Editor’s note: Bill Warner writes “The Angel Connection” which is a regular feature in WRAL Local Tech Wire. LTW asked consultant Bill Warner to share advice for entrepreneurs seeking angel investors and/or venture capital investment. He is chairman of the Triangle Accredited Capital Forum, an angel investor network with over 100 members throughout the Southeast.

This is the first of a two-part article.

RESEARCH TRIANGLE PARK, N.C. – With the economic downturn and unemployment rising, many more people than ever are thinking about starting a company. As a company founder, you should know what you are getting into.

The business and personal behavior of a company’s founder will, at any time in the history of the company, determine whether the company will succeed or fail. Venture firms know that. Banks know that. Public grant associations know that. Attorney and accounting firms know that. Most well-informed private investors know that. As a company matures, there are many transition points that require the founder to make key decisions:

• Selecting the founding team
• Picking advisors
• Funding the company
• Selecting the management team
• Deciding when to step aside or give up ownership
• Selling the company

Founder block

If the founder handles these decisions intelligently, the chances for success are much higher. If not, the company will experience a quick demise. I call this ailment “Founder Block.” Major roadblocks to success occur when:

• Founders pick incompatible founding team members who don’t share the vision and buy into the business proposition
• Inexperienced and irrelevant advisors are picked to assist with the business
• Founders display inappropriate business behavior that shakes investor confidence that the founder has the required maturity
• The founder does not relinquish control to the management team
• They don’t step aside when more qualified people are needed to run the company
• Founders balk when share ownership changes occur and when the company is going to be sold

At the start-up of the company

Let’s start at the very beginning of a company’s life. The founder has a vision and an idea for a company. The founder does the research and creates a business plan to flesh out the idea and determine if a viable business can be created. Depending on the type of business, the founder might need other people with different skills to join in the early formation of the company to complete the business plan and actually get the company started. This founding team has to be put together considering the following essential principles:

• Every founder has the passion for the vision and is willing to make incredible personal sacrifices to accomplish it
• Everyone has skin in the game, in both time and money
• They all agree on the business plan
• The founders create the culture of the company and have compatible business and personal values
• Everyone is an “A” player, and their skills are complementary and necessary to create the company
• They work well together

Business advisors

Every successful company has had solid business and technical advice from a small group of highly qualified and relevant advisors. A board of advisors can help a struggling founder avoid a lot of early pitfalls. Considerable thought is required to pick them, making sure the advisor team consists of:

• Relevant technical expertise within the company’s selected industries
• Business development experience and a broad array of contacts in the company’s market segment
• People with a broad range of experiences in business, finance and management
• People with complementary product or services experiences that can assist with determining alliance partners

Tuesday: Getting down to business

About the author: Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.