Entrepreneurship

MNO2009 - Session 3
Building a Founding Team
Prof. Dr. Sarah Cheah
 Recap L2
Goal Setting & Action Planning

Startup ecosystem Principles of Goal

Setting & Action
Planning

The Startup Lean Startup

Process
 Readings
Goal Setting & Action Planning

Read
• Spinelli and Adams (2015) Chapter 5, Opportunity Recognition, pp. 113-129 in
New Venture Creation, 10 edition, McGraw-Hill (IVLE e-Reserves)
• Cheah et al. (2017) Chapter 2, Developing a Product and Service Offering, pp.
39-46, Facing Down Failure, 2 edition (Pearson online coursepack)
• Cheah et al. (2016) Role of Public Science in Fostering the Innovation and
Startup Ecosystem in Singapore, Asian Research Policy Journal.
http://www.arpjournal.org/usr/browse/view_issues_detail.do?seq=132
• Blank, S. (2013) Why Lean Start-Up Changes Everything, Harvard Business
Review http://hbr.org/2013/05/why-the-lean-start-up-changes-everything/ar/1
• Isenberg, D. (2011) Introducing startup ecosystem, Forbes
http://www.forbes.com/sites/danisenberg/2011/05/25/introducing-the-
entrepreneurship-ecosystem-four-defining-
characteristics/#32cc91fc38c435dd899938c4
 Readings
Goal Setting & Action Planning

Browse
• Ahmad, N. & Hoffman, A. (2007), A Framework for Addressing and Measuring
Entrepreneurship, OECD/EUROSTAT, pp. 17-19.
http://www.oecd.org/std/business-stats/39629644.pdf
• Overview of Singapore government schemes for startups (check with
government websites) http://www.guidemesingapore.com/doing-
business/finances/singapore-government-schemes-for-startups
Watch
• Customer Discovery Process by Steven Blank
https://steveblank.files.wordpress.com/2014/06/what-is-customer-
discovery.m4v
• Customer Discovery process by NUS biz school production (IVLE/Multimedia)
 References
Goal Setting & Action Planning
(Optional reading)
• Frese, M. et al. (2007). Business owners' action planning and its
relationship to business success in three African countries. Journal of
Applied Psychology, 92(6), 1481.
• Frese, M. (2009). Towards a psychology of entrepreneurship—an action
theory perspective. Foundations and Trends® in Entrepreneurship, 5(6),
437-496.
 L1 to L6 Topics – Where are we?

L1: entrepreneur L2: entrepreneur makes plans L3: entrepreneur

identifies & evaluates and sets goals while finds co-founder(s)
opportunity developing target customers & builds team
1 2 3

L4: entrepreneur finds L5: entrepreneur persuades, L6: entrepreneur can

investors & mentors negotiates and networks to choose to build social
from ecosystem (e.g. engage prospective enterprise to help
incubator/ accelerator/ investors, employees, community or join a
clients & partners 5 6
coworking space) 4 corporation
 L1 to L6 Frameworks – Where are we?
1. Ardichvili’s model of 3. Babson’s framework of 5. Building a founding
opportunity startup ecosystem (6 team –Wasserman’s 3R
identification (4 domains) model (relationships,
factors) 4. Action planning process: roles & rewards)
2. Spinelli & Adam’s Lean startup approach
model of opportunity (customer development)
evaluation (5 criteria)
1 2 3

6. Self-motivation and 8. Watkin’s 4 principles of 11. ACSEP’s models of

personal factors: persuasion social entrepreneurship
Wasserman’s 9. Kolb’s negotiation 12. Wolcott and Lippitz’s
founders’ dilemma- approach models of corporate
rich vs king 10. Cross and Thomas’ model entrepreneurship
7. Saravasthy’s of building networks
causation vs
effectuation model 4 5 6
Session 3:
Building a Founding Team
 Agenda
Building a Founding Team

CEO

Relationships Roles Rewards

Building a Founding Team

CEO
Building a Founding Team

Relationships

CEO
Should you involve Family in your founding team?
 Archipelago
online collaborative learning tool
• Step 1: Open email sent to you from arch-
noreply@archipelago.1.comp.nus.edu.sg this morning
• Step 2: Click on link “To Archipelago” in email
– Note this link is unique to you. Do NOT share your link.
• Step 3: In Archipelago environment, on left panel, click
on Activity 1 – you will see questions in main window
• Step 4: Key in your responses in Activity 1 main
window
• Step 5: when done, click “Submit Answer” on bottom
right of main window.
 Relationship:
Families/Friends vs acquaintances vs past co-workers
What are the risks of blowing up relationships

