Ask the Expert: Whom to include in your initial team

Ask the Expert, Startup Initiatives |

This article first appeared in the Union Leader in April 2021

As with most journeys, how you get to where you want to go depends on where you start. This applies to starting a business as much as it does to going on any other journey.

No one, regardless of how good or smart you are, can go it alone. If someone starting a company agrees with this premise, how does that person decide whom to add to the team? First, it is important to note that adding to the team does not necessarily require hiring a person nor does it necessarily require taking on a partner.

For some businesses, especially service businesses that do not anticipate manufacturing a product, sole proprietors can get by with service providers and suppliers that include legal, financial and marketing (including web) services, and supplies and equipment.

However, for technology companies that expect to build and commercialize products, a team of three is a good place to start. Just as a three-legged stool is more stable than one with one or two legs, so a three-person team provides stability and strength to a new company. The three basic functions that will most often establish a company for future success are technical expertise, business expertise and application expertise.

If you are a technology expert and you want to form a company around an idea, you should find someone who can help on the business aspects (including financial) of what is needed to get started. If you are a great coder (or engineer or scientist) but have never worked in the initial target market, you likely need to add expertise from a user’s perspective. A focus on technology will be complemented by the other two.

If you are a financial wizard with a business background and an idea but have never developed technology nor worked in the field where you want to solve a problem, adding technical and application expertise will strengthen the team and improve the likelihood of success. If you are a physician with an idea to solve a clinical problem, for example, you very likely know all aspects of the application to solve that problem. You can address a solution for people like you but will need technical and business expertise in order to execute on your idea.

Notice what is not included in these examples of a three-person startup team. To form a company, you need a legal basis for it, but you can hire a business attorney to help you through that — there are online resources to get started but those carry significant risk for future success. It is better to spend $1,000 early to get the company established with an appropriate foundation than to spend tens of thousands later to correct a problem.

Also not included in the initial team is a chief financial officer. This is a key role for a company once it is established but, again, financial oversight can be the responsibility of the team member with business expertise and, as needed, financial expertise can be provided by a service provider. Eventually, adding a fractional or full-time CFO will be required. If the enterprise is built to the point that significant private or, even more important, public financing is required, an experienced CFO will be an important addition to the executive team.

Marketing expertise can similarly be outsourced in early phases. Web content (only needed when you have actually defined a story to tell) may eventually include ways for filling this need. Call-center services can also be added without taking on employees. Sales can be established through various outsourced channels (web, external fulfillment, distributors).

Product and applications expertise — making sure you are building the right thing for the right customer — are important upstream marketing activities that can initially be led by the technical and applications experts on the team. Eventually, marketing activities related to upstream, downstream, sales, and customer support will need the focus of an internal leader.

In some industries, keys to success are addressing regulatory requirements (in medical, pharmaceutical and communications sectors, for example) and making sure there is a payment path (that your customers can be paid so they can pay you, perhaps through third-party reimbursement). Quality management systems are essential — and, in some sectors, required — for customer service and some regulatory needs but development of these systems can also be outsourced.

Once the product is defined, designed and determined to meet market requirements, operations expertise will be needed. Many startup companies depend on a contract manufacturing partner and third-party logistics vendor to get products built and shipped to customers. The use of outside partners can be maintained for quite a long period, with the right partners, before in-house capabilities are needed. However, owning the supply chain and making sure customers are being served does require internal resources to ensure high service levels.

The three-function team with business, technical and applications expertise is an excellent start for technology-based companies. The thoughtful addition of marketing, financial and operations leadership at appropriate phases will strengthen the expertise within the company and lead to stronger execution. Legal, financial, and marketing services, regulatory, reimbursement and other capabilities noted can be added as vendors with potential in-house additions as you enjoy growth and success.

Roy Wallen is the CEO of Directional Healthcare Advisors, an international advisory services firm specializing in commercialization of healthcare technology.