If you’re an entrepreneur of any kind, you are most likely familiar with the dire statistics associated with building a successful business, most damning among them is 90% of all new startups fail.
New companies fail for a multitude of reasons – everything from scaling too quickly, to not understanding the customer and the market, to issues with the product or the technology that cannot be overcome.
Among the top reasons startups collapse are people problems. Building a business is an exercise in relationships and no company – just like no marriage – sets out to fail. While most entrepreneurs first learn this the hard way, the good news is the second time around they are usually much more successful in building the right team.
I am fortunate to be a first-time founder with a company that, at 10 years old, continues to grow on a global scale. This was not the first venture for my fellow founder, Dave Labuda, who had come off a great success with his previous company, and was able to bring great insight as we compiled the right team to capture our vision and grow with us. Along the way I’ve learned some key lessons about the impact of human capital on business success.
Carefully consider a co-founder
As I’ve discovered firsthand, having two founders rather than one significantly increases your odds of success. Companies with more than one founder raise, on average, 30% more money, have almost 3x the user growth and are less likely to scale prematurely.
Of course these success metrics better apply when your co-founder is the right compliment to your own skill set and personality. Having someone too much like you can stymie progress or send the company down the wrong course. One thing I considered when determining whether my fellow founder and I would be a successful team was his risk aversion in relation to mine. Too much risk aversion and the company never grows, too little and you risk scaling too quickly and toppling over.
I also wanted to know what Dave was like in difficult situations, and for him to know what I was like as well. Without question starting a new business will come with its fair share of stress and challenge. Do you know what your co-founder is like frustrated, angry or tired? Have you been able to see how they handle distraction, or how they multitask? If you can tolerate each other in the worst of times, chances are you’ll be successful in the best of times.
Longevity is an underrated currency
In today’s business climate, particularly in the tech world, the prevailing wisdom is not to stay in any position too long, or with any one company. Familiarity breeds contempt, or at the very least, apathy.
However research doesn’t always support this idea. Career success often hinges more on the individual’s ability to learn new things and progress, rather than how many different places they worked. In fact, as teams unify over time they tend not only to work better together, they also do a better job at utilizing everyone’s unique skill sets and knowledge.
In a study of a large, global software company by the University of Oxford, researchers discovered when familiarity increased 50% among team members, defects decreased 19% and budget deviations 30%. Even more interesting, the study found familiarity was a better predictor of performance than individual experience.
Just as critical to team performance is diversity. Corporate diversity has become something of a hot button issue, particularly for tech companies, but diversity should be a proactive mindset, not a reactive to-do item. When teams are built with diverse backgrounds, genders, talents, skills and experiences, it goes without saying they are better problem solvers.
I saw this firsthand as Dave and I built our own company and turned to teams we had worked with in the past. The level of familiarity was invaluable in matching their strengths, and it also served to help define and scale our corporate culture. As new members of the team have come on board, with their own unique backgrounds and experience, they bring a fresh and critical way of thinking that is folded into our growing family and allows us all to benefit.
Colleagues can be your friends, but friends can’t always be your colleagues
Finally, one of the common traps for an entrepreneur is wanting to work with people you like or consider a friend. Of course this makes sense – friendship brings with it trust and that critical component of familiarity, plus it’s just more enjoyable. This can spell disaster, however, in the work environment. The dynamic that exists within a friendship is very different than the dynamic that must exist within a professional relationship.
It can feel daunting hiring a staff of people you don’t know or haven’t worked with for a long period of time. There are ways to go about it, however, that give you a solid indication of how that individual works and how you would work together. For example, task a prospective candidate with an assignment or project they would normally do in that role, and see how the process goes. Do they communicate in ways you like? Are they able to problem solve on their own and with the team? Do they bring new and creative ideas to the table? Are they a team player and respectful of others time, ideas and contributions?
While building friendships with your colleagues is always a career bonus, it should not be the deciding factor on who you bring onto your team.
Starting a business and scaling it correctly is a gargantuan task fraught with challenges at every turn. Professional relationships that have the benefit of longevity and familiarity can make the journey much more manageable. One of the greatest investments you make is in the team you surround yourself with, so take time building something that can pay dividends now, but also for many years to come.