A widely regarded axiom amongst venture capitalists states:
“Rather fund a 2nd rate idea from a 1st class team, than a 2nd class team with a 1st rate idea!”
The realization of a project requires a team that is able to convert an idea into success. Therefore, investors as well as founders should ask themselves the following questions when evaluating a team:
What kind of experience does the team possess? For example, if someone has already started a business in the past, it would be safe to assume that they would be relatively comfortable dealing with obstacles in the early stages of starting a new business, since they should be familiar with these.
What does their background look like? Does someone have a background relevant to the industry and do they have the experience necessary to evaluate the market, the competitive environment, trends, etc. correctly?
What positions exist in the business and who occupies them? All necessary tasks and functions must be taken into account, as well as be assigned to an individual responsible person. Those people in charge, should bring the necessary competences.
Which qualifications and what expertise do the team members bring to the table? The educational and occupational backgrounds of the team should match the required skills. The team members’ abilities should complement one another. A team consisting of three engineers with a purely technical background will lack experience in fields like marketing, sales, strategic management, etc.
Is the business clearly defined and are the key positions occupied appropriately (CEO, Technology, Marketing, etc.)? An IT-specialist would be misplaced in the sales department. In order to run a business smoothly, it is important that everyone knows their position and the responsibilities that come with it.
A study conducted in 2004 discussed ‘how venture capital providers evaluate a team’ (N. Franke, M. Gruber, 2004). The authors of this study concluded that industry experience, followed by educational background (technical/sales) and the depth of studies (university degree or not) were the three most significant criteria in evaluating a team. However, one must consider that not every team member has to fulfill all the criteria to the same extent. It was also emphasized that the abilities and backgrounds of the team members should compliment each other.