Chapter 9

BUILDING A NEW VENTURE TEAM

Md. Bazlur Rahman

Associate Professor
Department of Marketing, University of Chittagong
[email protected] www.mbrahman.com
Chapter Objectives
1. Identify the primary elements of a new venture
team.
2. Explain the term liabilities of newness.
3. Discuss the difference between heterogeneous
and homogenous founding teams.
4. Identify the personal attributes that strengthen a
founder's chances of successfully launching an
entrepreneurial venture.
5. Describe how to construct a “skills profile,” and
explain how it helps a start-up identify gaps in its
new-venture team.
BAZLUR RAHMAN, DEPARTMENT OF MARKETING,
UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Chapter Objectives
6. Describe a board of directors and explain the
difference between inside directors and outside
directors.
7. Identify the two primary ways in which the
nonemployee members of a start-up’s new-
venture team help the firm.
8. Describe the concept of signaling and explain
why it’s important.
9. Discuss the purpose of forming an advisory
board.
10. Explain why new venture firms use consultants
for help and advice.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
New Venture Team
New Venture Team
◦ Is the group of founders, key employees, and
advisers that move a new venture from an idea to a
fully functioning firm.
◦ Usually, the team doesn’t come together all at once.
Instead, it is built as the new firm can afford to hire
additional personnel.
◦ The team also involves more than paid employees.
◦ Many firms have boards of directors, boards of advisers, and
professionals on whom they rely for direction and advice.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
 Liabilities of Newness

• New ventures have a high propensity to fail.

• The high failure rate is due in part to
liabilities of newness, which refers to the
Liabilities of fact that new companies often falter
Newness because the people involved can’t adjust
fast enough to their new roles and because
the firm lacks a track record of success.
• Assembling a talented and experienced
management team is one path that firms
can take to overcome these limitations.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Separate Elements of a New Venture Team

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
The Founder or Founders
Founder or Founders
◦ The characteristics of the founder or founders of a firm
and their early decisions have a significant impact on
the manner in which the new venture team takes
shape.
Size of the Founding Team
◦ Studies have shown that 50% to 70% of all new
ventures are started by more than one individual.
◦ It is believed that new ventures that are started by a
team rather than a single individual have an
advantage.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
 The Founder or Founders

Factors That May Contribute to a

Founders’ Success
Qualities of • Firm started by a team
Founders • Higher education
• Prior entrepreneurial experience
• Relevant industry experience
• The ability to “network” effectively

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Factors that Contribute to a Founder or
Founders’ Success
Firm Started by a Team
◦ Start-ups started by a team can provide greater
resources, a broader diversity of viewpoints, and a
broader array of other positive attributes than ventures
started by individuals.
Higher Education
◦ Entrepreneurial skills are enhanced through higher
education.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Factors that Contribute to a Founder or
Founders’ Success
Prior Entrepreneurial Experience
◦ Founders familiar with the entrepreneurial process are
more likely to avoid costly mistakes than founders without
similar experience.
Relevant Industry Experience
◦ Founders with relevant industry experience are more likely
to have:
◦ Better established professional networks.
◦ More applicable marketing and management skills.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Factors that Contribute to a Founder or
Founders’ Success

Broad Social and Professional Network

◦ Founders with broad social and professional networks
have potential access to additional know-how, capital,
and customer referrals.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Recruiting and Selecting Key Employees
Recruiting Key Employees
◦ Startups vary in terms of how quickly they need to
add personnel.
◦ In some instances, the founders will work alone for a
period of time. In other instances, employees are
hired immediately.
◦ A skills profile is a chart that depicts the most
important skills that are needed and where skills
gaps exist in a new firm.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Skills Profile for New Venture Fitness Drinks

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
The Roles of the Board of the Directors
Board of Directors
◦ If a new venture organizes as a corporation, it is
legally required to have a board of directors.
◦ A board of directors is a panel of individuals who are
elected by a corporation’s shareholders to oversee
the management of the firm.
◦ A board is typically made up of both inside directors
and outside directors.
◦ An inside director is a person who is also an officer of the
firm.
◦ An outside director is someone who is not employed by the
firm.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
The Roles of the Board of the Directors
Formal Responsibility of the Board
◦ A board of directors has three formal responsibilities.
◦ Appoint the officers of the firm.
◦ Declare dividends.
◦ Oversee the affairs of the corporation.

