It doesn't matter what kind of business model your startup is pursuing: tech development, service models, financial models, operational projects, etc. Unless you just get really lucky (which does happen, but can't be planned upon), you will need a team that executes at a very high level in order to succeed.
And yet, high-execution management teams are, from what I've found, the single rarest resource for the cleantech entrepreneurial sector. Much more rare than good business ideas. Don't read this as me saying that there are a lot of sub-par individuals out there -- but a lot of folks whose past experiences haven't (yet) prepared them for the unique challenges of their current role, and a lot of teams with significant but unaddressed gaps. Some will learn along the way and be able to execute at a high level anyway, certainly. But if launching a startup is described as "building an airplane in mid-air," these teams are also simultaneously trying to learn how to be a Top Gun pilot. It's really, really hard. Thus, investors are increasingly keyed into the team as a key success factor they want to see in place before providing capital to a startup.
So entrepreneurs -- especially first-time entrepreneurs -- would be well served to do a skills inventory of their founding team early on, to do an honest assessment of gaps that will need to be filled in sooner rather than later.
It may be helpful to think of four key skill areas that all startups share:
2. Head of finance
3. Head of tech / solution design
4. Head of sales / partnerships
For some early-stage startups, some of these roles can be combined, and for many startups, there are other critical roles beyond those four, but those are the four roles to think about in a broken-out way that seem common to every startup. Feel free to add additional ones as necessary.
Then ask, “Over the next two years, what critical accomplishments must we see out of each of these roles?” Write these down, so it becomes a scorecard for each role, and link each to an actionable time period. Include tight deadlines. These accomplishments should be as specific, quantifiable, and narrowly defined as possible to make it a useful scorecard for looking at the full scope of the role, not just one or two key tasks. Look to break down the role into very concrete and discrete tasks that must be successfully tackled along the way to bigger, overarching goals for the organization. So it shouldn't be "form strategic partnerships," but rather, "form co-marketing relationships with two of the following five potential corporate partners to result in $10M in incremental revenues by year 2," for example.
At Black Coral Capital, we do deep-dive (multi-hour) interviews of many of the key managers at the startup, to see if in their professional history they have demonstrated a pattern of executing on these specific types of tasks. We look for other patterns as well (what patterns can we see of their interactions with coworkers, etc.), but from a skills assessment standpoint, it’s pretty straightforward. We do lots of reference checks to confirm what we've heard. Obviously, given the time commitment, this is something we do only so often, but it's always a necessary part of our diligence before pulling the trigger on a new investment opportunity.
We don't ask questions like, “Does this manager seem to have the right general skill set or personality for this?” or "Are they a successful serial entrepreneur?" but instead, “Has this manager concretely demonstrated an ability to execute on something at least very analogous and transferable to the current scenario?” We focus on quantifiable results as much as possible, and focus on what the manager was individually responsible for, not just "part of a team that did X." (Note: This doesn't imply that the manager must have accomplished the specific scorecard tasks in an identical context before! Every entrepreneur has to be a first-time entrepreneur at some point. But we look for analogous examples from other roles they've held in the past, which is why breaking down the tasks as discretely as possible is helpful. For younger entrepreneurs, this can be pretty difficult, but it's still possible by taking into consideration the candidate's academic career, albeit with a grain of salt.)
But even without deep-dive interviews like those we perform, you can break down your career to date and run through this exercise. For each segment of your career, ask yourself: a) what were your specific performance targets; b) how did you do versus those targets; c) what did you do particularly well, and why; d) what did you struggle with or simply not do as well, and why; e) what your boss would say about you and your performance. Be brutally honest with yourself, but really by viewing yourself (as best as you can) through the lens of what colleagues and supervisors would say. Definitely look up what previous annual reviews or other actual delivered feedback said. No need to be unduly harsh on yourself -- you're looking for what skills tend to stand out and what gaps you tend to experience, and how those affect concrete results. It's not a substitute for a deep-dive interview by a trained professional who can help you discover things you wouldn't have realized for yourself. But it's a good place to start.
Do this for your key senior team, and use it to build a skills inventory independent of the scorecards. Then match up the scorecards to this skills inventory, and grade along the concrete tasks: "green" for tasks that the manager holding the role has clearly demonstrated before, "yellow" for tasks they have some strong indications for but haven't actually done before, and "red" for clear gaps that haven't been demonstrated at all (not that the manager couldn't develop these over time, just that it hasn't happened to date).
No one ever scores perfectly green down the whole list, but it’s very useful to see where the gaps are, especially across the team. Particularly for younger, smaller entrepreneurial teams where everyone is wearing multiple hats and often trying to learn new types of roles, it's important to recognize where the biggest gaps are and think about addressing those as high-priority early hires.
And the scorecard itself becomes a useful yardstick for assessing the performance of the team along the way.
The above-described method is just one way to go about it, there are other valid ways, go with whatever works best for you. A short-hand version is to simply ask yourself, "Given the idea we're trying to tackle, why is this team as it exists today uniquely positioned to out-execute any other team on this specific idea?" Still, a full skills inventory and scorecard exercise of some kind gives a fuller picture. And that's helpful.
Nine times out of ten, when I see a management team with clear gaps in skills and experience, they don't seem to understand them. And therefore, they don't have a concrete plan for addressing them beyond "We know we need a CFO" or such. And therefore I can't invest.
It's also the toughest subject area for investors to give honest feedback on when they pass on an opportunity, because it's the most personal. So if you have a great idea and you're having trouble getting investors on board, maybe it's the idea itself that's the sticking point. But as likely as not, one way or another, it's about the team, even if the investors don't say so. Take a deep breath, and do what you can to figure it out. Believe in yourself, but be honest with yourself too, and adjust accordingly. It's not a failure to spot significant gaps in your team's skills inventory, it's a win, because now you can go about addressing those gaps.
Note: This is not a personality test exercise. Personality tests are fun, they provide instant gratification, and some of the better ones can help people better understand themselves. But the science around how to mesh different personality and work styles is slim at best; plus, some of the more simplified personality tests just ask people about what they want to be like and thus just reinforce existing perspectives. They don’t really challenge folks to home in on what they truly do well or poorly. Besides, personality isn’t really a direct determinant of success in entrepreneurship. Everyone wants to be a visionary breakthrough thinker but execution takes many forms.
One caveat to end with: While I noted that you can consider analogous prior tasks when building the skills inventory, there's one aspect of venture-backed entrepreneurship that I've found there's just no substitute for, and that's understanding how venture capital works. I (half) joke that venture capital is more of an art than a science. More specifically, VCs tend to do things and ask for things and expect things that make sense from their perspective, but that can be surprising or may even seem illogical to an entrepreneur who hasn't worked closely with them before. It can lead to some real disconnects between strong entrepreneurial teams and their investors, simply because of those different perspectives. Understandable, but still potentially deadly disconnects.
If you are seeking venture capital for the first time, definitely seek to add to your team (either as a full-fledged senior team member or as a heavily involved and accessible advisor) someone who's done a slow dance with venture capitalists in the past, preferably as an entrepreneur. If they weren't in the board meetings, it doesn't count, so ask them about that. Rely upon this perspective to not only understand why the VC is saying what they're saying, but also to give you a heads-up as to what's coming next -- and what the tradeoffs are. And how to get as much value as possible from your relationship with your investors.
Also, feel free to ask the VCs themselves about what lessons they've gained and what surprises they've had in learning their business. You want to know and find a good match with your financial partners, after all, so they should be happy to share.
VCs can be quite valuable partners for entrepreneurs, but only if the entrepreneur understands where they're coming from, how they're motivated, and what they can truly bring to the table.