Building the Winning Start-Up Team by Philip Bateman

“Building the Winning Start-Up Team”

At the end of this e-book you will understand the elements of a winning team, what investors and customers look for in start-up companies, how your team drives both the funding & marketing of your company, identifying gaps in management & technical capabilities and how to fill those gaps through employees, contractors, advisory boards, and advisors. Each section run 3 to 5 pages and will provide professional templates for job requirements definition, recruiting protocols, & reference checking. About the author: Bo Varga has 30 years business development, funding, strategic consulting, and team building experience. His primary focus is to bring money to companies via angel, corporate, private equity, VC investment, strategic alliances, development partnerships, or OEM sales. His experience includes operations, sales, and marketing management in computer software and peripherals and in leading edge reconfigurable computing systems. He has worked with clean energy, ecommerce, image processing, nanotechnology, reconfigurable computing, information technology, and wireless companies as well as consulting to government agencies and economic development initiatives. Bo's focus is on "right message to the right people at the right time." He has staged 60+ nanotechnology or clean energy conferences and forums since 2000, primarily through the nanoSIG. He networks at two or three technology commercialization or investing events each month, mostly in Silicon Valley.

1 The Professional Recruiterâ&#x20AC;&#x;s Contribution 2 Building the Winning Start-Up Team: Performance Requirements 3 The Recruiting Process: 4 Hiring, Motivating, Retaining Key Employees â&#x20AC;&#x201C; the CEO example 5 What Investors and Customers look for in New Companies 6 Identifying & Filling Gaps In Management

This introduction focuses on the value added which a professional external recruiter can bring to building the winning nano venture team. External Recruiters: A professional recruiter is a skilled consultant who can identify the best technical or executive talent in a particular industry or functional area of expertise. Professional external recruiters maintain a high level of confidentiality, a wide network of knowledge and resources, objectivity in candidate evaluations, and utilize negotiating expertise to ensure a win-win scenario. Selection of the right professional recruiter is of key importance. Companies should hire a recruiter who knows the industry and has experience hiring for your position. A good recruiter will learn your company, leverage existing knowledge bases to learn your specific needs – including your technology, market, and other key factors, will understand the stage your company is at, and will represent your company in a very professional manner. Typically recruiters are hired to fill positions of a critical nature, where the company wants to "hire the best and the brightest” or “the most experience & successful” individual who can plausibly recruited. External recruiters can set realistic expectations AND assist the company in avoiding mistakes in the hiring process by providing an objective analysis of a candidate based on a professional process, extensive candidate sourcing and interviewing experience, and by thorough referencing. Often, companies don't have a problem identifying candidates as much as they do assessing & evaluating the "fit" of the candidate within the firm's corporate culture – which ideally is driven by the business model, business plan, and stage in the company’s life. Assessing a cultural fit can be a difficult task for your team and yet is the most cited reason for executives & key talent not performing satisfactorily and not surviving within an organization. It is therefore of key importance to ensure that the candidates’ "fit" with the team is carefully vetted. A third party consultant can often add tremendous value in this arena. Further, start-up & early stage companies often rely upon incomplete or amateur reference checking protocols. Reference checking is a key requirement for determining the fit of a candidate for a position on your team. A professional recruiter will have timetested reference checking protocols & proven success at “listening to what is unsaid”.

