[sk24iam]

I understand that one of the things investors look for is a strong management team behind a startup idea. I'm curious of to what exactly that entails. I currently have an idea and business plan and will be managing all operations if I can get it started. Are investors looking for more than one person to manage the initial phase and if they are is this team usually composed of multiple founders or a single founder with employees?

[rogercbryan]

The answer is different to every situation. It depends on the type of business, the amount of money needed, the goals of the business.... etc...

[bizdev]

What investors, either private or commercial lenders, are primarily looking for is the owner's ability to manage the company. What is your background and experience with the industry you going into? If you have no experience they won't be too anxious to hand over their cash.

Depending upon the size of your business and the business model, a one man show can be acceptable (again if you have experience). Otherwise, you would be required to show that you have a team in place that does have the experience that you may be lacking.

[sk24iam]

Hmm.... I am a one man team with little startup experience but I have a great education and several corporate internships to refer to. I have several people that I network with that are very successful in their industry that will help me with my venture along the way. They are not founders, nor will they be paid. Are they considered to be part off my team by investors?

[StealYourDreams]

Put those people on your advisory board and make sure they are a functional advisory board, not just for show.

Also, I've found that if you have a good enough project the more sophisticated investors will forgive, and trade, lack of experience for upside potential. The fact is that IF your company is a success, you will more than likely be replaced.

[sk24iam]

How could I be replaced if I own a larger percentage of the company?

[StealYourDreams]

Originally Posted by sk24iam

How could I be replaced if I own a larger percentage of the company?

Something that has enough upside to get the attention of investors is often something that will require multiple rounds of financing. You being removed as the CEO either comes in the way of a requirement from an institution or from the fact that your percentage of ownership has been decreased to a point to where you no longer have controlling interest.

Case in point: in my current venture I took on a partner to get things off the ground. My 100 percent was reduced to 50. After $750k in seed capital my position was decreased even further. Throw in a $2.5m raise and $1.5m from a private equity firm (35% discount and right of first refusal on any subsequent PIPEs) and I now own less than 30%.

[bizdev]

Originally Posted by sk24iam

How could I be replaced if I own a larger percentage of the company?

That's how private investors work. Don't think they just give you the money and walk away and wait for their big return. They basically take over. They own you.

If you can't live with that then you need to fund yourself or get a bank loan.

[ejansse2]

I was invited to a talk yesterday which was given to the Entrepreneurship Club of an MBA class at the Richard Ivey School of Business by the President of the National Angel Organization.

The presenter went on to speak about some barriers for new businesses in all industries, and one of the single largest problems is the lack of a good management team which should consist of three things: business acumen, domain knowledge, and operational expertise. You need people who know business and how it works, have experience in the industry and have gone out there and actually done it before. If you don't have these pieces on your own create an advisory board to plug the holes, not a board of directors, an advisory board with industry and operational experience.

If anyone wants more info email me at ejanssen.hba2009@ivey.ca

[sk24iam]

ok, so I'm in the process of creating an advisory board. There are several people I know through networking that would fit well with the business I'm building. Do I approach them with the offer of being on the advisory board for compensation or ownership? What I mean is, I'm not sure I understand how the advisory board is legally tied into the business.

[ejansse2]

My recommendation is that since you're a start-up you need to find those who are willing to do it because they genuinely want to help. Advisory Boards are not Board's of Directors in that they do not necessarily need to be tied in to a compensation package, but many are. There are industry experts, family friends, those you meet from networking that might be a good fit but I would admit that at this point it would be difficult to convince them to become a part of the board for free.

I would suggest finding someone that gets as excited about the business as you do, and someone geographically close. Perhaps what you need to start with is a mentor and not necessarily an offical Advisory Board. I go to my mentors often with questions, to get feedback, etc. and a lot of the responses I get are integrated into my business planning.

What kind of business are you working on?

[sk24iam]

Originally Posted by ejansse2

My recommendation is that since you're a start-up you need to find those who are willing to do it because they genuinely want to help. Advisory Boards are not Board's of Directors in that they do not necessarily need to be tied in to a compensation package, but many are. There are industry experts, family friends, those you meet from networking that might be a good fit but I would admit that at this point it would be difficult to convince them to become a part of the board for free.

I would suggest finding someone that gets as excited about the business as you do, and someone geographically close. Perhaps what you need to start with is a mentor and not necessarily an offical Advisory Board. I go to my mentors often with questions, to get feedback, etc. and a lot of the responses I get are integrated into my business planning.

What kind of business are you working on?

I'm building a unique person to person marketplace for a niche market.