Frequency of Meetings and Compensation

◦ Most board of directors meet three to four times a year.
◦ New ventures are more likely to pay their board
members in company stock or ask them to service on a
voluntary basis rather than pay a cash honorarium.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
What a Board of Directors Can Do to Help a
Start-Up Get Off to a Good Start
Function Importance of Function
Although a board of directors has formal
Provide governance responsibilities, its most useful
Guidance role is to provide guidance and support to the
firm’s managers.

Another function of a board of directors is to

Lend lend legitimacy to a firm. Well-known and
Legitimacy respected board members bring instant
credibility to a firm.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
 Rounding out the Team: The Role of
Professional Advisors

Board of Advisors

Lenders and Investors Other Professionals

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Board of Advisors
Board of Advisors
◦ A board of advisors is a panel of experts who are
asked by a firm’s managers to provide counsel and
advice on an ongoing basis.
◦ Unlike a board of directors, an advisory board
possesses no legal responsibility for the firm and
gives nonbinding advice.
◦ An advisory board can be established for general
purposes or can be set up to address a specific issue
or need.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Board of Advisors
Board of Advisors (continued)
◦ Many people are more willing to serve on a
company’s board of advisors than its board of
directors because it requires less time and there is
no potential legal liability involved.
◦ Like the members of a board of directors, the
members of a company’s board of advisors provide
guidance and lend credibility to the firm.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Board of Advisors
Guidelines to Organizing a Board of Advisors
◦ Advisors will become disillusioned if they don’t play a
meaningful role in the firm’s development and growth.
◦ A firm should look for board members who are
compatible and complement one another in terms of
experience and expertise.
◦ When inviting people to serve on its board of advisors, a
company should carefully spell out to the individuals
involved the rules in terms of access to confidential
information.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Lenders and Investors
Lenders and Investors
◦ Lenders and investors have a vested interest in the
companies they finance, often causing them to
become very involved in helping the firms they fund.
◦ Like the other non-employee members of a firm’s
new venture team, lenders and investors help new
firms by providing guidance and lending advice.
◦ In addition, a firm’s lenders and investors assume
the natural role of providing financial oversight.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Ways Lenders and Investors Add Value
to an Entrepreneurial Firm
Help identify and recruit key Provide insight into the
management personnel markets that the new
venture plans to enter

Help the venture fine-tune Serve as a sounding board

its business model for new ideas

Serve on the new venture’s

Provide introductions to
board of directors or board
additional sources of capital
of advisors

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Ways Lenders and Investors Add Value
to an Entrepreneurial Firm

Recruit customers Help to arrange business

partnerships

Serve on the board of Provide a sense of stability

directors or board of and calm
advisors

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
Other Professionals
Other Professionals
◦ The other professionals that make up a firm’s new venture
team include attorneys, accountants, and business
consultants.
Business Consultants
◦ A business consultant is an individual who gives professional
or expert advice.
◦ Business consultants fall into two categories: paid
consultants and consultants who are available for free or at
a reduced rate through a nonprofit of governmental agency.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
 Volunteer Consultants

SCORE currently has over 10,500

volunteer business consultants working
with entrepreneurs.

BAZLUR RAHMAN, DEPARTMENT OF MARKETING,

UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM
THANK
YOU
BAZLUR RAHMAN, DEPARTMENT OF MARKETING,
UNIVERSITY OF CHITTAGONG. WWW.MBRAHMAN.COM