FastTrac TechVenture

Chapter 7May 2, 2011

BUILDING THE TEAM

• Discussion tonight is on Building your Team– WHO• Employees• Board Members

– HOW• Recruiting• Compensation• Contracts

EMPLOYEES

• #1 HR Challenge around the world: Recruiting and retaining the “right” talent

• Know what you want and need– Knowledge/skill sets– Experience– Fit (assessments?)– Check out successful competitors– Look for rowers instead of people who want to work

out on a rowing machine (uncertainty, challenging waters, victories, defeats, survival skills)

EMPLOYEES

• How to Identify Potential Team Members– People you know– People known by a friend/co-worker– Employees of competitors– People who find you– Typical job listings---universities, Monster, etc.

• NOTE: Don’t take short cuts with the interview process

EMPLOYEES

• How to Determine the “Right” Pay– Surveys (e.g. salary.com), friends, the job

candidates– 70% of pay predictors correlate with company size– Salary? Commission on sales? Bonus? Stock?– Highly negotiable

• NOTE: No matter what someone says, pay matters

EMPLOYEES

• Considerations for Compensating with Stock– Dilution---e.g. 10% over 5 years?– Projected value—Cash + stock value/ # of years =

potential annualized value to an employee– Vesting—Immediate or earned over time– Restrictions---OK to sell? Buy/sell agreement?– Marketability—None, Some, Guaranteed?– Valuation---Formula? Valuation? Transaction?– Option vs Grant---Own now or buy later?

EMPLOYEES

• What about Contracts?– Employment contracts– Severance/termination agreement– Change of control agreement– Non-competition agreement– Non-solicitation agreement– Offer letter

EMPLOYEES

• Retaining Good Employees– #1 Interesting work– #2 Treated fairly– #3 Career growth opportunities

BOARD OF DIRECTORS

• How to Build a Board– Industry, legal, finance experience– Start- up operations– Investor– Majority should be independent outside directors

• Recruiting Board Members– Proceed with caution

• NOTE: Helpful to serve on other boards asap

BOARD OF DIRECTORS

• Organization– Elected by shareholders – Average size is 6 members (number grows as

company grows)– Board chair likely to be CEO– Specific term allows for a graceful exit– Fast track start-ups meet 6-12 times per year– Director and Officer liability insurance

BOARD OF DIRECTORS

• Primary Responsibilities– Assist with strategy– Provide proper risk management/governance• Financial oversight • Ethical behavior• Legal compliance• Reputational enhancements/Reputational damage• Acquisition/merger/liquidation event

– CEO compensation– Hire/fire CEO

BOARD OF DIRECTORS

• Compensation for Board Members– Equity plus travel expenses for early stage

companies– Equity equal to 0.5% – 2.5% of common

shares/director– Cap of approximately 10% of common shares– Initial directors might get more than late joiners– Non-executive chair will get more than others– Vesting schedule negotiable