1 The Professional Recruiter‟s Contribution The key elements which a professional recruiter can bring to your company are focus, specific expertise, industry awareness, top talent sourcing, negotiating skills, speed, & knowledge of the nano marketplace. Focus: An external recruiter can focus on your performance needs, especially critical in start-up & early stage companies where the in-house team is usually over-committed to existing projects. And I want to stress performance needs – often teams and companies focus on requirements such as education, experience, etc. while ignoring the only reason to hire an employee or consultant – to get the job done. Specific Expertise: The recruiter is a service provider hired for the added value and specific industry knowledge and expertise they bring to your team, especially the people networks which bring the top quality candidates and validate their capabilities. Industry Awareness: Professional recruiters spend their days talking to people who are knowledgeable about business. They know the competitive landscape, and what it will take to recruit key talent. Professional recruiters also know where the hidden talent is located and can identify individuals that can't easily be found through the Internet, newspaper ads, databases or from resumes in a filing cabinet. Executive recruiters have an edge because they have expertise in the industry in which they are recruiting. They can source candidates who will be viable candidates for the client. They become intimate with the details of the potential candidate's career history, are aware of the kind of opportunities these executives are seeking, and can effectively present the client with selection among the wide array of talent available. Top Talent Is Not Looking For A Job: Successful executives & senior technical people by and large do not spend time surfing the Internet for jobs, reading the classified ads or circulating their resumes on job boards. A professional recruiter's skill is often required to bring good people to the client. The best candidates are recruited through the joint efforts of both the recruiter and the hiring manager. If a company truly wants the best people, they have to find them proactively. This is not easy but is what professional recruiters do every day. Negotiating: The recruiter is an intermediary who can convey information, proposals, and suggestions between the parties, probe both parties, reduce misunderstandings, and increase the probability of a close. Recruiters know the package the client can offer. Recruiters amass considerable knowledge about the candidate, including details of the candidate's personal life and professional desires. With this information, the recruiter is able to enable a win-win scenario. The needs of both client and candidate are viewed from a position of mediation. Speed: Speed is critical in identifying and assessing the right individual for the opportunity, locating viable candidates who can fill the post and "ramp up" in terms of getting to work and achieving the company’s performance goals. Speed is also critical in terms of scheduling interviews, debriefing both parties, and then scheduling the followups to get to a close. Bo Varga  Copyright 2009

Knowing the Marketplace. Good recruiters advise their clients in identifying the right type of person and the salary required to attract them. Additionally, external recruiters can add value to their clients, providing alternative possibilities that are outside of the obvious choices and industries. Successful entrepreneurs & executives know that the fee paid to a good recruiter is an investment, not an expense. The recruiter is active in the marketplace and can act as marketing eyes and ears for the client, help the client company keep up with industry, and remain current not only on people but also technology, product, and market trends. Moving on to build the “Winning” Start-Up Team Entrepreneurs, investors, and recruiters often intersect to match a startup with experienced business management. However communication, ego, and power struggles can emerge which can break a company or significantly affect or the prospects for success or limit the success that is achieved. Many nano startups can have a standard set of weak spots in their initial management team – a lack of customer focus, little to no background in launching or heading a corporation, or technologists that cannot drive a business and develop a technology and get a product to market. Even companies with the strongest potential and IP can become an unattractive investment decision if the right management team isn’t in place and if a cooperative team environment with a focus on both the long term vision and short term performance goals is not set. The following 5 articles in this series of 6 will address: (1) building performance requirements for team members from the business model, business plan, & stage of company (2) establishing & maintaining a corporate culture focused on business success; (3) hiring-motivating-retaining key employees, consultants, and advisors; (4) the process, timing, & costs of building the nano team; (5) and the tradeoffs between permanent employees, long term consultants, and project consultants. And all 5 articles will cover the three most important elements for success – right team, & closing money & customers. The right team will attract the right funding from the right sources at the right time and in the right amounts – the necessary pre-condition for the success of most start-ups. And the right team will target and close the right customers at the right time – a sufficient condition for the success of most start-ups.

