Top Lessons in Building Great Teams from Founders Fund

The Team You Build Is The Company You Build

Startups can get distracted by their awesome product, great design or breakthrough technology, but if you don't have the right people who can support that and leverage it out, for five to 15 years, you're not going to be to build an iconic company.

Mr Rabois said, “We learned this lesson at PayPal. We had an incredible density of talent, in one building, mostly in mountain view. And it was a heroic sort of mission.That was a company that absolutely should have failed, but for the extraordinary efforts of a couple hundred people and really 20 to 40 people that were absolutely amazing. So as an investor, and as a board member, and now as a VC fund, we obsess on, ‘what is the core team and what is the core team for this specific type of project.’.”

Investing in a Startup

Most investors like to get involved as early as possible, partially because they can help with the team building to ensure the foundation of the team is as strong as possible; rather than trying to fix things later. Culture and team building are a lot like concrete. When concrete's in liquid form, it's very malleable and you can shape it easily, but once it solidifies, you have to use a JackHammer. But how do you know something is worth investing in?

Mr Rabois said, “The thing that stands out is there's at least one founder who has this ridiculous spark of, you know, you're in the presence of potential and greatness. You see this spark that you just don't see in normal people. And for me to make an investment early, before there's a product or before there's metrics, there's a spark. I'm saying, I don't even know if I buy the idea, but this person is incredible and I’m, sort of be lucky to work with them.”

Team Evolution

Most startups have an average of three to five core problems to conquer before becoming successful, and once they decompose each of them, their job is to find the best person in the world to solve each specific problem.

Mr Rabois said, “It's like, okay, we are here and we want to go there. What are the two to five most likely problems that we're going to encounter? How do we address them or validate them as fast as possible? And do we have the right person who's the ‘Directly Responsible Individual’ for delivering that. And if not, I’ve got to go find that. The earlier you have the three to five people mapped against the three or five most important things, the more likely you are to succeed.”

Internal Promotions Versus External Hires

Every individual in a company has a growth curve and every company has a growth curve. You can only promote people internally if their personal growth curve is exceeding the company's growth curve. So perversely, the faster your company grows the less you can do internal promotions, people just can't evolve that quickly. Fortunately, even the most successful companies grow at a steady pace, so you have a chance of keeping the people that are growing faster than the company and promoting them, grooming them, mentoring them.

Mr Rabois said, “ [Internal promoting] Certainly has less risk in the sense of cultural transformation, but you have to have a way of teaching and mentoring to do that successfully. You probably wind up at best with a ratio of 50% internal promotions. That's very healthy if you can do that ratio, 50% external hires that keeps most things working pretty well, but it takes a lot of work to be able to survive with that ratio. On the team building again by a Series B, the metrics are kind of speaking for themselves and so you can identify what parts of the team sort of need upgrading almost empirically. Series A, you're still taking a leap on a story, a narrative about why we're going to change the world. We're going to conquer the world and ‘what are the gaps in that story’ is really where the hiring comes in.”

A successful company operates best when employees work with a team mentality, each playing a specific role and fulfilling long-term goals. Setting short and long-term goals with your team also becomes the foundation for daily tasks. Being enthusiastic about the outcome will help your team members to make sure they work with a sense of the big picture, knowing why every project they do is necessary for achieving the long-term goal.