GATHERING RESOURCES:

FOUNDING TEAM,
INVESTORS
Dalhia Mani
nsrcel
Gathering resources
 One of the biggest sources of uncertainty in a
startup is finding the right team (co-founders,
employees, and investors)
 The business simulation game mimics this real-life
problem so you experience the process of finding
your right match, and negotiating and finalizing
terms.
 And helps us learn lessons experientially regarding
the trade-offs involved and some frameworks to
help navigate these situations.
 Tradeoffs when gathering resources
 Giving up control versus attracting talent, investors
 Diversity versus homogeneity when assembling a team

 Getting the right combination of skills for the task at hand

(how good is a potential employee really)
 Getting needed funding (not too much, not too little)
without giving up too much stake
GOAL
 Your goal is to participate in a successful startup.
 Founders will search for key employees and funding.
 Investors will decide which startups to back financially,
and negotiate equity in return.
 Employees will try to join companies that they think will
be the best matches, and negotiate for the best terms.
 When you close a deal, be sure to record it. Otherwise,
it will not count. This is the responsibility of the
employees and investors.

Time starts now – You have 45 minutes

Game debrief
 Tradeoffs when gathering resources
 Giving up control versus attracting talent, investors
 Diversity versus homogeneity when assembling a team

 Getting the right combination of skills for the task at hand

(how good is a potential employee really)
 Getting needed funding (not too much, not too little)
without giving up too much stake
 Market cleared?
 Spikes in demand for certain skills, certain startups
 Coalition behaviour – syndicates
 Employees playing startups off each other
 Who don’t do anything
Rich versus King
 In the game, decisions about how much control to give
up to get investments, employees

 Rich: Maximize return by hiring high-end employees,

delegating authority, and taking on investment
(Wasserman 2013)

 King: Maintain control and give up little equity, making it

harder to get talent and raise money (Wasserman 2013)
Rich versus King
Funding
 In the game, choice about how much money to raise – not too much
and not too little!
 Funders get control and equity in return for investments
 Important to balance immediate needs for funds with the desire to
get the best terms possible
 Funders can provide more than money: The right funders can provide
prestige, access to resources, networks (Ferrary and Granovetter
2009)
 Negotiation determines value and nature of deals. It is a market
where value is determined by a matching process of who is willing
to give what
 At an early stage, valuation is more art than science, funders look at
the team, market, product, pitch and other factors (Waldron &
Hubbard 1991; Miloud, Aspelund and Cabrol 2012)
Diversity/Homogeniety
 In the game, companies had exploratory and exploitative
strategies. What is the difference?
 Startups have Exploratory or Exploitative strategies
 Exploratory: Radical innovation and new ideas
 Exploitative: Smaller improvements and fast execution
 Exploratory startups best served by diversity
 More diverse teams are better at solving hard
problems
 Each unique affiliation on TMT increased chances of
getting VC by 7-12% (Eisenhardt and Schoonhoven
1990)
 Exploitative startups slowed down by diversity
 Less diverse teams tend to act and agree more quickly
 Bring products to markets quicker (Beckman 2006)
Skills
 In the game, there are many “lemons” – no clear
way for companies to assess.
 Resources are smaller and stakes are higher - Talent
differences can have large future implications in
many positions at startups (Burton & Beckman,
2007)
 The best programmers may be 20x better than the
worst (Sackman et al. 1968)
 Top hires help attract other top hires
 Best practice: Incremental hiring process
Results?
Key Takeaways
 Diversity of skills, backgrounds, perspectives works best in an
environment where the task is exploratory
 Homogeneous teams tend to perform better, faster when the task is
exploitative.
 “Rich” versus “King” approaches reflect different preferences
regarding control. The “rich” approach doesn’t mind a small share of
a larger pie.
 Assembling the right set of skills is crucial though a less visible and
quantifiable aspect of a startup
 Funding should be need-based (not too much, and not too little)
 Funding and valuation is a matter of negotiation and norms.
Matching process