2 Building the Winning Start-Up Team Entrepreneurs, start-up teams, investors, and recruiters often intersect to match a startup with the experienced business management required for success. Different perspectives & needs & communication styles - as well as individuals egos - can lead to power struggles that can unify a team or break up a company. Building and maintaining a corporate culture focused on the company’s goals can promote success. Many startups have a standard set of weak spots in their initial management team – a lack of customer focus, entrepreneurs with little to no background in launching or heading a corporation, or technologists that cannot drive a business as well as develop a technology and also get a product to market. Even companies with the strongest potential and IP can become an unattractive investment decision if the right management team is not in place and if a cooperative and focused team environment is not established & maintained. Developing an operations plan with performance requirements – so current team members can see where they can & will perform and where new hires are needed – can also promote success. Article: This article addresses how job requirements should be based on performance requirements which are driven by the company’s business model, business plan, & stage of company. It also covers establishing & maintaining a corporate culture and the process of building a winning team. Objectives: Upon completion of this article, you will understand elements of a job requirement & job requisition, the key role of performance requirements in driving hiring, the importance of a corporate culture, and the importance of process in hiring. 1. COMPANY JOB REQUIREMENT

MONTH, DAY, 2009

(i) Usually job reqs cover job title, who the position reports to, job responsibilities, and experience, education, and technical skills. Rarely do they cover the only reason why anyone is ever hired – to accomplish a task, AKA performance requirements. Performance requirements are driven by the business plan, which in turn is driven by the business model and the stage of the company’s development – what needs to get successfully completed each week, month, and year in the company’s path to success. Standard business models include: Engineering Consulting / Consulting Services IP Developer / Licensing / Incubation Product Company – Direct Sales Product Company – Channel Sales Product Company – OEM

Start-up companies are usually opportunistic and may adopt a combination of business models, direct sales to some customers, joint venture & IP licensing with major corporate OEMs, etc. – and often transition from one model to another – one common model is moving from engineering consulting to a product model. Over time the start-up focuses on one model or develops divisions or business units focused on one model. The difficulty for a start-up is that people requirements for each model are different, the most obvious being the need for greater manufacturing people assets for a product company & greater engineering assets for a consulting company. Each model requires different business development, sales & marketing skills. Assuming the start-up accepts the need for experienced, successful executives in top management, different performance criteria and business experience will be required to successfully implmeent each model. For an initial period managers and executives can juggle multiple roles, but as business grows the need to focus increases (ii) The business plan has (or should have) a staffing plan, which falls out from the operations plan that documents how the company will implement the business plan and establishes performance requirements for each functional area. The priorities on the staffing plan drive the hiring plan, which in turn drives the job requisitions which are the basis for hiring. Professional investors, consultants, & recruiters can be of great help in preparing a realistic staffing plan and addressing key issues as they arise. One issue that often arises is unrealistic expectations about the types of people who can be hired – senior people bring their credibility & reputations to a venture and need to be “sold”. And the more desireable a candidate the more the candidate will want from a company in terms of maturity of technology, product, and funding and the scale of the business opportunity. So compromises will have to be accepted. As nanotechnology ventures are often spin-outs from academic, corporate, or government laboratories, nano start-ups are often led by scientists or engineers. In our experience the greatest single hurdle to success (and certainly to acquisition of funding) is the desire on the part of the scientist or engineer to retain control of his or her “baby”. The core requirement for raising money is a credible business team, with a CEO who has proven success at raising money, assembling a core team, and building revenue. Ideally the CEO will be supported by a technical team with people who have a customer & product & business focus – if they are not part of the start-up team then hiring them should be a major focus. These people will cost more, but will return this investment many times over. A fundamental error which occurs in hiring is to focus on credentials and not on outcomes. Even a focus on credential & experience can miss the point. The only purpose for hiring a permanent employee, on-going consultant, or project consultant is to achieve performance goals, desired outcomes - within the time, money, and other resources allocated for those outcomes.

A top level example of a performance driven job requisition follows. (iii) COMPANY JOB REQUISITION

