Monday, August 18, 2008

Section V contd

Particularly since the dotcom bust, funding agencies have started to scrutinise the management team. The first to come under the scanner are the promoters. If the company is promoted by a single entrepreneur, the upside of that is that the first round of due diligence has to be around him, his socio-cultural-economic background, the reasons for which he is planning to embark on this entrepreneurial journey, what are his psychological and economic drivers, and most important, is he planning to become an entreprenuer for the right reasons (there are people who become entrepreneurs when they are pink-slipped by their organizations, do not get suitable job offers post leaving and then take on something temporarily till such time a job of their liking comes their way. these are the wrong reasons).

the downside of a single promoter is that he has to hire the variety of skill-sets that are required to build the organization. and as we have seen earlier, most entrepreneurs make mistakes in this. they hire people who are available, not because they are the right people. when CEO's tell me that people are their biggest assets, i tell them: you are wrong; right people are your biggest assets, wrong people are your epitaph.

when there are plural promoters, the upside is that amongst the promoters themselves there is a variety of skill-sets that could be complementary and augur well for the organization. but i must caution all of you on one aspect. sometimes people come together to found companies because they are good friends or they worked well together in their previous company, or because they were all fired together and they became partners in adversity. whilst being good friends or knowing each other may be good, it does not guarantee a good bench-mark in co-founding. i have known companies that were promoted by best buddies and fell by the wayside within one year of operation because they discovered that being friends and being co-founders were two separate ball-games and the presence of one did not underwrite success in the other.

irrespective of whether it is one promoter or multiple promoters, one unassailable fact is that when you start putting the management team together, it is very important to get it right. the first who... and then what prinicple has to be followed religiously. you need people on board who are powered by the biz idea, who are energised by the other members of the team, who are invigorated by the thought of building a biz, brick by brick.

you need people who board the bus because they are attracted to the people already on the bus. where the bus is going is irrelevant, who is on the bus is most important. if people board the bus because they are attracted by the destination, mid-way through, because of changes in the eco-system if the direction has to be changed, they will not only be most unhappy, they will not let you change the direction. which could mean the death knell for the organization.

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