Chapter 9: Building a New Venture Team
3 Formal Roles of Board of Directors
-Appoint the firm's officers (the key managers) -Declare dividends -Oversee the affairs of the corporation
NV team is more than paid employees; also includes:
-Boards of directors, board of advisers, and professionals they rely on for advice.
Factors that May Contribute to Founders' Success:
-Firm Started by a Team -Higher Education -Prior Entrepreneurial Experience -Relevant Industry Experience -Ability to Network Effectively
Elements of a New Venture Team
-Founder or Founders -Key Employees -Management Team -Boards of Advisers -Lenders and Investors -Board of Directors -Other Professionals
New Venture Team
-Group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm
new venture team
A __________ is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.
appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation
A board of directors has three formal responsibilities:
declare dividends
A board of directors has three formal responsibilities: appoint the officers of the firm, oversee the affairs of the corporation, and:
appoint the officers of the firm
A board of directors has three formal responsibilities: oversee the affairs of the corporation, declare dividends, and:
outside directors
A board of directors is typically made up of both inside and:
inside and outside directors
A board of directors is typically made up of both:
Skills Profile
A chart that depicts the most important skills that are needed and where skills gaps exist in a new firm.
F
A founding team larTer than two people is typically too large to be practical
T
A new venture team is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.
Heterogeneous Team
A team whose individual members are diverse in terms of their abilities and experiences.
Homogeneous Team
A team whose individual members' experiences and areas of expertise are very similar to one another.
executive search firm
A(n) __________ is a company that specializes in helping other companies recruit and select key personnel.
advisory board
A(n) __________ is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis.
provide guidance and support to the firm's managers
According to the textbook, although a board of directors has formal governance responsibilities, its most useful role is to:
5 and 15 members
According to the textbook, most boards of advisers have between:
are one of the most consistent predictors of future entrepreneurial performance
According to the textbook, prior entrepreneurial experiences:
50 to 70 percent
According to the textbook, studies show that more than one individual starts __________ of all new firms
there is no relationship between a founding team's size and its effectiveness
According to the textbook, which of the following statement is inaccurate regarding the size and composition of the founding team of a firm?
T
Although a board of directors has formal governance responsibilities, its most useful role is to provide guidance and support to the firm's managers.
advisory board
Amy Phillips founded a cosmetics firm several years ago. Her firm has grown rapidly and is financially successful. One thing that Amy attributes her success to was that early on, she assembled a panel of experts who provided her ongoing direction and advice about her business. What Amy created is called a(n):
T
An advisory board can be established for general purposes or can be set up to address a specific need.
T
An advisory board is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis.
F
An inside director is someone who is not employed by the firm. An outside director is a person who is also an officer of the firm
signaling
Betty Cassidy just launched a firm in the medical products industry. On the day the company was launched, Betty issued a press release, indicating that the vice president of Johnson & Johnson, a highly respected drug company, had agreed to serve on her board of directors. Betty knows that such a high quality appointment will send an important message to her potential clientele. This phenomenon is referred to as:
T
Consultants fall into two categories: paid consultants and consultants who are made available for free or at a reduced rate through a nonprofit or government agency.
board of directors
Dave Harrison is in the process of launching a financial services firm. He plans to incorporate the firm. Because the firm will be incorporated, Dave is legally required to have a:
F
Founding teams that are working together for the first time, as opposed to founding teams that have worked together before, have an advantage.
T
Heterogeneous teams are diverse in terms of their abilities and experiences
F
If a new venture organizes as a corporation, it is legally required to have a board of advisors.
board of directors
If a new venture organizes as a corporation, it is legally required to have a(n) __________, which is a panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm.
inside director
In the context of boards of directors, a(n) __________ is a person who is also an officer of the firm.
outside director
In the context of boards of directors, a(n) __________ is someone who is not employed by the firm.
F
It is generally believed that new ventures started by an individual have an advantage over those started by a team.
networker
Jake Sanderson is a three time business owner. One thing that has served Jake well throughout his entrepreneurial career is his ability to build and maintain relationships with people whose interests are similar or whose relationships could bring advantages to his new ventures. According to the textbook, Jake is a good:
new venture team
Jason Kemper is preparing to launch a home security firm. The team of people that will launch Jason's firm are as follows: Jason (CEO), Tim (VP-Finance), Carey (VP-Sales), a six person Board of Directors, a five person Board of Advisors, and Jason's primary investor, who will assume an advisory role. The group of people that will launch Jason's firm is called its:
advisory board
Jim Kite recently launched a printing company. One thing Jim is now thinking about creating, is a panel of experts who can provide him with ongoing direction and advice regarding the future of his business. Jim is thinking about creating a(n):
liability of newness
Kate Ellington started a software firm two years ago. Unfortunately, the firm failed after 18 months. Kate attributes the failure of her firm to that fact that her employees couldn't adjust quickly enough to their new roles and because her firm lacked a "track record" with outside buyers and sellers, which made it difficult to form partnerships and make sales. Kate's suffered from what research calls the:
outside director
Keith Barnes is a general partner in a venture capital firm that just funded South Florida Software, a software firm in Coral Gables, Florida. South Florida Software is incorporated, and Keith has taken a seat on the firm's board of directors. In board of directors terminology, Keith is a(n):
signaling
Michael Castor just launched a firm in the wireless communications industry. Shortly after the company was launched, Michael announced that a prominent Silicon Valley venture capitalist had agreed to serve on his board of directors. Michael knows that such a high quality appointment will send an important message to his potential business partners and clientele. This phenomenon is referred to as:
inside director
Michelle Collins is the Chief Financial Officer of a startup in the electronics industry. She is also a member of her firm's board of directors. In board of directors terminology, Michelle is a(n):
T
Most boards of advisers have between 5 and 15 members.