MONTH, DAY, 2009

Title (Nominal) CTO Role (Real) VP ENGINEERING/DIRECTOR MANUFACTURING KEY PERFORMANCE REQUIREMENTS: (1) get coating manufacturing process set up within X months and Y budget (2) get production ramped up to Z units/week within 3 months (3) commit 20% of time with customers & strategic partners to close deals (4) commit 20% of time with CEO in managing deals, both close & on-going management KEY BACKGROUND REQUIREMENTS:  Strong management skills – minimum 10 years  Strong production skills – minimum 10 years  Chemistry or Materials Science Degrees, BS, MS, PhD  PhD not required, nice to have but proven ability to get things done is the key  Coatings Engineering & Production Experience  Strongly prefer hunter type – joint ventures, strategic alliances, customer closing  Experience: 1) Proven experience applying innovative technologies to product development, manufacturing, and release 2) Strong experience with polymeric materials 3) Blend of scientific talent and business success is key 4) Strong experience with advanced materials manufacturing 5) Proven experience with manufacturing scale up for polymer processing & testing, pilot plant build out 6) Strong focus on the least cost & least energy path engineering Following technical experience is useful, but specific domain knowledge (removed from this template) is not required: 1) Plastics for Electromagnetic Interference Shielding 2) Resins for High Temperature and Fire Resistant Composites 3) Resins for High Performance Composites 4) Plastics for Electrical and Optical Materials Other: Travel Requirement = 25% Will pay to relocate candidate Compensation: $125 - $175 based on business experience Performance Bonus – based on meeting or exceeding mutually negotiated goals Stock Plan – basic stock plus bonus stock potential

2. PERFORMANCE REQUIREMENTS AND THE WINNING TEAM. (i) Job Titles are political in nature, in our example above the VP Engineering position was not available as a founder was “holding” this title and was unwilling to switch to a CTO title due to personal career requirements, so an “equivalent rank” title had to be found. In addition, the company wanted to be seen as a technical innovator and in fact had a Japanese manufacturing partner, so a VP Manufacturing or VP Operations hire was not desired as the company did not want to be pulled too far in the manufacturing direction but wanted to focus on development of innovative coating processes. (ii) The example is a top level job requisition, which does not define the detailed parameters of job performance, which was defined by the business plan – in the case of coatings manufacture time & budget to get manufacturing process up & running, technical issues that had to be resolved, volume of square meters/day or some other metric used to measure the capabilities of the candidate – based on past performance and establish future performance criteria. (iii) Performance can only be measured by performance metrics - for example a CEO who has raised $1 million in private equity could be a good candidate for a company which wants to raise $2 million, but we would not recommend that CEO to a company which needs to raise $10 million or $20 million. Budgets, staff supervision, products released on time and on schedule, manufacturing volume & quality goals met - a variety of appropriate metrics can be used to judge past performance. Past performance measured by relevant metrics is the single best indicator of ability to meet target performance goals. The new start-up can rarely if ever afford on the job training! 3: BUILDING CORPORATE CULTURE (i) When we meet with founding teams and ask basic questions such as (1) where will the company be in 1, 2, 3 years in terms of products, customers, revenues and (2) where will you be in 1, 2, 3 years in terms of your responsibilities, compensation, work hours, etc. we often find that real lack of match in the vision of the founding team. Founding teams determine the future of the company, the “founder effect” is quite real and the founding team needs to consciously agree where the company is to go - in order to actually get there!

Agreement must be reached and maintained not only on goals but also on process. For example, will the team work on a consensual basis – everyone gets their say and work proceeds based on common agreement (typical “Japanese” model) or will the team work on an entrepreneurial, almost opportunistic basis (typical “Silicon Valley” model); Once vision is established and goals are set each executive, team leader, etc. leads in their area of responsibility and keeps others informed as required for common tasks. (ii) Founding teams should regularly meet to define and agree on goals for the company and the roles, performance criteria, communication and work process, and other factors that create the work environment. Once agreement has been reached on vision and goals this should be reflected in the company’s positioning in the marketplace, web site, and other aspects of the company’s appearance to both insiders and outsiders. (iii) Communication styles, spoken, written, presentation, coaching, mentoring, etc. are key requirements to build the desired corporate culture. This includes communications from the team to candidates and by candidates to the team. Some areas of measurement for new hires include focus, clarity, appropriateness, etc. In the case of technical personnel published papers can be one source of evaluation - as personal styles are present in even the most technical document. (iv) In the recruiting process for new candidates for hire, repeated interviews with all key people on the existing team – both 1:1 and group interviews, as well as requesting formal presentations in response to performance requirements and on topics of interest to the company are two key ways to determine communications styles and fits with corporate culture.

