Putting The Band Back Together

One of the great things about being in business with serial entrepreneurs is that they have a wealth of talented people they’ve worked with in past startups to tap into as the company grows.

Some founding teams stick together from startup to startup and its always great to get the chance to back a whole team of successful serial entrepreneurs. But that doesn’t happen very often.

Success creates wealth and wealth and ambition generally lead talented startup people to try their own startups. Its like when the Beatles broke up and John, Paul, and George each went on to solo careers.

But sometimes a startup is so exciting and full of potential that it pulls the dream team back together. Everyone in startup land likes to work on a big winner and so many entrepreneurs are willing to give up on their own startup dreams (at least temporarily) and get the band back together for a while.

We are seeing this play out in a number of our portfolio companies right now and its a very encouraging sign. It may also be true that as times get tougher, the best teams are coming together and consolidating around the best opportunities.

Whatever the reason for it, it’s very exciting to see. Teams that have worked together successfully before know the strenghts and weaknesses of each other and they know how to get along, make hard decisions, and move the ball forward each and every day.

One thing that’s really hard in putting the band back together is equity stakes. When you have a team that was together in a prior company, they have the knowledge and history of their respective value and ownership stakes hard wired in their mind.

When some come back to join the band well after the company has been formed, the equity stakes that can be offered are often much less and certainly in a different balance. I’ve seen this problem delay and even prevent putting the band back together.

One thing I generally advise is to be more generous with equity being offered to a former colleague or partner than the market might dictate. For one thing, you know the value of the person much better. And also, you can argue that even though the stake being offered is lower than they might want or expect, its higher than market. That often does the trick.

The one area I think this approach is the most effective is with engineering talent and engineering management. Its so hard to build a technical team that can deliver the right product in the right timeframe and works well with the rest of the company.

I once flew from SF to NYC seated next to Steve Chen, co-founder of YouTube. When I asked him about their ability to scale the service without many issues he said ‘I never worried about scaling issues. Whenever we needed more engineering talent, we’d just tap into our network of former colleagues from PayPal and eBay’. It didn’t hurt that eBay/PayPal had become a big company by then and talented people were vested and chomping at the bit for a new challenge.

Putting the band back together is a key reason why places like silicon valley have a competitive advantage over other startup regions. But locations like New York City, Boston, Seattle and a few other regions around the world certainly have enough history of startup success now that they benefit from the same effects.

So when you are growing fast and trying to find the right talent to match the opportunity, you should always try to put the band back together if you can.