Your First Investment: The Executive Team
By Vail Horton
A year and a half prior to launching Keen Mobility in August, 2001, I was scouting the University of Portland campus, where I was then a student, for people who could design prototypes for our products: innovative crutches, canes, and other items for the ambulatory disabled. I found a life science major and three engineers to tackle that job.
At the same time, however, I was looking to put together another more fundamental group: the executives with whom I would build the company. This, I would discover, was no small task. As a young company's core and energy center, this group is its motivator of talent and its face to the investment community. For the founder, the executive group provides a primary source of support and expertise.
THE VITAL INGREDIENT.
In short, the executive team is a most critical asset in a company's early stage, and thus, putting it together becomes an entrepreneur's most important first investment. It is also a difficult sell. Passion aside (and like most startups, we had that in bounds), funding at early-stage companies is limited, if it is available at all. The entity itself is little more than a legal document and a founder's dream.
At Keen Mobility, overcoming such obstacles to secure the executive talent we needed meant taking distinct steps, namely anchoring the company with the right second-in-command, recruiting to the strengths of who was available to us, bootstrapping, and, finally, editing the group so that it would serve our needs.
A look at each of these steps might be helpful to other entrepreneurs tackling the formation of this essential unit.
FINDING AN ANCHOR.
Keen Mobility was my idea, born of a personal involvement. I am ambulatory disabled, having been so from birth. Early on, doctors said I would never walk. Through the efforts of my grandfather -- the "Keen" in our company's name -- I was able to become mobile. Going forward, I would need products that would help me continue to be.
That said, passion alone doesn't build a company. Thus, the first member of an entrepreneur's executive team should be an individual who balances the founder's vision with an ability to attend to the details necessary to get the job done. For me, that person is Jerry Carleton, my senior-year roommate and now our company's president.
While I wasn't a good friend of Jerry's on campus -- his and mine are different personalities -- I was impressed with what I eventually learned about him. He had a 3.8 grade-point average, turned in every paper on time, served as student body president, and was active in campus ministry and volunteer services. Whereas I was the dreamer, Jerry was the dream-maker.
Young companies need such a person to make dreams come true. Jerry was my first recruit to the company's executive group. The lesson for entrepreneurs is to secure your venture with a strong number two, and to recruit for that person from among people you know.
BEST AND BRIGHTEST.
As a young company, it's easy to make a laundry list of executive needs -- indeed, there are so many of them -- and then sift through resumes looking for the right people to fill those spots. Instead, at Keen Mobility, I've learned that the reverse is apt to be more productive: sift through the people who are available to you looking for their strengths, and then recruit to those strengths. It's hard to go wrong using this approach because your company's needs at this stage are wide open.
Early on, for example, we retained a marketing consultant who helped us formulate our strategy in that area. We soon discovered that in a previous position, he had single-handedly outsold a required quota by 900%! Initially, we had considered tapping him in a chief operating capacity. Once we thoroughly understood his forte-, however, we recruited him to be our vice-president for sales. The lesson is to think, not out of the box, but from the outside in: Who out there is good at what it is he or she does, and is that a skill for which you have a need? If so, you've made an executive match.
THE BOOTSTRAP CHALLENGE.
Next, face facts: there's no getting around the given that a startup possesses little in the way of resources. The strategy for finding the best high-level talent under those circumstances is to bootstrap.
That I began my search for executive talent on a college campus wasn't just a matter of my familiarity with that environment. Young talent is less expensive, and better able to trade current income for future potential. The need to support families generally isn't yet a factor.
During our first year as a company, neither Jerry nor I were paid (nor, for that matter, were any of our employees). We drew our first stipend in June, 2002 and began regular payroll -- at the minimum wage -- in August. It was clear to the executive talent we approached that a day job (or personal resources) would be necessary to pay the bills. It was also clear that we, in turn, needed to be flexible regarding their other commitments.
DELIVERING ON PROMISES.
Another bootstrapping tactic is an entrepreneurial classic: sweat equity, or the agreement to work for less than the market rate in exchange for a stake in the company. Using this tactic, we were able to hire the experienced executives we badly needed: the aforementioned vice-president for sales, and our new chief financial officer, who joined in January, 2003.
A variation on this theme is the investor who takes an even bigger stake and contributes talent as well as money. In our case, this was Jerry's father, an experienced distribution executive, who has set up our system for assuring that products are delivered to customers once sales are made. As our largest investor, Jim Carleton is a de facto member of our executive group.
The lesson is to look everywhere for talent and be flexible about whom you bring in and how recruits are compensated.
MISTAKES? MOVE ON.
Startups are nothing if not works in progress, and central to the integrity of the ultimate design is getting the critical executive team right. It's likely not to happen at the first pass, which means that part of the entrepreneur's job is acknowledging mistakes, making changes, and moving on. Think of it as an editing process.
In the case of our first chief financial officer, whom we recruited from the college campus, the mistake involved a less than optimal fit. He and I often clashed over the issue of risk, with me believing that a startup needed to be more adventuresome than he was willing to allow. He left in the fall of 2002.
Another editing point occurs when considering consultants who might become recruits. In the case of our sales vice-president, we were able to secure from the consulting ranks a talented person for our executive group. Conversely, another sales consultant who put into place an effective system for creating leads wanted to advise us rather than get down in the trenches, and so we decided to "edit" him out before the fact.
VALUE FOR MONEY.
At Keen Mobility, we now have a committed executive group of four talented individuals. Using the tactics of anchoring the group with a strong second in command, hiring to strength, bootstrapping, and editing our ranks, we have been able to put together this core asset despite extremely limited financing.
As an early-stage company, your most important first investment is your executive team. Take the time and use these tactics to make it all that it can be -- an A plus business.
Vail Horton, 25, founded Keen Mobility Co. in August 2001 to provide enhanced mobility devices for the ambulatory disabled, and currently serves as chief executive officer. Based in Portland, Oregon, the company makes wheelchair cushions, crutches, canes, and related products. It expects revenue of $1.1 million in 2003. Horton's executive team includes of a president, chief financial officer, and vice presidents of sales. He is a 2002 graduate of the University of Portland with an interdisciplinary major in business, Spanish and philosophy.
Entrepreneur's Byline comes to BusinessWeek Online readers courtesy of EntreWorld.org, a resource for entrepreneurs that is sponsored by the nonprofit Ewing Marion Kauffman Foundation.
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