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The most cited answer among investors – and perhaps the most underrated factor among first time entrepreneurs – is the startup team. There may be a need for your product or service, the market may be enormous, your business model may be attractive, there may be few competitors in the space, and you may even have some bonafide intellectual property, BUT if you don’t have the management team with the skills, experience and track record to execute on your business plan then you likely will not attract investors.
Why Do Investors Care So Much About the Management Team?
The reason is simple: something will go wrong, and only great teams can effectively respond to competitors, markets, funding environments, staff departures, PR disaster, etc. Furthermore, success breeds success. Investors want to put their money in the hands of people who have a proven track record with launching companies and providing a solid return to investors.
How To Build the Management Team
You likely will not have the capital to hire a full suite of C-level gurus when launching your company (you wouldn’t be fundraising if you did). But, you can still have a team of gurus acting as your board of advisers. By simply having the knowledge and resources that these advisers bring to the table at the tips of your fingers will go a long way in easing the concerns of investors. Furthermore, you’ll want to make it clear in your business plan that 1) you are aware of the C-level positions and the expertise gaps with your current team, and 2) this is exactly what you will be spending their capital on (among other important startup costs). Lastly, you current management team will likely not have all of the skills and experience to effectively run all components of the business, but it is imperative that your team has enough to be effective at the companies core competencies…even if that means bringing on a partner before approaching investors.