EC1 Capital Advisor Roy Vella's story of how a team saved his company from going bust.
EC1 Capital Advisor Roy Vella is a former PayPal and RBS executive, but it was at his own startup where he saw that building a strong, committed team on the foundation of exceptional individuals can be the difference between a company’s life and death.
“Its under adversity and stress that teams show their true colours”
In April 2000 Roy was just about to close a $15million series A funding round, but against the backdrop of the impending dotcom bubble burst they lost their VCs just 2 days before the expected closing. That left them with just seven weeks of burn, no where near enough time to raise another $15million, particularly at that time. So they were forced to take the decision to sell, but even then they didn’t have nearly enough time to find a buyer. Drastic steps had to be taken.
The founders’ first action was to go to zero salary to eek out a few more days and give them an ever so slightly better chance of finding a buyer. But of course, on its own this wasn’t anywhere near enough so they came up with what Roy calls a “compensation deferral program” for employees.
The offer was this: if an employee was willing to defer a portion of their pay they’d get a 50% bonus on that amount when the company sold, the flipside being they might get nothing if they failed to sell. In such an environment, when it seemed the very future of the internet was hanging by a thread, you could be forgiven for expecting a low rate of adoption for the this “deferral program.” But actually 95% of staff deferred an average of 75% of their salaries, turning a 7 week runway into 7 months of burn.
This was enough time to approach around 30 potential acquirers, start having serious conversations with 5 of them, receive three good offers, and eventually settle for one.
Roy puts this down to his awesome team.
Without the team being prepared to take risks for the company, they would never have had time to find a buyer. On top of that it was a huge selling point that the team had enough belief and desire to stay together that they would take such a risk for the company. As Roy says, “the strength and belief of the team saved the company.”
In this article you’ll find out how you can build your own team and culture that could just be the difference between success and failure.
“Building a team is the essence of any company and it’s not about hiring individuals, its shaping a team that works together well”
Back in the days before LinkedIn it was through personal referrals that you started making connections. Roy and his co-founders would ask everyone they felt they could in order to find people who were right for their company. Still today there is nothing as valuable as having a strong network to tap into, but hiring someone also gives you the opportunity to tap into theirs. Roy hired people who “brought their own strengths and assets to the table but also brought the strength of their network too.” This is a point that many hirers overlook, but it is really important according to Roy. Not only is there the obvious benefit of having their connections to tap into, but a high quality network is also a sign of a high quality person… and at the very least it means people can stand them.
Tip - look beyond the candidate, check out their network and make it a part of your hiring decision.
“Someone who is strong and confident in what they’re doing wants to hire someone who is as strong or confident, if not more so. They want to hire a peer or someone they can learn something from.” This means when building a team you should always look to level up - arguably this is a defining characteristic of great CEOs - the ability to convince those more experienced than them to join their company. Roy says if you can do this “everyone will be pushing everyone else to excel, grow and go further … so there’s a lot of mutual respect and understanding.”
Tip - don’t look for people you can teach, be strong enough to look for people who can teach you, and be good enough to hire them.
Tip - if you’re the smartest person in the room, you’re in the wrong room.
In Roy’s case, when funding fell through just 48 hours before closing their round he could be forgiven for taking a step back from the company and keeping his cards close to his chest. But instead he and his cofounders fronted up as soon as they could. “If you’re transparent and open then you garner trust because you’ve earned it” - Roy says being this way was a huge factor in people staying on and taking their deal, and giving the company a chance to sell.
Tip - being open is more than about being a nice boss, its a factor of management that gets people invested in you.
Roy’s worked for an extremely large corporation when at RBS so he knows a thing or two about hierarchy, but he didn’t have much time for it at his company: “hierarchy breeds bureaucracy which breeds politics which makes everything less transparent, thats a natural progression.” As a founder of a business in the early days you have to ensure that there is no rigid structure that will restrict contributions, a startup needs all the help it can get.
Tip - a flat management structure gives you access down, as well as people access up. Both these things are of huge benefit to startups in terms of culture and contribution.
As Roy’s story shows, the strength of your team and the culture of your company really come into use when your back is against the wall. However, he says that although your company culture may feel strong when things are going well, unless you “stress test” your team you can’t be sure it will hold together when the chips are down. How to do this? Set deadlines and targets, not arbitrarily and certainly not impossible - you won’t be able to justify either of these things - but challenging enough to probe for tears in your team fabric. Aside from anything else it’s good practice.
Tip - work in sprints to keep the team motivated. Developers have worked like this forever and it preps the team for when times aren’t going smoothly and as we know, that’s when the strength of the team really matters.