T
Networking is building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm.
SE Case
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Board of Directors
Panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm. A board is typically made up of both inside and outside directors.
T
Prior entrepreneurial experience is one of the most consistent predictors of future entrepreneurial performance.
T
SCORE currently has over 10,500 volunteers, who are typically retired business owners.
T
SCORE is a for-profit organization that provides consulting services to small businesses.
F
Similar to a board of directors, an advisory board possesses legal responsibility for the firm.
F
Studies show that more than one individual starts 90 percent of all new firms.
Consultants
Subject matter experts hired to analyze and assist an organization with a problem utilizing their expertise (can be pro bono "free")
executive search firm
Susan Griffin is in the process of launching a firm in the communications industry, and is trying to identify job candidates to fill the roles of Chief Marketing Officer and Chief Financial Officer. Rather than spend considerable time trying to identify candidates for these positions, she has decided to hire a firm that specializes in helping other companies recruit and select key personnel. Susan is planning to hire a(n):
brings entrepreneurs together to learn from each other's successes and failures
The "Partnering for Success" feature in Chapter 6 focuses on the Young Entrepreneurs' Organization (YEO), which is a nonprofit organization for business owners under age 40 who are leading companies with sales of $1 million or more. The YEO is a peer group, which:
conduct meetings online
The "Savvy Entrepreneurial Firm" feature in Chapter 6 focuses on the challenge of finding a convenient time and place for a firm's advisory board to meet. A possible solution to this problem mentioned in the feature is to:
relevant industry experience
The "What Went Wrong" feature in Chapter 6 focuses on Garden.com, a 1996 startup in the online gardening supplies industry. According to the feature, Garden.com's failure is a vivid reminder of the importance of __________ for the founders of a new venture.
Founders
The ______________characteristics, and size of the team, significantly impacts the success of the new venture
Signaling
The act of a high-quality individual agreeing to serve on a company's board of directors, which indicates that the individual believes that the company has the potential to be successful.
F
The fact that a corporation has a board of directors precludes it from having a board of advisors.
liability of newness
The fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and sellers, is referred to as the:
the people who start the firms can't adjust quickly enough to their new roles and the firm lacks a "track record" with outside buyers and sellers
The high failure rate among new ventures is due in part to the liability of newness, which refers to the fact that new companies often falter because:
diverse in terms of their abilities and experiences
The members of heterogeneous teams are:
similar in terms of their abilities and experiences
The members of homogeneous teams are:
board of directors
The panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm is called the:
networking
The process of building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to the firm is called:
T
The term liability of newness refers to the fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and suppliers.
firm started by an individual rather than a team
Which of the following qualities was not identified in the textbook as a preferred attribute of the founder(s) of a firm?
prior experience working in a government position
Which of the following qualities was not identified in the textbook as a preferred attribute of the founder(s) of a firm?
if a firm has a board of advisory it is not permitted to have an advisory board
Which of the following statements about advisory boards is incorrect?
similar to a board of directors, an advisory board has legal responsibility for the firm in certain areas
Which of the following statements about advisory boards is incorrect?
SCORE is a for-profit consulting agency that has over 10,500 employees
Which of the following statements about business consultants is untrue?
Teams that are working together for the first time have an advantage over team that have worked together before
Which of the following statements is INCORRECT regarding founding teams?
founders with experience in the same industry as their new ventures will typically have "blinders" on and are typically not as effective as founders new to the industry
Which of the following statements is NOT true regarding the attributes of the founder or founders of a firm?
it is generally believed that new ventures started by an individual have an advantage over new ventures started by a team
Which of the following statements is UNTRUE regarding founding teams?
if a new venture organizes as a corporation, it is not legally required to have a board of directors, but it is strongly recommended
Which of the following statements is incorrect regarding boards of directors?
It is generally believed that new venture teams started by an individual have an advantage over new ventures started by a team
Which of the following statements is incorrect regarding founding teams?
Customers
Which of the following was NOT identified in the textbook as an element of a new venture team?
suppliers and vendors
Which of the following was NOT identified in the textbook as an element of a new venture team?
avoid the use of committees
Which of the following was not identified in the textbook as one of the guidelines for forming an effective board of directors?
pick members who are personal friends of the firm's founders
Which of the following was not identified in the textbook as one of the guidelines for forming an effective board of directors?
help manage the day-to-day activities of the firm
Which of the following was not mentioned in the textbook as a way that lenders and investors add value to a new venture, beyond providing money?
liability of newness
companies start to lose strength because: people who start them not able to quickly adjust to new role & firm lacks track record with outside buyers/suppliers
NVs have a high likelihood of ______ ; due to ________
failure, liability of newness