Business Strategy

Real world MBA: 20 entrepreneurial lessons, part 2: the right people

August 19, 2014

  • Alex Bratton

This article is adapted from a talk given by Lextech CEO and chief geek Alex Bratton at an event hosted by Choose DuPage’s Rev3 Innovation Center at Northern Illinois University. This is part two of a four part series. Read part one here.

A-team or no team

As Steve Jobs said, make sure you get the A-team, because the really mediocre people are not going to help you succeed as a startup. You need to vet the heck out of the people who are part of your initial team. I’ve seen some nightmares in my own life from picking the wrong partners.

I am five for 13 in picking good partners. Eight times I’ve had to deal with breakups. I’ve dealt with buying out a partner, firing a partner, somebody walking, and business cratering. You don’t want to go through that. You’ve got to get to know who your prospective partner really is.

One partner in particular  was a Jekyll-and-Hyde poster child. When things were good he was one person. When things hit the fan, he’d completely change. He was unhealthy and it was unhealthy for the company. Unfortunately, this is not uncommon. Wherever possible I try to artificially induce stress in a trial relationship up front to test someone’s mettle.

I recommend when it comes to partners, start out your relationship with something contractual at first. You’re investing in each other without committing fully so that you can really discern if it’s a good fit. I’ve done this previously. One partner came in for a couple of months working on some key strategic projects and worked them through together and one of the things that I try to do is artificially change dates or otherwise to find out how they are under pressure. How do they work under stress? I wish I had learned that many years before. My batting average would be much higher.

Another difficulty is when you have a partner or team member who cuts corners on their job. That’s the hard case. I had this happen not too long ago. I once had an individual who was really good at what they did but was incredibly negative, didn’t play well with others, and couldn’t participate. It’s not just about their team work ethic. They’re just poisonous to morale. You know the feeling. You walk into the room and think, “I don’t want to go talk to this person.” Get rid of them. It hurts like heck, and it may take a while to replace them, but they shouldn’t have come in in the first place. You’ll improve your recruiting process and quality. In the mean time, every single member of the team will thank you when they’re gone.

How to afford the A-team

You may think it’s easy to advise you to aim for the best and avoid the worst partners. Everyone’s response is: “But I can’t afford that person.” You can’t afford not to have them. Figure out a way to get them in. If that’s the $60,000 employee, that’s only $5,000.00 a month. With that investment, you’re going to become productive because it will give the time back that you need to grow the business and focus on your priorities.

Since getting the right leadership team in place and the right partner to help move this business forward, we’ve tripled size in three years. We had 40% year over year growth, 2011, 2012, and 2013. We’re at 80% year over year growth this year. I’m not doing it alone. It’s the whole team. You must get those right folks in, and it will drive huge change. Think creatively, nonlinearly about investing in talent. There are 50 more ways to structure everything than you think. Whether it’s a deal with a customer, or as we’re talking about now, a deal with an employee, you can do it.

You need a decent partnership agreement. Talk hard stuff.

Everybody in this room thinking about starting something: you have to read Slicing Pie by Mike Moyer. He’s here in Illinois. The book instructs you on how to account for everybody’s contribution in starting the company, whether that’s development hours you put into it or cash investment. Take a look at this process because it’s a way to preemptively sort value.

As soon as you start that company and say “I have half you have half,” you’re wrong. Somebody’s contributing more than the other one. Recognize that. You’ve got to get it right. Otherwise, when it gets to the point where somebody is putting a million bucks into it and holds that over the other’s head. That hurts.

Sort it out. Legalzoom.com and similar resources have the boiler plate for the other finer details. There’s other stuff you probably need in there. You’ll want to talk to somebody about the intricate points. I’m talking about the outlier stuff, the worst case scenario stuff. It’s not that you expect it to happen, but you’ve got to have it figured out. What happens if the partner gets run over by the bus, but they’re still with us? So someone’s disabled and they can’t contribute at the same level—what does that mean to the business? How do you deal with that? It stinks to think about it, but you have to. And you think about it while everybody is in the right frame of mind.

How do we handle if we decide that we just can’t work together? Or a year into this we’re driving each other nuts how do we part ways without having to get expensive lawyers? Just get the basic cases out. Should either one of us buy the other one out or bring somebody else in? Make sure you understand how you’re going to part ways.

Using video games to test team player authenticity

I have found that video games are a window to the soul. You can tell a lot from people playing a team focused video game together. You know who that person is. I use this as interview technique. When folks are playing a video game they forget about all that stuff they’re supposed to do and they become who they really are. If they’re a good communicator and don’t seem emotionally reactive, that’s a winner. You don’t need video games, either. Take the candidate to a basketball court. Play whirly ball. Do something team centered because in non office game environments people relax and act more like themselves.

Find a mentor

Find somebody to whom you can ask those hard questions. Whether it’s partnership or technology advice, find a mentor to be a sounding board. That person doesn’t need to be in the same industry or business phase, but do make sure they have some experience under their belt. Maybe it’s a one time kind of thing rather than a weekly long term thing, but find someone with whom you can build a relationship.

I really had two mentors over time, neither of them technical. The first one gave me my my basic sales training. He taught me to be prepared for failure. I learned that it’s largely about numbers, and I needed to be persistent. Those were excellent lessons.

The other mentor—with whom I still have a great relationship to this day—taught me everything I know with regard to the PC world, the fundraising world, the finance world and was just really well connected in Chicago. And he was a genuinely really good person, good human being on lots of philanthropic boards and is an all around good role model.

Finding a person who can share quality knowledge and real entrepreneurial wisdom is worth its weight in gold. It’s something beneficial for them, too. It’s a mutual relationship. There’s a lot of people in Chicago like that. You’ve got to look. Don’t forget about retired business owners. Ask colleagues to hook up with those folks. It’s hard to find the right fit, but it’s worth it.

The family that decides together

Being an entrepreneur isn’t just about you. It’s a family issue and lifestyle. I am incredibly fortunate that my wife, Michelle, has been amazingly supportive. Your spouse needs to be involved in the decision to take this leap. You have to understand that it’s going to impact the family as well because it’s going to have a bunch of time involved. And that’s why I would recommend talking with counsel and a mentor because that’s a hard one. To me family is critically important. I love starting businesses and doing cool stuff in tech. My pieces came together where I can do that, but it doesn’t work that way for everybody. You need to be able to recognize that.

You can get there

I’ve been incredibly fortunate to be able to really find people who fit, who drive the organization. I have people that get stuff done and are passionate about it. They’re thinking about changing the world. That’s the impressive stuff. But I learned it through pain and making mistakes. Remember: make your family part of decision, don’t be afraid to let the toxic people go, invest in the A-team, get it in writing, and find a mentor. It will save you headaches, but most importantly, it will help your team thrive and drive your business.