Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Entrepreneurs, Finding Key Personnel Takes Time and Effort

Finding the right personnel is one of the keys to a successful start-up company.  With everything on the line each day, as the CEO of your start-up company, you need to find individuals that not only will add value to your start-up company, but are dependable, and at the same time are willing to walk through walls to get things done, all with little to no supervision.  These individuals are hard to come by. You will find individuals that tell you that they can do job.  Or you can find individuals that want to be involved in a start-up.  Or you can find individuals with strong resumes that most likely will not pan out in a start-up environment. So, the game begins. Out of all of these individuals and others you need to determine which candidate will be successful in a start-up environment, contribute beyond expectations, and survive the ups and downs, when things are both good and bad.  In what follows is a short discussion on some of the things that need to be addressed when you are looking to find the right key personnel for your start-up company.

Clearly Define Your Needs

One of the success factors in finding key personnel for your start-up company is to first clearly define your needs.  This includes not only defining the “job” requirements, but defining the individual’s background, experience level, and personality traits. First, defining the job requirements is the easiest. This includes defining the responsibilities and functions that this individual will required to execute on a day-to-day basis.  Next you need to look for individuals with the right background.  Have they worked in a start-up environment in the past, or have they tried to start their own early-stage company?  Individuals that have only worked in a large corporate environment are probably not the correct individuals for your start-up company, as they generally have not had the requirement of getting things done on their own.  That is, they are used to a support staff to take care of them and their job responsibilities.  This is not true for those who have worked in start-up companies.  Experience level is next.  Does this individual need to be a seasoned veteran or do they need to be a less experienced individual with a leading edge technology focus?  In some cases, it is better to get a younger person with less experience, but understands the technology and the associated trends. More often than not, you will not get this from a season veteran.  Why, because technology changes rapidly and generational shifts in technology are happening faster and faster, so make sure you find a person with the appropriate experience level and technology focus. Finally, you need to look at the individual’s personality traits. Are they are self-starter or will they require lots of support and supervision? Can they accept responsibility and run with it or do they need to be coddled to get things done? In the start-up environment you need individuals that require little to no supervision and at the same time have the ability to add significant personal value during the process.  This often comes down to their basic personality traits. So make sure you take the time to look at this, and the other characteristics and requirements outlined here, as they will make the difference between and successful and unsuccessful employee in a start-up environment.                            

Cast a Wide Net

Finding the right individuals for your start-up company and various key positions is not an easy task. In addition, the individuals you need may not be in your backyard.  In today’s environment, many start-up companies are “virtual” corporations. That is, they operate as a group of individuals that are networked via the Internet from various geographic locations across the country, or across the world.  So, when you are looking for an individual with a particular set of skills you need not necessarily stick to your immediate geographic area. You should cast a wide net to find the “best-in-class” individual with the right skill set for the job.  At a future point in time, if there is a need to have these same individuals to move to a given geographic location, this can be done. Until then, operating virtually in today’s environment is both cost effective and efficient for almost all start-up companies.

One of the best ways to find the appropriate individuals for the job and to cast a wide net at the same time is to use Linkedin, a professional social networking site.  If you are looking for a skill set in a given industry or area of expertise, all you need to do is join the appropriate “group” that focuses on the industry or area you are interested in, and post a brief job listing.  This approach to finding individuals with the right skill set is not only efficient and effective, but it is free. So, take the time to cast a wide net, it will provide you with the best set of candidates for your start-up company’s key positions. 

Do Your Diligence

Finally, do your diligence on any potential key personnel. This includes obtaining at least three references and calling all of them.  But before you do this, take the time to create a question list covering both professional and personal background questions. This list is key to making sure you ask all of the appropriate questions to all of the references during your due diligence process. Asking some questions to some references and other questions to other references will not give you a complete picture of an individual candidate.  You need to necessarily go through all of the questions with each reference, including tough questions. This can include asking what you do not like about that candidate or what personalities of this same individual are tough to deal with in a work environment.  By doing your diligence you will get a good picture the individual in question, in order to make an informed decision.

 Finding the right individuals that will fill key positions in your start-up company is a task that takes time and effort.  To do this you need to clearly define your needs, cast a wide net and do your diligence. This is not always a fun task, but in the end, you will find the best candidates for the key positions to help propel your start-up company forward and ensure both near term and long term success.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.