Damage if
relationship
blows up

Prior social relationship No prior relationship Prior professional

(Family, Best friends) (Acquaintances, relationship
strangers) (Past co-workers)

Source: Noam Wasserman (Cheah et al,,2017)

 Relationship:
Families/Friends vs acquaintances vs past co-workers
What is likelihood of discussing “Elephants”

Likelihood of
discussing
“Elephants”

Prior social relationship No prior relationship Prior professional

(Family, Best friends) (Acquaintances, relationship
strangers) (Past co-workers)

Source: Noam Wasserman (Cheah et al,,2017)

 Relationship:
Families/Friends vs acquaintances vs past co-workers
Gap exists between damage & “elephants”

Likelihood of
Damage if discussing
relationship Gap “Elephants”
blows up

Prior social relationship No prior relationship Prior professional

(Family, Best friends) (Acquaintances, relationship
strangers) (Past co-workers)

Source: Noam Wasserman (Cheah et al,,2017)

 Relationship:
Families/Friends vs acquaintances vs past co-workers
How to reduce the gap?

Likelihood of
Damage if discussing
relationship Gap “Elephants”
blows up

Prior social relationship No prior relationship Prior professional

(Family, Best friends) (Acquaintances, relationship
strangers) (Past co-workers)

Source: Noam Wasserman (Cheah et al,,2017)

 Relationship:
Families/Friends vs acquaintances vs past co-workers
Reduce damage by taking actions

• Founder agreements
• Pre-nup agreements (for couple-preneurs)
• Disaster plans
• Buffered reporting arrangements
 Relationship:
Families/Friends vs acquaintances vs past co-workers
Reduce damage by taking actions

Damage if
relationship Gap
blows up Gap

Prior social relationship No prior relationship Prior professional

(Family, Best friends) (Acquaintances, relationship
strangers) (Past co-workers)

Source: Noam Wasserman (Cheah et al,,2017)

 Relationship:
Families/Friends vs acquaintances vs past co-workers
Founders Agreement to reduce damage
 Relationship:
Families/Friends vs acquaintances vs past co-workers
Discuss “elephants”

• Harness angst about potential

damage to force discussions
• Involve outside party to guide
discussions
• Use mutual mentor to mediate
negotiations
 Relationship:
Families/Friends vs acquaintances vs past co-workers
Discuss “elephants”

Likelihood of
discussing
Gap “Elephants”
Gap

Prior social relationship No prior relationship Prior professional

(Family, Best friends) (Acquaintances, relationship
strangers) (Past co-workers)

Source: Noam Wasserman (Cheah et al,,2017)

 Relationship:
Families/Friends vs acquaintances vs past co-workers
Discuss elephants

Hear the perspectives of serial entrepreneur, Mark Suster, on

“marriage counselling” for co-founder disagreements. How do they
hurt the startup?
 Relationship:
Families/Friends vs acquaintances vs past co-workers
Gap is reduced as a result

Likelihood of
Damage if discussing
relationship Gap “Elephants”
blows up Gap

Prior social relationship No prior relationship Prior professional

(Family, Best friends) (Acquaintances, relationship
strangers) (Past co-workers)
Building a Founding Team

CEO
Roles
 Building a Founding Team

Team Roles
Leadership definition

Roles

Team Decision making

Development structures and
processes
 Building a Founding Team

Team Roles
Leadership definition

Roles

Team Decision making

Development structures and
processes
 Entrepreneurial Leadership
Transformational Leadership

Inspire followers to transcend their own self-interests

for good of organization, have profound and
extraordinary effect on followers

Idealized influence Inspirational motivation

Intellectual stimulation Individualized consideration

 Behind the Alarming Expose on Amazon’s
Workplace Culture, CNBC Nightly News 2015
In 1999, Jack Ma delivers a speech to 17 friends in his
apartment to introduce Alibaba and lay out his plan to
compete with U.S. internet titans.
Entrepreneurial Leadership
Transformational Leadership –
idealized influence

Provides vision and sense of mission,

instills pride, gains respect and trust
We are here to discuss in 5 to
10 years, what will Alibaba
become in the future? Our
competitors are not in China,
but in America’s Silicon Valley

Jack Ma’s 1st pitch to 17 employees, 1999

Entrepreneurial Leadership
Transformational Leadership –
inspirational motivation

Communicates high expectations, uses

symbols to focus efforts, expresses
important purposes in simple ways
Entrepreneurial Leadership
Transformational Leadership –
intellectual stimulation

