investors on the state of company and management Ensuring transparency of information flow between management and shareholders
Proceedings at Board Meetings	Collects input from all directors and management on the board agenda - this facilitates surfacing difficult issues. Creates the board meeting agenda with the CEO. Ensures report(s) have been issued well in advance of the meeting Runs the agenda of the board meeting, holding items to schedule or extending the time spent on them if the consensus is to spend more then the appointed time on an item. This frees the CEO to focus on content and allows the Chairman to keep the meeting on track. Gathering input from, and providing feedback to, shareholders from the board meetings.

Top 30 Internet Start-ups- erm not!

Top 30 Internet Start-ups

Real Business published on "Thursday, 30th August 2007"

I stumbled across this fascinating article today.

 

The top 30 includes Beenz.com and Boo.com- so somehow I think that their content management system isn't getting the date of the article quite correct. Anyone care to guess the correct date?

 

Seriously, it makes interesting reading if you want to compare the original .com bubble to the web2.0 situation today. I don't think you'd be left with the impression that there was too much in common?

 

A more interesting comparison for me was in the IT suite of my kids (primary) school, the end wall had been peppered with around 25 Web2.0 services that they were suggesting the children might like to use for entertainment or for coursework. Interestingly very few of these were actually targeting children, no doubt many are putting out a free product with a view to building paying customers later. The most sobering thing was how few of these services I'd actually come across!

 

 

 

Government Agency does better Due Diligence than Investors- apparently!

So the "technical due diligence done by EEDA (East of England Development Agency) often exceeds that of investors"! According to the article on the Cambridge Network website this is because "EEDA pay for the Patent Office to carry out a patent search, and also send applications to at least two experts in organisations such as the National Physics Laboratory and National Engineering Laboratory".
I'm not sure if I'm more gobsmacked that the Development Agency that investors in their region do less DD than that, or that they put so much faith in the kind of reports they get from people like NPL and NEL to confirm the commercial potential of the innovations they see.