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  < POLL >  

Who do you consider as the right investor for your business?

Angel Investors (Individuals)

Strategic Investors (Corporate Ventures)

Institutional Investors (Investment Banks, VC Firms)


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Table of Contents
1. Foreword
2. The Venture - A Profit Machine
3. Assessment Elements
3.1 Market Opportunity
3.2 Product/Solution
3.3 Execution Plan
3.4 Financial Engine
3.5 Human Capital
3.6 Potential Return
3.7 Margin of Safety
4. Mathematical Model
5. Score, Confidence & Weight Criteria
6. Disclaimer
7. Acknowledgements
8. Author
9. Copyright
10. References


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3.  Assessment Elements









- 3.5 Human Capital - Can the team execute?

"Coming together is a beginning, staying together is progress, and working together is success."
~ Henry Ford

One of the most important assets of a business is its people, which include the management team, key employees, board members and advisors. No matter how good an idea, in the end the team will be the reason for success or failure of a business. There should be an understanding of missing key personal and plan of filling those positions within the execution plan.

Many technology startups are founded by engineers. But, they might quickly run into problems if there the management team comes short of marketing, sales and finance. However it should also be noted that hiring the wrong executive can be very costly, even fatal, for a small company.

Ultimately investors are dealing with one person, Entrepreneur, CEO or leader. A good leader will build and maintain the harmony between team members. The commitment and passion of entrepreneurs is infectious and the best ones are able to form teams with deep common bonds.

The leader is required to have specific characteristics such as:

Decision making ability
Resource management skills
Intellectual honesty (honest with themselves)
Bold self-confidence
Willingness to take risks
Sense of vision and ability to execute
Stress tolerance
Fiscal responsibility
Result (and not action) oriented

The examination should cover leaderís qualifications, as well as harmony between team members.

3.5.1. Confidence and Commitment

Every great startup needs someone who walks through walls to make their vision a reality. They are the ones who have the guts and fortitude to undertake enormous risk and fully commit themselves to achieving incredibly lofty goals, and who also have a strong belief in their own ability to achieve those goals.

It is important to know:
Does the entrepreneur really wants it or is there just for the ride?
Is he or she confident and committed to make it happen?

3.5.2. Persistence and Focus

Too many entrepreneurs fail to maintain their focus and try to be all things to all people instead of focusing solely on those things that add the most strategic value to their companies and developing the skills that will put them at the leading edges of their market segments.

It is important to know:
Is the entrepreneur determined and focused enough?
How does (s)he handle failure or situations that do not develop as planned?
Has the team met previous development milestones? If not, why?

3.5.3. Objective & Rational

"It is not the strongest species that survives. Nor the most intelligent. But the one most responsive to Change."
~ Charles Darwin

The biggest problem is when you have an entrepreneur who is sentimentally attached to his company to the point where he won't let go and accept help.

It is important to know:
Is the leader coachable and willing to sacrifice and compromise in favor of the venture?

Does the team understand their weaknesses?
Is the team willing to take advice or bring in professional management if and when required?

Does the team have realistic expectations?

3.5.4. Ethics and Integrity

Entrepreneurs, team members and their investors should view their relationships "like a marriage". They will have to get along for a long time and they have to operate from a common set of guiding principles in an atmosphere of trust, integrity and respect.

It is important to know:
Does the Leadership value integrity and demonstrate superior ethics?
Is there anyone who might question their integrity?

3.5.5. Motivation and Alignment

Alignment of objectives between management accelerates value creation. Misalignment on the other can easily cause problem. It happens when team members have different interests at stake.

Needless to say that alignment is required between all stakeholders. For example investors may be part of different rounds of financing. One requiring to sell the company for $20M to turn a profit, another who needs the company to sell for $50M to justify the investment.

It is important to know:
Are the personal motivations and goals of the team members known and aligned?
Do the key team members have some skin in the game?
Are the team objectives aligned with business strategic goals?

3.5.6. Roles and Responsibilities

Itís not just the people - itís the team. Investors look for a balance between all the key functions. The members of a team have to offer complementary skills and experiences. If there is no team in place, the founder should have a clear description of missing key positions, and ways to fill those.

It is important to know:
Are the roles and responsibilities clearly defined and complementary?
Is the board composition wisely selected?
Does the team work together very well? Do they agree on their roles, both short and long term?
Does the team cover all the functional areas needed for the stage they are at?
Are there enough communication skills, negotiation skills and charismatic personality available in the right positions?

3.5.7. Skills and Experience

"The trouble with the first time entrepreneur is that he doesn't know what he doesn't know. After a failure he does know what he doesn't know and can beat the hell out of people who still have to learn."
~Don Valentine from Sequoia Capital

Quality of management team is a key decision factor in the investment process. Each key function requires specific industry expertise and experience. A balanced team should cover innovation, discipline, drive and experience.

It is important to know:
Is the management experienced and/or is an experienced and capable board in place?
Is the required skill set and expertise available or can they be acquired externally?
How hard or easy is it to recruit required talent for the project?
Is there any previous experience in start-up?
Is there name recognition among the press, public, etc.?
What is the profile of the advisory board members?