4: PROCESS KEYS TO BUILD A SUCCESSFUL TEAM I. Establish a formal hiring process, including interview protocols, reference checking protocols, and so forth – an example of a recruiting protocol follows. II. Hire top down – and have senior people work lower level jobs as required until funding or other constraints are relaxed to allow lower level team members to be hired. The keys to success in staffing are (a) the higher level people can scope out job requirements and are in a much better position to manage subsequent hires if they have successfully accomplished tasks (b) generally higher level people are better at multi-tasking and get more done in rapidly evolving and semi-structured start-up situations III. Hire “been there, done that” when possible – a start up lacks the resources – both people and the financial runway – to support “on the job training”, with the exception of specific domain knowledge relating to the company, its proprietary technology & applications, and marketing network. IV. Focus on benefits which align team members with corporate goals – bonuses, promotions, educational opportunities, flexible stock plans, flexible work places (i.e. mobile tools so team members can work at home, on the road, etc.) V. Stay as flexible as possible - leverage on-going and project consultants when possible, but convert them to “permanent” employees or hire a replacement when the role becomes critical for the company’s growth. Align consultants with corporate goals by providing stock & other benefits. While the short term cost will often be more when working with consultants, this is an investment in your company which can often yield major payoffs – including people referrals which eliminate recruiting fees! VI. Timing of the hiring plan should never prevent the hiring of stars who will be needed “later”. The performance of one star often cannot be duplicated by several intermediate players. We recommend the hiring of stars whenever they are found, assuming a cultural fit and compensation and other requirements that work for the company.

3 The Recruiting Process Introduction: This article addresses the actual recruiting process an entrepreneur or team can use and the knowledge, background and reference checking to establish baseline trust in a new team member. Objectives: Upon completion of this article you will understand how to develop a recruiting process and build an overall understanding of a candidate’s ability to meet performance requirements as well as the importance of reference checking using a protocol. Whether building a small team or a large team, one way to work efficiently and to avoid hiring mistakes - especially costly for a start-up - is to develop and use a formal recruiting protocol. While multi-talented individuals with a wealth of experience are not rare, the focus should be on the relevant needs of the company. A common mistake is to rely on external recruiters to submit candidates and let each hiring manager or the entrepreneur handle hiring. This process often results in uneven hiring, with very strong people in one area, say engineering, and weak people in another, say marketing. A formal recruiting protocol can avoid much wasted time and energy and money as well as many hiring mistakes. A template to be adapted to your needs follows: 1: RECRUITING PROTOCOL I. Establish position requirements & job description based on performance goals / desired outcomes, business experience, knowledge base, education, company business model & company culture – include all relevant people in this task, however the hiring manager should drive the process. And the perfect should not be the enemy of the good. I have seen 10 page documents – the goal should be a 1-page document, possible 2 pages. II. Review requirements, revise as needed, agree on compensation package – base salary, bonus, equity, relocation and other special benefits – and take a second look, ideally let a weekend pass before completing this task. And for senior positions review with Board of Directors, Board of Advisors, Investors, Corporate Lawyers, or other outside parties with an interest in the company but not involved in day-to-day operations. III. Get company agreement on recruiting process including who schedules the candidate, greets the candidate, “sells” the candidate on company history and goals and achievements, and who manages the candidate through the recruitment process, including candidate debrief and follow up post interview. This is often an external recruiter, whether working in house or only present to shepherd the candidate. If an external recruiter is not used the responsible person may be the hiring manager - but once a core team is in place a HR manager or specialist is best for this role. In the situation where an external

recruiter is not used, a specific person needs to be designated to shepherd each candidate interview. IV. Signoff on position requirement & recruiting process – each position needs signoff by the hiring manager and the recruiting team needs to signoff on the process V. Review & sign off on contract for services if external recruiter is used, otherwise

