When raising capital for a new company, most novice entrepreneurs and investors focus on the idea. Is it a BIG idea? Does it have legs? How large is the addressable target market? The most common mistakes are talking about capturing 1% of a $500 billion market or showing conservative estimates that the company will go from zero to $100 million since the idea is so great.
Experienced entrepreneurs and investors know it’s all about the team. The reasons are quite simple actually:
• The idea and company you start with will morph with time.
• There will always be numerous mistakes and challenges of all sorts along the way.
• The markets shift quickly and unexpectedly.
• If the idea and the market are indeed good, there will always be competitors with more money, resources, and access.
• Access to capital varies with the mood of the investment community.
A smart, experienced team is one that has the ability to figure this out along the way, without falling in love with the idea itself, showing flexibility, agility, decisiveness, and maturity.
A good team thinks things through in an objective and thorough manner.
How do institutional investors know if you are someone they want to invest in? One of the most key elements is your ability to assemble a team that is credible, has relevant experience, is committed, articulate, and demonstrates integrity. A team that radiates the qualities discussed above.
How do you assemble such a team when resources are limited, and there is little or no cash in the bank?
A good leader has the ability to convince high bandwidth people to follow his/her vision and ambitions. The ability to assemble such a team demonstrates leadership capabilities which are key in the early, turbulent, and uncertain early stages of startups.
So rely less on the idea and more on putting the team together.