As you enter a fundraising round, you want to present a united front to investors. You want a strong, stable team so you can focus all your energy on communicating your business, perfecting pitch decks, and keeping in touch with people who look interested.
Surely this isn’t the best time to disrupt your founding team.
But actually keeping your team evolving — bringing on new people, shifting roles and responsibilities, even saying goodbye to core members — can be the best way to capitalize on the results of a raise.
Here’s how to keep your team in a state of evolution before, during, and after a funding round, and still appear like a squadron to your investors:
Before: Find your core
People have tried to show that there’s a magic number for members in a founding team, 2.09 no less. But this is not the math you should be doing to create a great team. A team whose passions align will always be greater than the sum of its members.
Find Co-Founders That Speak To You
Unless you’re Adam Fleischman, bolshy founder of Umami Burger, who insists on working alone, you’re going to need co-founders. Investors worry about single visionaries like Fleischman. Stubbornness can be good for vision, but it rarely leads to a successful team down the road. You won’t always have the luxury of single-mindedness — if you grow as you hope to, your team will grow too. It’s vital to create a strong core team first so that you grow into a goal-based collective, rather than a dictatorship.
There are many resources you can turn to to find great co-founders, including:
- Founder Dating: Allows you to sort through ready and willing candidates by the qualities you’re looking for. There are other founder “dating” sites too, like Build it with Me, mainly for finding developers and designers, and CoFounders Lab, which lets you search co-founders by industry and expertise.
- Reddit: There are particular subreddits for finding co-founders, especially technical co-founders. Describe your business in an appealing letter to potential partners or search through ads from techies looking for new adventures.
- Personal networks: It’ll surprise you how many people you’ve already met who are looking to start a business. Send out feelers to peers you trust and relevant groups you’re part of. Look back at that deck of business cards you’ve collected from networking events. Reach out.
Match Your Passion Keywords
You’ve met some potential core members; now you must divine which of them is the co-parent to this baby. You can only do this by homing in on your goals.
Super-herb drink brand REBBL has a clear, passion-led purpose: “To introduce the American market to adaptogen herbs, eradicate slavery and human trafficking, and prove once again that an ethical business can be a successful one.” If a potential co-founder came to REBBL and said “I just want to make great-tasting juice,” they’d clearly be barking up the wrong CPG.
Test the compatibility of core members by how precisely they match your goals’ keywords. If potential members match passion keywords unprompted, that’s a sign they’ll be able to commit and contribute to the success of your business.
Nail These Three Conversations
You’re not just starting a business, you’re also embarking on relationships with your co-founders. Even if you’ve known them your whole life, this is a new kind of relationship, and you probably don’t have a framework for talking about it yet.
The co-founder relationship is a lot like dating. When Alex Blumberg set out to find a co-founder for Gimlet, his podcast startup, he found himself surprisingly emotional. “Really it’s just about raw feelings. Do you respect me. Do you value me.”
There are a number of tough conversations you’ll need to have, including how much equity you want, whether to hire a CEO, and how to change when somebody’s unhappy. So it’s important you have a way of talking to each other that you’re all comfortable with and that helps you identify problems. Try these conversation starters, until you’re comfortable starting on your own:
- “Hey (co-founder’s name), can we sit down and talk about the month ahead?” This is a deceptively simple question. It allows you to talk about the future without going too big-picture. You’ll get a sense of each other’s short-term goals and any doubts have a chance to show themselves.
- “Hey (co-founder’s name), I need to talk about (this thing you’re worried about).” We all need a way in to tough conversations. If you feel misunderstood or you need to confess a concern you have about the business, simply admitting you want to talk should give you the momentum to go through with that conversation.
- “Hey (co-founder’s name), I’m getting the feeling you’re not into this.” Even if you’re wrong, and your co-founder’s pumped about this new idea, this lead-in gives them a chance to be honest about their misgivings.
During: Bring in reinforcements
Don’t wait for funding to fill the gaps you know exist in your team. Neither you nor your co-founder has ever designed packaging before, for example. You need to fill that gap before you invest in production.
Step Away From Your Baby
This is one of the hardest parts of building a team, knowing when you need someone else to take the lead. But the traits that made you a great founder may not be the traits of a great CEO.
How do you know when you need a CEO? Maybe a fundamental gap in your business knowledge has cropped up. Neither you nor your co-founder feels comfortable talking to investors about the numbers. Or you and your co-founder are starting to fight about roles and responsibilities, which might be a sign that you need a CEO to bring clarity and direction.
