(Originally published in the WSJ Experts January 29, 2016 6:30 a.m. ET)
10 Ways to Show Investors Your Startup Has Good Management
JOHN SULLIVAN: Entrepreneurs must realize that when venture capitalists select new investments, the management team is the most important criterion.
Cass Business School research found that an effective management team was number one, followed by strong market drivers and a unique, disruptive product.
Stating that you have great management isn’t enough because you must also effectively “sell” the team’s management strengths to the investors. And that means providing insightful information beyond the standard: years of experience in the industry, previous firms, degrees and their primary technical skill sets.
To maximize investor confidence, also include information covering the following 10 powerful capabilities.
The culture the firm will operate under: Investors insist you have a plan for developing the type of culture that is required for continuous innovation and scaling up. As part of your plan, mention other effective company cultures that you’ll try to emulate because they mirror your situation.
Learning and adaptive capability: Google found that during rapid change, learning ability is the one factor across all positions that predicts on-the-job success. Build investor confidence by showing that your team has a systematic way to stay on the leading edge of knowledge and to adapt, learn from and bounce back after failures.
Show collaboration: Show that to maximize innovation, you have designed collaboration into every aspect of your team’s workflow.
Rapid conflict resolution: Conflict is common when passionate individuals with complementary skills collaborate. So show a process and a track record for rapidly resolving major conflicts.
Show the team is forward looking: Reveal your process for systematically spotting upcoming problems and opportunities, while there is still time to act, evolve and adapt.
Balance strategy and execution: Show your team understands the future strategic direction of your industry while at the same time it can effectively execute t10 Ways to Show Investors Your Startup Has Good Management tactical aspects of your business plan.
Show you can convince others: Leaders must have passion but it may be just as important to have the capability of convincing others to also believe as fervently as they do. So reveal how management has been able to successfully convince top talent to join and remain with your firm. Also include your proposed process for incentivizing and continually motivating your team during the inevitable lean times.
Openness to accepting referred talent: Few VCs expect you to have a complete team when you ask for funding but many will want a voice in “filling in the gaps.” Be sure and acknowledge those leadership gaps and show enthusiasm for accepting new team members that are referred by the investors.
Reveal mutual acquaintances: It might seem like a small thing. But showing that team members and the investors share common long-term acquaintances helps to build trust and it provides them with a credible reference.
Team member summaries: Finally, don’t force investors to read a dozen resumes. Instead, provide a summary section covering each current and potential management team member. Include a one paragraph compelling story that effectively sells only the best aspects of each person.