designated team member can be substituted when a recruiter is mentioned for the balance of this article VI. Recruiter generates a pool of candidates and identifies top candidates – while this can be done by use of personal networks, advertising on the internet on sites such as tinytechjobs.com, etc. we recommend team recruiting only where it is financially impossible to hire a recruiter. The recruiting task takes bandwidth that most nano start-ups can better devote to the product development, release, sales, and support. VII. In depth interview of top candidates by recruiter – these are screening interview PRIOR to an in-house interview and can be done by phone and preferably is done via face meetings off site. This way obviously unsuitable candidates, but who have good paper, are screened out prior to burning team bandwidth. VIII. Recruiter presents candidate profiles – how they track position requirement – CVs – and notes from outside interviews. IX. Recruiter sets up interviews and prepares candidates for process and confirms meeting sequence & timing with all team members to interview the candidate. X. Recruiter present in person during initial interview of candidates XI. Recruiter debriefs team and candidate and communicate feedback to both XII. Recruiter works with hiring manager & team to select target candidate(s) XIII. Second set of interviews with candidate(s) is optional but highly recommended XIV. Recruiter debriefs both parties and communicates respective feedback

XV. Company identifies target candidates and appropriate compensation package envelope – least and most to offer for base, bonus, stock, non-standard benefits such as relocation, education allowance, etc. XVI. Recruiter or hiring manager conducts depth reference checking for target candidate(s), based on reference protocol – as adapted to company needs XVII. Relevant team reviews references and revisit references as needed XVIII. Recruiter participate in negotiations / communications as required to close

In „2: Building the Start-Up Team: The Importance of Performance Requirements‟ I noted that: “Past performance measured by relevant metrics is the single best indicator of ability to meet performance goals.” The obvious question is how to determine past performance and create trust within the team about the skills, knowledge, experience, and character of the candidate and the candidate’s fit with the corporate culture? One important method is reference checking. Ideally candidates for senior positions will submit six (6) references, that is two direct reports, two peers, and two hiring managers or project manager or people to whom they reported or who managed the candidate at past engagements. Educational degrees, publications, patents, and past positions should be checked as a matter of course – while many companies will not give out details of past employment, the fact that a candidate was employed can always be verified and the tile or position can also be verified. The candidate should have references from recent positions – the prior five years – if he or she does not, this is a red flag. Internet searches on the candidate should always be done, in particular by linking the candidate’s name with the educational institution, publication, patent, and past employers. Red flags that I have found during internet searches include both criminal and civil legal actions that are normally a red flag – as well as “resume escalation”, claiming positions, responsibility, and authority that was “deflated” during an internet search. Even for candidates that come from the team’s personal network, references should be checked. I would almost argue “especially from one’s own network”, as we tend to rely on friends who may not really know a candidate’s background. The following is a protocol I have successfully used on many executive and senior technical recruiting assignments. When talking with references it is important to evaluate the reference, their tone of voice, how quickly or how slowly they answer questions, questions they choose not to answer, and whether questions are answered shortly or in some detail. In my experience listening to the voice of the reference can communicate as much information as the actual data about any specific point. 2: REFERENCE CHECKING PROTOCOL (adapt questions to company needs) Reference Check for: Submitted to:

Candidate Name Hiring Manager & Company

Reference Name (all reference information comes from candidate) Reference Contact Information:  Home  Work  Cell  Email

Current Title/Position:

Reference Title/Position:

Current Company:

Reference Company:

