Top 3 VC Secrets to Team Building

Building a team is one of the most significant tasks for both founders and venture capital fund managers. Though not glaringly obvious, VCs and founders alike both have the same set of challenges when it comes to launching their firms. One of these is the matter of team building and recruiting top talent. Team formation is a crucial stage of any venture and the foundation of both an enduring venture firm as well as a successful startup. 

Peter Thiel, the co-founder of Paypal and investor at Founders Fund, in his highly acclaimed book ‘Zero to One’, refers to this phenomenon. Aptly, his theory is refered to as ‘Thiel’s Law’, and states that “A startup messed up at its foundation cannot be fixed.”

One of the key elements of a startup’s foundation is the team. When you think of some of the most successful startups of our time, one common theme becomes abundantly clear, a balanced team. When you look at Google, YouTube, PayPal and many other era-defining companies, you will see that they’ve had a perfectly constructed team, right from the start.

The team formation topic is a favorite of some of the most accomplished and successful venture capitalists, who have worked with such startups. To build a high-functioning team, founders can look to their counterparts in venture capitalists. Said VCs have a way of constructing highly functional teams for their own venture firms as well their portfolio companies. 

The Top 3 things great Venture Capitalists optimize for when team building are: 

1. Performance

Every person’s performance must be measured in both a startup and a venture capital firm. Doug Leone, Global Managing Partner at Sequoia says that this is the legendary venture firm’s number one ‘tenet’, and if an employee doesn’t have performance nothing else matters. This is because, at this crucial competitive stage, every member of the team must contribute something another member of the team cannot in order to beat your competition.

2. Culture

Every great startup has a great culture between the founding members and consequently the rest of the team. Initial hires are very important as they will later hire others and pass on their biases in a ‘domino effect’. This means that founders should be incredibly meticulous in their first batch of hires and not compromise on the culture fit. 

3. Diversity

Diversity has statistically been proven to lead to better performance. This can be diversity in gender, ethnic & socio-economic background, or diversity in thinking. Diversity allows a team to have both a broader set of skills and views of the market which leads to better performance in the long run. 

Read VC Lab’s in-depth guide on team-building.