Lori Dernavich is a leadership development advisor for startups. She helps founders develop the skills they need to scale their companies. I sat down with Lori to learn about how first-time founders can find the right people to build a successful biotech company.
What are investors looking for in a founding startup team?
I’m not an investor but can tell you what I hear from investors. They are more interested in companies that have co-founders. It’s important to have a partner to help you build your company. If you are a scientist-founder, find someone who has business experience or who is willing to be the sales person or business developer, someone who can really go out there and tell a good story about what the company is trying to do.
What are the most important characteristics when choosing a co-founder?
The big issue is figuring out your true vision and making sure everyone has the same vision and wants the same outcomes. Think about your strengths and weaknesses and find people who can complement those. Find people who are truly willing to give you feedback. Oftentimes, this is not your friend or family member. Friends and family can find it difficult to be upfront.
A lot of what I do is help people get the feedback they need about their leadership skills. You need people to tell you the truth. This is important when you are building your advisory board as well as choosing co-founders.
Investors want to see people on your advisory board or in your management team who understand the science and its possibilities—people who have been in the industry, have experience and can guide you.
If you don’t have the right person in your network, how can you find the ideal co-founder?
You could find the right person through your college or university alumni network or by attending networking events at big conferences.
Ask people in your network if they know someone who might fit the job description. Be very specific when you ask. Know what traits, skills and experience you are looking for in this person, the role you want them to fill and their tasks and responsibilities. If you say, “I’m looking for a co-founder, can you suggest someone?”, people have no idea what you are looking for. Your network can help if you say, “I’m looking for a co-founder and here is the background I have, the vision for my company going forward, the story of our science/tech and where we see it going. This is the actual skillset I need.”
If you already have seed funding, don’t be afraid to lean on investors and ask them to help you find a co-founder.
There are also a couple of organizations that help you find co-founders such as CoFoundersLab.
What about choosing early employees? How can founders make sure they have the right people?
The more people you have on board, the more chaotic it will be. Before you make your first hires, be sure that as cofounders, you have your roles and responsibilities established very clearly. Who will be the decision makers for which issues? Who is responsible for which part of product and business development?
The first people you hire are the most important. They will set the tone for the culture and direction of the company. The first employee is usually a technical person because you need to get the product out or experiments going.
One of the hardest parts of being a co-founder or CEO is learning how to delegate. You must give some of your work away to others or you’ll never be able to scale and grow your business. Work out what are you willing to let go and what you want to do more of. There is an awesome article about this called ‘Giving Away Your Legos’ by First Round Ventures.
When making a new hire, ask “Where is the pain point?” Then spell out the specific skill set you will need for that individual. Know the kind of traits or characteristics needed to fit into your culture or help create the culture of your company. I don’t recommend choosing people who have a big company background. They tend not to have a startup mentality where you are working 80 hours a week with no resources. You are your own resources.
How can founders with a limited cash flow incentivize employees?
You are not going to have a hard time incentivizing scientists who love the technology they are creating. They will come to you because they want to work with the technology, not because they’re interested in job titles and high pay. If you are interviewing people and they start talking about titles and compensation early on, those to me are red flags. Those people can turn into problems. Six months down the line they’ll want to be promoted.
People who love a company’s technology and purpose will often come on board at or below market comps and/or for equity. You can get interns if you are really low on cash. Go to schools and see if you can do a hackathon. People will come in and work for a day for nothing because they love to do it. Hackathons also allow you to see people in action, so if they’re terrific, perhaps you’ll want to offer them a job at some point.
Do you have any tips on Founders’ Agreements?
You should absolutely have a Founders’ Agreement. That is critical to making sure that the two (or more) of you are on the same page, especially thinking about equity. Never assume that equity or bonuses will always be 50:50. As a company progresses, one of the co-founders will be seen by the board or investors as more critical to the company so they end up getting more money. You have to be open to that as the company grows.
What are the most common reasons that you see early stage companies fail?
The founders don’t know how to delegate. They are unable to let go of things. They think they know all the answers and only they can do it. I’m always astonished when I work with a CEO and they say, “We hired all these Harvard graduates and they are not smart”, and I think, ‘It’s more likely that something is wrong with your management style’.
Communication and accountability go hand-in-hand. If there’s not enough communication back and forth, employees won’t understand what they are supposed to be doing. They won’t see the big vision or know who to go to for answers or guidance. Miscommunication leads to redundant work and wasted time and resources.
Accountability is making sure people know what they have to do and it is getting done. This comes from good leadership. If you’ve never led people, grown a group or facilitated group or team meetings, then these are all new leadership skills that you have to learn. You must learn how to hold people accountable and say, “This is what you need to do and this is how we will know it’s getting done.”
How can people avoid these mistakes?
People who do not have the leadership skills they need should use a coach. It’s preventative care and is much more effective than coming in once a crisis has happened. If you learn and plan early on, you can avert a crisis. Also, if a founder is coming right out of academia, why should we expect them to be an amazing leader that can grow a company? A coach can help you understand what you don’t know and teach you the skillset you need.
The other part is hiring the right people. Know how to fire quickly. Don’t hold onto the wrong people too long. With US contracts, you can fire ‘at will’.
What should someone do if they are thinking of starting a company?
Don’t be afraid to start talking to investors, because you want to find out if what you are hoping to do is interesting to an investor. Investors may seem intimidating, so look up any networking events for pitch nights and attend some of them first. Listen and find out how people are doing it. Do research and talk to people about their pitch decks. Try to find out how you can get other people excited about what you want to do. Find out if what you have is viable. Work on crafting an interesting and concise story that will lead people to desire more.
Lean on your colleges and alumni networks. A lot of universities have incubators or other assistance that can help you hone your business skills.