human capital: building high performance teams for your start-up's success

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Every start-up encounters speed bumps on the highway of growth. It's the people on your team who will enable your company to power through them. Skills and capabilities must evolve as you grow. You'll need to navigate advisory and other boards, recruit well and have effective team communication and a CEO who sets the stage for the company culture – all just to set you up for that early-stage VC funding.Lance Laking, an experienced successful entrepreneur, talks about how to successfully drive this off-road path.Part of the CIBC Presents Entrepreneurship 101 lecture series: http://www.marsdd.com/events/details.html?uuid=fb57c3a5-7e11-4bb6-b8b6-6276e0ec27c3

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Human Capital: the importance of high performance teams to start-up success.

Outline

Context Team diversity & dynamics On hiring Culture Communication style Compensation / incentive programs Advisory Boards Challenges, closing

Context: my background

U of Waterloo, Chartered Accountant, Queens U & UWO Executive Development

20+ years in tech companies Co-founded DCI, grew to 60 staff then RTO on TSE Country manager HUBER+SUHNER

Swiss multi-national, blue chip Team of 125 within 2,300 globally

CEO BTI Systems to 2008 Raised ~$60M VC over 4 rounds From 12 to 225 employees Revenue from $0 to $40M

Currently EiR MaRS, freelance consulting, and equity partner in e-Security professional services firm TRM Technologies

Context my typical playing field:

A (very) technical product A technical sales process

A long, complex, B2B sales cycle High growth market dynamics Very much a David & Goliath landscape

High Performance teams...

Communicate openly, with diversity of opinion

Align on 3 or 4 top initiatives and track them

Plan as a group: short & long term & with plan Bs (and have resiliency - High AQ = Adversity Quotient)

Are accountable to deliver

Multi-functional teams

Software engineers

Product Management

Hardware engineers

Marketing HR Sales

Quality Operations

Manufacturing Finance Administration

Investors Customer Service

Management

Directors

OR

Venus & Mars

Research

Sales & Marketing Software Engineers

+

= ???

+

Motivation & drive: different strokes for different folks

Peer recognition Papers published, patent

applications

Speaking at industry forums Technical challenge

coin operated show me the money

But wait a minute: were not that different

1. Everyone needs recognition - the feeling that you are important, contributing to the success of the business, that your efforts are respected

and appreciated by fellow employees

On budget / On time Cracking a new customer Customer testimonials helping solve real problems

2. Technical teams want to work on a successful products.

Sales teams want to sell winning products.

The common metric is real customers /market share

Fostering teamwork

Trade notes Technical teams are starved for customer feedback Sales teams are starved to technical innovation / uniqueness

Push decisions to where the expertise resides

The key linkage between Development, Operations and Sales is Product marketing / product line management

On occasiontake a software geek to a customer, and bring a sales puke into the lab

On hiring

Bring in PLM, marketing / sales, & HR early

Have a hiring plan force rank key hire timing.

Hire the best you can have choices dont compromise or settle

Attitude over Academic credentials

Be careful with big company experience (no job too small attitude)

Use all the free tools you can, especially

Director and investor referrals are great but

On hiring

Refer to the March 24th EN101 HR for Entrepreneurs

Do employment agreements right and from the start

Compensation plans Termination & Severance IP protection that survives employment term

Caution re structure - when choosing consulting vs. temporary employment vs. permanent employment this

can set precedents downstream that are difficult to undo.

Culture

Every company has a culture, every company has politics

Perception is reality Work with it

My observations:

1. Culture changes with company lifecycle: The $1M, 5M, 10M, 25M, 50M barriers

2. In Canada, were trs multinational: use it to your advantage 3. As the leader: be candid

Candid = Integrity A culture of candour is a source of sustainable competitive advantage

4. Celebrate wins, debrief setbacks, encourage mistakes (but not repeat mistakes)

Communication style

As CEO - Be yourself, know your biases

Be OPEN, honest, straightforward

Have the tough conversation

Stop management happy talk

Soft on the people, HARD on the problem

Be inclusive: tie in the remote teams

Set 3, clear company goals & repeat them

Share the numbers: good & bad

Regular informal & formal updates

Have fun!!

Compensation & Incentives

Fair, transparent and equitable

People talk, especially engineers

Salaries (the start-up factor)

You have to be competitive but not the highest Sometimes you want to pay a premium for A+ players

Test candidates with we like you but simply cant afford you

Its the rich experience and reward that trump pure $$$ - that is how you compete with the big companies

Compensation & Incentives

Company-wide incentive plan 10% at plan , 20% stretch Metrics must be aggressive, but realistic, and simple enough Combination of financial / market / product milestones Always drive home the capital efficiency message (Cash Flow Positive)

Stock Options (ESOP) A key tool, but dont oversell them

Fun and other rewards work Create a friendly competition / bragging rights Do not require big bags of $$$ Examples: IP, a goofy award, employee referral bonus

Advisory Boards

Very helpful to young companies but more informal, without governance and director liability responsibilities

Try to complement the in-house expertise across broad functional areas (technology, sales & marketing, finance)

Pedigree is great, but access to the advisor and willingness to help is equally important

Can use members formally and on ad hoc basis

Compensate typically with options or per diems

Ive used 1 yr renewable terms, options granted annually with immediate vesting

Make it enjoyable for all - dinners or special events

Tech team challenges

1. The Investor / VC influence The same vested interest or ?? An exit and minimum 20% IRR is natural

2. As the company grows up

Start-up excuses go away

Employment / HR expectations expand

Balancing formal (e.g. employee handbook) with informal (just do it) gets harder

Speed and flexibility diminish Management teams hit glass ceilings

Closing comments: high performance teams for success

1. COMMUNICATE

Set a tone that is open, based on mutual respect, and interactive

2. ALIGN

Dont all drink the Kool-Aid: get all the customer / market touch you can

Structure rewards & incentives to reinforce the behaviour & culture you are looking for

3. PLAN

A high AQ team will handle the inevitable speed bumps

4. DELIVER

If individuals and team FOCUS on the delivery of KEY goals it will automatically

generate a performance culture

pg 21

Lance Laking Entrepreneur-in-Residence, Advisory Services, Venture Group

MaRS Discovery District T (613)797-9033 E llaking@marsdd.com W www.marsdd.com