Part 1.

The innovation environment in Minnesota has been gaining steam in recent years due to a number of initiatives by both the private and the public sector.  There are interesting new software ideas, opportunities, and technologies being developed, and market opportunities are plentiful.

We’ve all seen plenty of situations where innovators, founders, and entrepreneurs develop viable software products with ample market demand; however, they never quite reach their potential.  It all starts with leadership.

The wrong hire at a start-up or emerging software company can stymie its growth, prevent it from realizing its objectives, or in the worse case, doom it to failure.  A Fortune 500 company is much better positioned to absorb an occasional bad hire, but small-to-mid sized companies have to be very strategic in how they go about building their Executive team.

Let’s start with how the leadership team should be structured.  Often times the original innovator, while gifted with unique abilities to be visionary and come up with much-needed solutions to real-world problems, too often doesn’t have the experience required to run a successful business.  Some entrepreneurs have gained the ability to run a company through previous successes, but for those who haven’t, they need to be able to recognize when to seek out those who can commit their business savvy to the cause.

Rare (although not unheard of ) is the leader who is broad and deep in their knowledge of all the functional areas of running a successful business in the twenty-first century.  Today’s complex legal , regulatory, and compliance environment, along with sophisticated sales channels, markets, and global competition make it necessary to have someone skilled in several facets of running a business, but also recognizing leadership gaps and how to address them.  Let’s talk about some of those leadership needs.

Sales & Marketing. The importance of understanding the markets into which the software product should enter is crucial.  Notice use of the word “should”!  Often times products are created that have wide and varied market potential, but it becomes unwieldy, and sometimes downright counter-productive for a start-up company to attack too broad of a market.  If the founder isn’t gifted in Sales & Marketing of software, and in particular, researching and understanding the competition, and developing a strategic and coherent go-to-market strategies, then it is imperative to onboard an executive with this background.

Operations. Every penny is critical to a newly formed software company as well.  Even if significant funding is obtained, it is necessary that the organization have someone in a leadership role who knows how to maximize efficiencies, invest what money is available wisely, and make great resource decisions.

Technology. As the start-up company emerges, it’s not enough to have a staff of technical gurus.  The appropriate level of processes and methodologies must be matured in order to guarantee a quality product that meets customer needs in a timeframe that takes into account competitive forces.  Typically a seasoned software development leader needs to be introduced into the organization at a strategic time in the growth cycle of the organization.

Governance. Too often, the small software company fails to construct a meaningful team of advisors.  This doesn’t necessarily mean that a formal Board of Directors is necessary right away (depending on the nature of the company), however, it is important to have objective advisors who have a track record of guiding other software companies to provide oversight , guidance, and governance.

Certainly, the decision as to how the organization will be funded correlates to how to build out a leadership team, and helps shape decisions around these key functional areas and other leadership roles as the organization grows.  If it is determined that there is a small window in which to enter and gain market share, larger chunks of funding will need to be raised in order to build out the leadership team quicker, whereas in other situations “bootstrapping” the organization may make more sense, and the leadership team can take shape at a more steady pace.

In summary, generally speaking the tendency for founders and entrepreneurs is to understate the need to hire key leaders at the right time in the company’s life cycle.  The rationale and reasons behind this are many, but the ability of the founder to recognize that they need the intellectual capital of someone more qualified can determine the long-term success or failure of the organization.

Now that we have described the “what” aspect of The People Factor, in the next post we will address “how” to go about securing the right executives who will lead the start-up or emerging company to high growth!

Kevin Spanbauer

Founding Mentor