Start-ups need a solid foundation: the right people and culture, and balanced owner interests.
Every company needs to lay a solid foundation to survive in the long run. So when you start out on the long road of building up a business, the first days are absolutely crucial.
The first key component in this foundation is finding the right people. Typically, start-ups are so small that every single person on the team plays an important role.
That’s why, before making an investment in a company, the author not only makes it a point to analyze the skills and vision of the people involved but also their personal connections. He’s seen firsthand what weak personal ties can do to a team. Before co-founding PayPal with Luke Nosek, the author had invested in a company that Nosek had started with someone he barely knew. Eventually, their personal differences took the whole venture down, along with the author’s investment.
Another key factor in a strong foundation is ensuring that the different interests of the various company owners are balanced. After all, the founders and investors may have very different interests, but the company shouldn’t have to suffer from such misalignments.
For example, the founders of the company may wish to develop their products patiently, whereas the board of directors usually wants to bring in profits as soon as possible. While these interests aren’t necessarily mutually exclusive, they can sometimes cause conflict, so it’s crucial to define a way of resolving such conflicts early on.
Finally, start-ups should also try to instill a strong culture in their teams because it helps everyone work effectively together.
Company culture doesn’t consist merely in the perks you offer to your employees, like a pool table and a soda machine, but rather the relationships that people have.
A good example of a strong company culture could be seen at Paypal, where the team was so close that many of them went on to start new companies together later.
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