Promotes intelligence, rationality, and

careful problem-solving
 Entrepreneurial Leadership
Transformational Leadership –
individualized consideration

Gives personal attention, treats employee

individually, coaches and advises
Entrepreneurial Leadership
Elements of Transformational Leadership

Build Create a
Commitment Strategic Vision

Model The Communicate

Vision The Vision

Bass (2008)
 Building a Founding Team

Team Roles
Leadership definition

Roles

Team Decision making

Development structures and
processes
 Homogeneity vs diversity
Write down the diversity in knowledge & skills needed
Homogeneity vs diversity
Startup team
Are Team Diversity and Performance really related?
 Research on

US new ventures

Diversity has direct correlation with new

venture performance (esp. sales growth)
 Diversity contributes to breadth (innovativeness of
products) of tech learning, which in turns positively
affects new venture performance

International diversity Tech learning

• No of countries + New venture
+
• Tech diversity • Breadth performance
• Cultural diversity + (Partial) + (Partial) • ROE
• Geographic diversity • Depth • Sales
• Foreign market growth
∩ +
segments • Speed

Source: Zahra, Ireland & Hitt, 2000

Xiaomi – the “Apple” of China?
 Xiaomi – a large Founding Team?

Lin Bin Zhou Guanping Li Wanqiang Hong Feng

Ex-MS Ex-Motorola Ex-Kingsoft Liu De Ex-Google
Ex-Google Wang Jiangji Lei Jun
Ex-Beijing Wang Chuan
Ex-MS Ex-Kingsoft
Industrial Dept Serial entrep
 Position assignment
Overlapping Roles vs Clear Div of Labour
What are the pros & cons of each?

COO1 CEO1 CTO1

CSO2 CFO2 CMO2 COO CEO CTO

COO2 CEO2 CTO2 CSO CFO CMO

CSO1 CFO1 CMO1
 Position assignment
Overlapping Roles vs Clear Div of Labour
What are the pros & cons of each?

Overlapping role Clear Div of Labour

increased flexibility, tap on greater initial accountability &

Pros
collective knowledge clarity

harm team’s ability to

redundancy, role conflict,
Cons coordinate interdependent
weakened incentives
tasks
 Building a Founding Team

Team Roles
Leadership definition

Roles

Team Decision making

Development structures and
processes
 Belbin’s Team Roles
Which roles are most suitable for Team Leader?
What are the strengths & weaknesses of each role?

Source: http://catadv.wordpress.com/
 Belbin’s Team Roles
Which role best describes you?

Completer- Action-oriented
Shaper Implementer
Finisher roles

Resource People-oriented
Coordinator Team Worker
Investigator roles

Monitor-
Plant Specialist Cerebral roles
Evaluator

Leadership roles
Source: Belbin (2011)
 Building a Founding Team

Team Roles
Leadership definition

Roles

Team Decision making

Development structures and
processes
Decision-making
Egalitarian vs Hierarchical
 Decision-making
Egalitarian vs Hierarchical

Egalitarian Hierarchical

Can quickly mobilize

Foster climate of trust,
Pros resources & efforts in a
leverage team knowledge
coherent fashion

May face suboptimal

Slow down decision-making
Cons decision making if leader
& may miss opportunity
lacks knowledge
 As the team grows..
Clear division of labour and hierarchical
decision-making become inevitable for
efficiency and effectiveness

Overlapping Clear Division

Roles of Labour
+ +
Egalitarian Hierarchical
 Building a Founding Team

CEO
Rewards
 Activity 2
Case of vodka, Erbe (HBR)
 Activity 2
Case of vodka, Erbe (HBR)
• Background
– Vodka entrepreneur, Brooks spent 5 years on beverage
deals in investment banking @Morgan Stanley, saw
opportunities in premium liquor market
– Took 1 year off to tend bar in LA and test ideas
– Came up with idea of a line of herb-infused vodkas
– Invested $250k of savings to get started
• Dilemma
– Cousin Tyler, quit his private equity job, found investor,
worked hard for Brooks for one month.
– Now Cousin Tyler demanded for half the equity
 Archipelago
online collaborative learning tool
• Step 1: Open email sent to you from arch-
noreply@archipelago.1.comp.nus.edu.sg this morning
• Step 2: Click on link “To Archipelago” in email
– Note this link is unique to you. Do NOT share your link.
• Step 3: In Archipelago environment, on left panel, click
on Activity 2 – you will see questions in main window
• Step 4: Key in your responses in Activity 2 main
window
• Step 5: when done, click “Submit Answer” on bottom
right of main window.
 What are the Rewards

