Restructuring and leadership in the start-up world

A start-up’s not like a large corporation with a thousand people. With only a handful of executives in place, their individual behaviour will dramatically impact the business’s development. Appointing the wrong person can have drastic consequences, especially during the early stages of the business’s growth. Here are some factors to consider. 

The other side of restructuring 

When people hear the word “restructuring,” it tends to have negative associations. It’s a phrase you often hear in reference to a company that’s struggling or even on the verge of bankruptcy.

It’s not always a bad word, though. For a start-up, restructuring can be a good thing. There are three situations where it’s liable to happen:

1. The company’s preparing to raise money 
2. After the company receives an injection of funds
3. The company is getting ready to sell

All of these scenarios are positive signs. I want to concentrate here on the first one and in particular the importance of having the right leadership in place when a company is trying to grow.

Identifying the right type of leader

Conventional wisdom has it that in the highly competitive world of start-ups, you need a great idea to succeed. But there’s another school of thought about this.

In my previous career as an entrepreneur, when I was looking to raise funds for my business, I met with someone at a bank who told me something that opened my eyes. 

“You always take an average idea backed by a great team over a great idea backed an average team,” he said. 

When I asked him why, he elaborated: “It doesn’t matter how much money you put into a company if it’s the wrong people.” 

So what should you look for in a start-up’s leadership? Obviously, they need to have a certain level of expertise in their field; otherwise, you wouldn’t even consider them. Beyond that, here are some key qualities to look for.

• The ability to manage expectations: Good communication skills in general and the capacity to manage investors’ expectations in particular are essential for start-up executives. When you have several investors on board, differences in vision tend to arise. The company’s leadership needs to unify everyone around a common vision aligned with the business’s five-year development plan.
• The ability to inspire others: This is not an easy quality to quantify, but you know it when you see it. At Strato, I look for people who offer a mixture of vision, charisma and elegance. It’s an intangible that plays a crucial role, especially in the early years, when it’s difficult to separate a company’s brand from its leadership.
• The ability to leverage the expertise of others: Sometimes, entrepreneurs believe they can do everything themselves. This represents a risk – especially if that person ends up leaving the company. A start-up executive should be able to work with others to build the business and delegate tasks to those with expertise.

Minimizing risks with strong leadership

Chasing after money is part and parcel of doing business as a start-up. However, one thing I tell my start-up clients is that money isn’t necessarily more important than leadership. 

If I were an investor, I would only want to put my capital into a company with a strong executive team. And I would make sure to vet a start-up’s leadership and HR structure before investing in it.

As it happens, here at Strato we’re developing a consulting service that will help investors select companies to fund – the first of its kind in Quebec. Part of this service will involve reviewing the HR and financial structure of potential funding recipients to ensure they have the right plan and talent in place.

Why? Because this is essential in order to protect both the start-up and potential investors against risks.

NB: There are resources available to help start-ups in these areas. For instance, in Quebec, the Centre d’entreprises et d’innovation de Montréal, an organization that focuses on innovation, mainly in the IT sector, can provide support, knowledge and coaching for executives and employees. In Ontario, there is a similar organization called StartUp HERE Toronto to support the growing startup community in Toronto and the broader Toronto-Waterloo innovation corridor.

About the Author

Before joining Strato’s executive recruitment team, Nicolas Pallares held sales and management positions in the B2B and B2C distribution, manufacturing and IT sectors for a dozen years, then started his own company with two partners in the entertainment industry. Today, he draws on these diverse experiences to match CEOs and VPs with the right companies, especially SMEs, based on a client experience-centered approach.