Or “Entrepreneurship Is A Team Sport”

I’ve founded six companies and helped manage, create, and advise many more.

When I decided to be an entrepreneur in my twenties, I was truly excited at the prospect as a creative endeavor (I had set my sights on being a writer/actor/director in college and even spent summers in Hollywood and New York chasing that dream!). In business, especially technology businesses, I saw an opportunity to use my imagination and budding execution skills to create real value for real people.

Studying the craft of creating businesses I was steeped in lessons about financial planning and market research. I believed startups were a technical challenge: get the mechanics working right and success will follow. I saw myself as following in the footsteps of the American Solo Entrepreneur, standing alone atop an organization dedicated to my ideas and bending reality to my will. I was smart enough and skilled enough to make it happen by myself if I needed to.

I was wrong.

“The idea is the least important part.”  

~ Mark Cuban

Don’t Try To Do It Alone

After years of effort chasing the solo entrepreneur myth, it became clear to me: success is not possible without help from other people. No successful entrepreneur ever succeeded alone, no matter what our national myths might suggest. Even Arnold Schwarzenegger agrees, saying famously, “You can call me anything you want. But don’t ever call me a self-made man.¹“

I’m not an athlete, but I get team sports. Star players matter, but you win by having solid players in all positions and in coordinating them to shine. This is the one pattern I’ve seen repeated in every successful startup – my own and others: when a founder focuses on people: finding them, aligning them, listening to them, and helping them be great, she has a far higher chance of success.

I might be smart, but I’m never smarter than when I’m on a team. Entrepreneurship is about people.

Thinking More Deeply About People In Startups

Fair enough, you might be saying. But what does that mean in practice? How should a founder go about executing this principle?

It starts with an acknowledgement that organizing people is one of your most important responsibilities. With that in place, you should have a mental model of what the end state looks like so you can have something to shoot for.

In an organization, people have different functions and different roles. While some individuals may occupy more than one role, each role has a distinct definition and a distinct contribution to make to the organization.

The exchange at the heart of each role

From the perspective of a member of each circle, the relationship is transactional: humans give in return for something they get. Team members exchange their labor (and time and energy and creativity) in exchange for financial compensation. Customers exchange money for a product or service. But it’s important to recognize that not all human engagement are based purely on money – to the contrary, financial transactions are the least resilient, ephemeral, and predictable there are.

That may be fine in some contexts, but successful businesses know it takes more than that. People want – need – to be part of something deeper. As social animals we like being part of groups and tribes. As thinking creatures we like being part of a story that’s bigger than ourselves. And as humans we have an innate sense of empathy and a drive to do good².

Understanding this is key to defining and nurturing these groups. How does one craft an offer to each circle that exchanges value for value?

Developing Your Circles

FIRST CIRCLE

The first group of people a founder should assemble when they have a venture or product idea. This is a group of people who are intrigued by your vision but have a different kind of experience than you do. Their job is to help you think of the things you wouldn’t on your own, help figure out what the risks are and how to address them, and to disagree with you in good faith. As such, you can’t pay them. Compensation has a corrosive effect on truth-telling: if you benefit financially from someone there is a very natural human tendency to pull your punches and not jeopardize that relationship. Instead, seek people willing to exchange open feedback for A) reciprocity on their own ideas (now or in the future), B) professional recognition, or C) an opportunity to learn something valuable. Most important: D) if you operate your First Circle as a team participants can develop strong relationships with quality people who they wouldn’t otherwise work with. Experienced people know that this is hugely valuable over time.

ADVISOR CIRCLE

Specialists who operate as a group to provide perspective and input. Like your First Circle, Advisors should be selected to augment your skillsets and experiences and should be specialists in relevant areas. Unlike your First Circle whose importance is most critical during the concept stage, Advisors should be an ongoing resource. The same exchange of value applies, but awarding Advisors with warrants or options is more appropriate because they should have a long-term impact on the company’s success. Members of your First Circle are excellent candidates for Advisors: nothing says these two groups can’t overlap. Someone with a background as an Angel investor may make a great First Circle member, while someone skilled in scalable operations might be better in your Advisor Circle.

INVESTOR CIRCLE

In many ways in modern extractive capitalism, investors are considered the company’s owners and a constituency to themselves. But for new ventures good investors should be considered part of the team with a role in making the venture successful. You should seek those with whom you have a personal connection and can take an active interest in helping you, and keep them happy and engaged for your next round with more than pure financial performance. Cash in exchange for equity is the lion’s share of this relationship, but making sure their other less tangible needs are met is important as well. Angel investors often thrive on being actively engaged – making introductions, offering advice, making connections – so discover their needs and give them opportunities to reap those intangible benefits. General Partners of institutional investment firms have Limited Partners who need to believe in them, and they need to tell positive stories of your venture’s progress to keep them happy. Actively work to develop relationships based on trust so you can share challenges with which they can help.

LEADERSHIP CIRCLE

Once your venture is underway, your most critical Circle is your leadership team. The lion’s share of your effort should be devoted to staffing this team and making it work well at an interpersonal level. To get minimum value, leaders must be compensated at hygiene levels (see Herzberg’s Motivation-Hygiene Theory), which includes intangible motivators like achievement, interesting work, recognition, responsibility, advancement, and growth. Find the highest degree of quality and the best vibe/chemistry you can afford, then cultivate trust, the ability to disagree in good faith, collaboration, consensus building, and the ability to execute decisions as top priorities. The members of your Leadership Circle should consider their “First” Team – senior to their loyalties to their functional departments. See Lencioni’s Five Dysfunctions of a Team for more.

TEAM CIRCLE

Lots has been said about the members of your organization who do the bulk of the work. As with Leadership, strive to compensate the team at each individual’s hygiene level, and keep Herzberg’s intangible motivators and demotivators in mind. This is also where the rubber of corporate culture meets the road: take great pains to craft and maintain a culture conducive to your goals. Remember, you can’t do it alone, and well-motivated people contributing to the best of their ability is the ONLY way you will succeed. Your Team Circle has multiple layers and adjacent Circles, depending on your business (Partners, Vendors, and Regulators to name a few), each deserving of your attention.

CUSTOMER CIRCLE

Obviously, your Customers are what your entire venture is about. But like all the other Circles they are participating at a level that is more nuanced than pure money-for-service transactions. Customers like to be part of a tribe, part of a story that’s bigger than themselves, and want to believe they are doing good. Especially for startups, whose customers are often asked to take risks on a product or service or venture that is untested or unproven or risky, offering those intangible benefits can make all the difference.

FAN CIRCLE

Many businesspeople don’t consider much beyond the Circles with defined definitions listed above. But remember that nobody moves directly into any of those Circles without passing through the Fan Circle first. Think about the organizations you’re affiliated with: you heard about them and developed a positive opinion of them before you became a customer or an employee. The larger your Fan Circle, the more likely they will matriculate into another Circle to the advantage of your venture. So always be conscious of your fan circle; find ways to track them and nurture them if you can, and remember that everyone in the world is a potential Fan.³

Finally: Why They’re Circles.

Circles imply equality, reciprocity, and sustainability. There’s a reason why King Arthur designed a Round Table and not one that looked like an org chart: he was a member of a team (granted, with special privileges) who wanted everyone to feel able to contribute and share in ownership of the result. As a Founder you’d be well served to think the same way.

What do you think? Am I missing any Circles?

1. There’s NO Such Thing as a Self-Made Man (Arnold Schwarzenegger, motivational video) – YouTube ↩︎
2. Except for sociopaths. Which you probably don’t want in your organization anyway. ↩︎