IPO in Feb 1990, mkt cap: $224m, both had $170m

First financing

Investors,
40% First financing
Investors,
9%

Founders, 60%
Founders,
91%

Source: Digital Intelligence Today, IPO $104b, May 2012

How to split the equity pie

Past contributions Future contributions

Prior experience as serial

Our opportunity costs
entrepreneur

Source: Noam Wasserman

How to split the equity pie

Earlier or Later

Static or Dynamic

Source: Noam Wasserman

 Drivers & Effects of equity split

Equal splits more likely to Unequal splits more likely to

happen happen

Homogeneous founders Heterogeneous founders

Less prior work experience More prior work experience

Relatives Non-relatives

Smaller teams Bigger teams

 Summary
Building a Founding Team

CEO

Relationships Roles Rewards

 Readings
Building a Founding Team
Read
• Cisco Just Turned 30: This Is The Dramatic Story Of How The Founders Were
Ousted
http://www.businessinsider.sg/how-ciscos-founders-were-ousted-2014-
12/?r=US&IR=T#.VuVpJ6Mj-iA
• Xiaomi’s Phones Have Conquered China
http://mobile.businessweek.com/articles/2014-06-04/chinas-xiaomi-the-worlds-
fastest-growing-phone-maker
• Founder’s agreement
http://www.jfdi.asia/terms
https://www.docracy.com/6348/founders-agreement-template
• Cheah et al. (2017) Chapter 3, Starting the Venture, Facing Down Failure, 2 edition
(Pearson online coursepack)
Watch
• Hiring the Right Employees 1 and 2 by NUS Biz School Production
(IVLE/ Multimedia)
 Readings
Building a Founding Team
Read
• Jack Ma’s last speech as Alibaba CEO
https://www.techinasia.com/alibaba-jack-ma-last-ceo-speech/
• Jeff Bezos: We are what we choose
http://www.businessinsider.com/we-are-what-we-choose-2010-6?IR=T&r=US&IR=T
• Jack vs Jeff
https://www.techinasia.com/jack-ma-jeff-bezos-amazon-alibaba-billionaires-
ecommerce/
Optional Reading
• Bass, B. M. (2008). The Bass Handbook of Leadership: Theory. Research, and
Managerial Applicati ons. 4th.
• Meredith Belbin, R. (2011). Management teams: Why they succeed or fail. Human
Resource Management International Digest, 19(3).
• Zahra, S. A., Ireland, R. D., & Hitt, M. A. (2000). International expansion by new
venture firms: International diversity, mode of market entry, technological learning,
and performance. Academy of Management journal, 43(5), 925-950.
 Preparation for Tutorial 2
7 Sep 2017

Pre-tutorial activities:
• Read Tware case (Healthcare/Medtech) (Pearson online coursepack)
• Read Cheah et al. (2017) Chapter 2, Developing a Product and Service
Offering, pp. 39-46, Facing Down Failure, 2 edition (Pearson online
coursepack)
• Read Blank, S. (2013) Why Lean Start-Up Changes Everything
• http://hbr.org/2013/05/why-the-lean-start-up-changes-everything/ar/1
• Review Lecture 2 notes
• Watch Customer Discovery Process by Steven Blank
• https://steveblank.files.wordpress.com/2014/06/what-is-customer-
discovery.m4v
• Watch Customer Discovery Process video by NUS biz school production
(IVLE/Multimedia)
 Preparation for Tutorial 2
7 Sep 2017
Pre-tutorial activities:
• Read Tware case
• Please go through the reading and answer the following
questions:
1. Critically evaluate the pivoting process that Tware went through.
Discuss whether Tware’s offerings would attract you (in your
capacity as a consumer). Suggest new offerings that Tware can
make, and new business models that it may pivot into, with
reference to the lean startup approach.
2. Identify the challenges that Tware is facing. Using lean startup
method, recommend a plan of action for Tware to overcome these
challenges.
 About Individual Assignment Options
How to use Facing Down Failure (FDF) cases in
Pearson online coursepack

FDF Cases Industry Tutorial Assignment

Option
QLC ICT, Edtech 1 A, C, D
Healthcare
Tware 2 B, C, D
Medtech
Digify ICT, Securitytech 3 A, C, D
Vault Dragon Healthcare, EHRtech 4 A, C, D
InvitroCue Healthcare, biotech 5 B, C, D
I3 Precision Healthcare, Medtech B, C, D
Fashion
Her Velvet Vase C, D
e-commerce
One Rochester F&B, wedding event
C, D
Group management