Or you’re missing insight into your chosen industry. Tava Kitchen recognized their need for a CEO as they raised money on CircleUp. In order to fulfill their mission, they needed someone at the helm who really knew restaurants. Jeremy Morgan was their answer. He’d just helped the Smashburger team scale to 300 locations. The Tava Kitchen founders knew he’d be able to help them make competitive changes to menus and design, while they focused on growing the business in line with their vision.
There are many parts of your business, and as you raise money it’s becoming abundantly clear that you’re an expert in maybe 5% of them. What about marketing? What about packing and shipping? What about distribution?
Don’t rely on bringing on another co-founder or reassigning the CEO-ship every time you find a gap in your knowledge — instead fill these gaps with other talented people and advisors who can bring new perspective to your business. You could find a mentor to help you get your product into the distribution channels you want. You could make relationships with local writers and bloggers who can drum up early word-of-mouth for your brand. A “founding team” is way more than just founders.
Make A “Keeper” List
The more money you raise, the more people you’ll meet who want to be part of your team. It can be tempting to invite impressive people on board as soon as you encounter them, but hire every talent and you’ll start to feel like you’re crowdsourcing your decision-making.
Samuel Clemens, co-founder of InsightSquared, advises founders to make a “keeper list,” a list of people you meet who might not be right for your founding team but will be great down the road. Keep in touch with these people as you would with potential investors and when you’re ready for them, they’ll know how well you’re crushing life and be even more eager to get involved.
After: Reinvest in your team
You’re not stuck with your founding team once you’re funded. In fact, rearranging and adding to your team can help you expound that financial advantage. Take time for your team after a fundraising round just as you would for other elements of your business.
Give Your Team A Raise
Now your business has a higher value, so do your team members. Your founders and CEO now have a responsibility to investors and you need to pledge an amount of your raise towards those team members, representing that new value. CEO of Tava Kitchen, Jeremy Morgan, decided on a ratio for allocating funds. “I call it 60, 30, 10,” says Jeremy. “60 on building, 30 on brand and 10 on team.”
You also need to support areas of your team that you expect to grow now that you have funding. It’s time to reassess the gaps and allocate accordingly. Ice cream company Phin and Phebes took their Circleup raise and devoted a large proportion to hiring a national VP of sales. Co-founder Crista Freeman says, “I’ve been doing all the sales up until this point. But to continue growing aggressively, we want someone with a lot of experience in the industry.”
Incorporate Your Investors
Here’s a group of lovely people who have taken a risk on your business. They care about you and now they’re part of your extended founding team. Most investors will expect to have a hand in the running of your company. You’re handing over your baby again, but instead of putting up defenses, seize the opportunity; use investors’ experience and expertise to fill those remaining gaps in your knowledge.
When Wild Friends Food raised on CircleUp, their lead investment came from president of Annie’s, John Foraker. It was $100,000 and a life-changing sum for the then-tiny nut butter company. Founders Keeley Tillotson and Erika Welsh were smart and actively worked to involve Foraker in their plans. He became a mentor to them, advising them from his wealth of experience about finding a co-packer and raising further capital.
Evolve Like You’re Endangered
Your startup may not be a wobbly skeleton anymore but it should still be growing quickly and significantly. As you allocate funds and propel your production line to scale, don’t get lulled into a false sense of security. New gaps will open up. Add to and rearrange your team so that you’re covering those gaps and taking advantage of all the opportunities that arise.
It may even be that you need to bring in another leader. Take REBBL for example — current CEO Sheryl O’Loughlin came to REBBL after a long tenure at Clif Bar. Coming in late shouldn’t be off-putting, she says. “What you have to do is go to your most humble place, and start just asking questions, so you can get to a beginner’s mind.” Opening your founding team to newcomers after a raise keeps you from growing out of that “beginner’s mind” that’s so important for growing fast.
This Is Just Your First Venture
After being acquired by Coca-Cola, the founding team of UK-based drinks brand Innocent handed their torch over to a new trio of leaders in the company and moved on to found a new company together, JamJar. The team’s experience together, raising money and building a household brand name, allowed them to pivot into a new arena, investing in startups.
It’s also very possible that you won’t get acquired by Coca-Cola, and even that this particular idea will fail. But if you’ve grown your team as you’ve grown your business, the team will be the thing that lasts. If your founding team is strong enough this won’t be the last idea you embark on together.