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August 16, 2010 Posted by | Venture Capital | , , , , | Leave a comment

First Time Entrepreneurs, Developing a “Capital Efficient” SaaS Company Requires Work, Dedication and Diligence

Every five years or so, venture capitalists develop a new mantra with regard to their investment philosophies. In the late 1980’s and early 1990’s the mantra was “synergy”.  Towards the turn of the century and shortly thereafter, the new mantra was “scalability”.  Today, in a risk adverse environment, venture capitalists’ new mantra is “capital efficiency”.  This is especially true for start-up companies looking to develop Software as a Service (SaaS) companies. What does this really mean to entrepreneurs – spend less and so that venture capitalists can achieve a higher return on their early stage investment.  With the development of the SaaS business model, there has been a simultaneous emergence of offshore software development houses in India, Russia, Pakistan and other countries that provide Internet-focused software development services that support significantly lower labor rates that can provide equivalent services at a much lower cost than can be achieved with local software development teams in developed countries.  This is very attractive to both investors and entrepreneurs as it provides a means to facilitate capital efficiency with the delivery of a high-quality product.  In what follows is a short discussion regarding some of the issues facing entrepreneurs looking to take advantage of this offshore “capital efficient” business model on their way to developing a successful SaaS product offering.

Understand the Details

Given the geographic and time differences required by using offshore talent to develop your start-up company’s SaaS product offering, you must take the time and effort to understand the details of your SaaS product requirements.  This includes developing a proper functional specification. This document must be detailed enough to outline all of the capabilities and requirements of the website application and database. This is very important, as you need to provide a basis for which your offshore development team with the ability to analyze the needs and requirements from the technical side so that they can provide proper estimates of the total development costs and associated schedule.

During this process you also need to make a clear delineation between design and development activities.  Both are clearly different in focus and function.  During the design, generally done locally, you need to have a designer focus on the website look and feel and he necessary user interactivity that makes your website function as desired.  This needs to be accomplished before development begins. The end result or delineation point is generally the delivery of a complete architectural specification with an appropriate number of design files (.psd files) to your offshore development team.  The offshore development team then takes these results and does the necessary programming in the appropriate language for the targeted end application (e.g., website, Smartphone app, or tablet app).  The key here, to achieve successful results, is to proper delineate your requirements in a functional specification, understand the details of the design development process, and identify the proper handoff point so that both parties can do their respective jobs appropriate and deliver a successful SaaS product offering.

Get Multiple Quotes and Understand Their Differences

As in any business transaction it is important to get multiple quotes from different service providers.  If this is your first time developing a SaaS product offering, you will need to ask a lot of questions to fully understand the differences between the various quotes, their costs, and delivery schedules.  You also necessary need to understand what is required from you as the customer.  Questions you need to answer can include:

  • Do you require a project manager with the appropriate expertise to manage the process from on-shore?
  • How often will you interface with the development team?
  • What are the development milestones?
  • What do you need to deliver so that that development can proceed as required?
  • Is this a “platform” based development or a “custom” development?
  • Is there any license fees (one-time or recurring) associated with final product?
  •  What does the development contract look like?
  • What are the service and support terms, conditions and costs?
  • Where will the development be hosted?
  • Who will host the production product offering and what are the costs?

As delineated above, there are several different scenarios that you can run into when looking to source your offshore development overseas.  Make sure you get multiple quotes and that you thoroughly understand each quote and the differences between each.  Remember, the most inexpensive quote and shortest schedule may cost you more in the long run. In addition, you need to make sure you do not enter into a development contract that will tie you hands when you try to sell your start-up company. 

Check References

You need to do a reference check on your service provider(s). This is necessary and appropriate.  Remember you are putting the future of your start-up company in the hands of a stranger.  So, unless you get a recommendation from a trusted source, you need to do your due diligence and check at least three references.  In addition, develop a list of questions that covers all of your bases. This will do two things. First, it will allow you to ask the same questions to different reference sources to see how each responds. Second, it also provides you with a dialog in which to drive the conversation. During your reference check discussions, you may get off track, but you will have your reference list of questions keep you going forward as you move through the reference check.  Finally, ask tough questions to see how the references respond. This can include:

  • “What didn’t you like about the development team?”
  • “What would you do differently in the future?”
  • “Would you use them again for a future project?” 

 These types of questions provide the reference person with the ability to respond honestly to things that they would not necessarily bring up on their own.  These same questions will also provide you with a comfort level that cannot be achieved any other way.  Hence, by the time you are finished with your reference checks you will have a good feeling as to whether you want to move forward with this service provider or not.

The development of the SaaS business model and the requirement for “capital efficiency” from venture capital investors has required entrepreneurs to look overseas for their software development.  With the low cost of labor and the highly skilled readily available labor force, using an overseas software development team can significantly lower development costs and provide for the necessary capital efficient model deemed necessary by today’s venture capital investors. When looking to source their development from overseas, entrepreneurs need to necessarily understand the details of their development get multiple quotes and understand the differences, and check references.  By going through this process you will help facilitate a successful development and the delivery of a product offering that meets your requirements.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.

July 12, 2010 Posted by | Venture Capital | , , , , , , , , , | Leave a comment