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November 27, 2007
Getting the Gang Back Together
Venture investors often find comfort when a team of entrepreneurs beginning a startup have previously worked together. If the prior endeavor was a wild success, then the prevailing thinking is that it makes sense to back a team who should know the playbook for victory. But even when the last go-round was a mild success or even a tremendous failure, there is signal value in the fact that these individuals deliberately choose to work together another time.
Getting the gang back together, so to speak, should show above all else that each individual truly wants and needs all of the others to participate. All of them realize that a company isn’t built with one individual alone. It’s a strong indicator that every person brings a certain set of skills, experiences, and mindset to the company that are complementary to the others on the team – otherwise given a blank slate they would choose otherwise.
Moreover, when a team decides to launch a startup together for a second (or third or fourth…) time, it’s a clear demonstration that they have been able work with each other. Despite differences in opinion that might (read: should) arise when building a new company, they all respect each other enough to work together in a de novo situation. And so the risk for personality conflict amongst the team is lessened.
Yet there are still issues and questions that arise in this situation which are a result. Who is missing from the group from the last time? Why wasn’t s/he included? Who will fill their shoes? Should we fill their shoes? Also, the dynamic of having a team with a history together can bring baggage from a previous situation into it – there’s potential for leftover touchy-feely issues which weren’t resolved and could remerge or be exasperated this time around.
Having a prior history with a founding or management team can also negatively impact those newcomers to the company who weren’t part of the old team. The beauty of a startup is that it’s an organization starting fresh - unencumbered to move quickly and dynamically. But when there’s a common outside shared experience with a significant set of folks, then it can potentially create a divided culture of those who were there the last time around and those who are new, which hurts morale and likely performance. Additionally, it can make others reluctant to join because they’re missing the set of experiences or worry about integrating into the team. (People don’t join a startup to hear about “the good old days.”) And finally, a common set of experiences can lead people to the same conclusions and inhibit fresh ideas or novel approaches.
On the face, having people in a startup who have worked together in the past is positive sign. Brining the team back together again? Good. Now it’s important to remember to leave the old baggage behind and sincerely open the team to new members. Having the old crew gives you a leg up, but it’s only a start.
Comments (2)
I agree with David that this is a good indicator, but it's just the tip of the iceberg. Unfortunately, as I've seen firsthand with two companies that raised in excess of $100m from well-respected firms, "being able to work with each other" is not necessarily a good indicator of future success. Often the same cultural, decision-making dynamics that led to failure in the first venture(s) leads to failure again - even if everyone appears to work well together. Sometimes co-founders will follow a founding CEO just because it is the comfortable, easy thing to do.
The good news for an investor (or prospective employee) is that the management team is highly due diligenceable. Ask a handful of employees (at least 3!) from the original company why it failed and how the mgmt team performed. In both of my examples, the issues that undermined the first company (eg. inability to make product decisions, trying to do too many things well, core mgmt team too insulated), undermined the sequel as well.
Posted by vctrepreneur![[TypeKey Profile Page]](http://www.genuinevc.com/nav-commenters.gif)
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November 28, 2007 9:33 AM
Posted on November 28, 2007 09:33
Well, bringing the gang back together is also what entrepreneur prefer. And yes the main drawback of this is 'the divided culture' but you can't help!
There are other issues as well - like what if you don't need all of team for the new venture? and because of this person left out raises their eyes next time you need him. Then there are compromises in team which happen like last time you got more ***(could be anything - status, recognition, responsibility) so this time I should get and so on. And from outside world point of view people will see the team as it was in earlier startup - same decision making process, same point of contact for some things, so it could be difficult to explain outside world the new changes and which could create problems.
Even though there are some issues in bringing the same gang back together it is better especially due to chemistry between the members which is very crucial in startups.
Posted by Prashant![[TypeKey Profile Page]](http://www.genuinevc.com/nav-commenters.gif)
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November 30, 2007 2:19 AM
Posted on November 30, 2007 02:19