Introduction: Hello, my name is Bo Varga & CANDIDATE NAME gave me your name as a Professional Reference. I’d appreciate about 30 – 45 minutes of your time for a confidential reference. Is this a good time to call you? If not, is there a better time to call you, when you can talk? Please note that your reference will be confidential. I work with Silicon Valley Nano Ventures in CA, recruiting for a client in Silicon Valley. Our client is an early stage nanotechnology company, focused on bringing TYPE OF products to market, focused on APPLICATIONS in MARKET OR INDUSTRY. Our client is looking for a CEO to grow the company from early revenue to $25+ million sales within 5 years. As part of that process, CANDIDATE NAME will be required to raise equity in the $10 - $30 million range & to assemble a management team to complement the founders. What I’d like to do is to get your observations & opinions regarding Candidate’s management skills, the scope of his past assignments, his team building skills, his funds raising ability, and his customer facing skills. Please feel free to comment at any length. Also, our client may want to call on you for some additional information. And I may need to call again as a follow up. Is this all right with you? Naturally the introduction will need to be written to reflect the position to be filled and the company that wants to hire. 1) How long did Candidate work with you and at which company? 2) Was this a contract or permanent position and what was Candidate’s title(s) or role(s)? 3) What was your working relationship with Candidate? (hiring manager, direct supervisor, co-worker/lateral, direct report, company director, if other, please define) 4) Were you familiar with Candidate’s assignments – his performance goals? 5) What was the primary mission of his team, what outcomes were they to achieve? 6) What was the secondary mission? 7) What was the technical environment? 8) What functional areas was Candidate responsible for? 9) What were the major projects or tasks that he worked on? 10) In your opinion, what are his greatest strengths as a manager or executive? 11) In your opinion, were there any areas where he could improve his skills? 12) Can you give me your observations on Candidate’s client interface skills, that is his customer facing skills? 13) Can you give me your observations regarding Candidate’s success at closing major contracts, strategic alliances, or other important revenue generating relationships?

14) Do you have direct knowledge regarding Candidates ability to acquire funding or financing required to grow a business, from corporate, VC, investment banking, or other sources? 15) Can you give me your opinion regarding Candidate’s effectiveness in raising money from venture capitalists or other sources to grow a business. 16) Do you have any knowledge regarding Candidate’s effectiveness in working with a Board of Directors, either as a member or as a senior corporate officer reporting to the Board? 17) From the first month you worked together or became familiar with Candidates work, what first impressions still remain? 18) Why did he leave the assignment or the company for which you are giving a reference? 19) Did you learn anything from him during the time you worked together? 20) What was his most significant accomplishment while you worked together or for the period for which you are giving a reference? 21) What budgets were Candidate’s responsibility on the reference assignment? 22) Do you know approximately the dollar levels of those budgets? 23) How many direct and indirect reports was he responsible for? 24) How many of these reports were senior level, VP or Director or the similar? 25) Can you tell me how intense or stressful the work environment was on a scale of 1 to 10, with 10 the most intense & stressful, such as 24x7 mission critical service with an unstable IS/IT platform & unhappy customers? 26) To your knowledge did Candidate meet or exceed project goals? 27) Were deadlines met and tasks completed on time? 28) On budget? 29) Do you know how Candidate expanded/kept current his skill set? 30) Do you know how Candidate expanded/kept current his team’s skill sets?

Now please give your ratings for Candidate as Superior, Very Good, Good, or Average for Industry in the following areas. I appreciate any comments you have. Please feel free to speak at length:

After each question I ask Superior, Very Good, Good, or Average for Industry â&#x20AC;&#x201C; and when I get the response I ask if the reference has any additional comments. 31) In your opinion, how effective was Candidate in meeting his hiring plan? 32) How effective was he in attracting senior management & executive talent? 33) How would you rate his interaction with technical founders? 34) How do you rate his track record of delivering against his promises? 35) How do you rate his Leadership Skills 36) How do you rate his Customer Facing Skills? 37) How do you rate his ability to raise equity or funding for projects? 38) How do you rate his Technical Ability? 39) How do you rate his Commitment to Work? 40) How do you rate his Dependability? 41) How do you rate his Integrity? 42) How do you rate his team recruiting, building, motivating skills?

43) How do you rate his effectiveness in handling conflict among team members? 44) How do you rate his effectiveness in handling conflict between functional departments? 45) How do you rate his communication skills with non-technical upper management? 46) How do you rate his working relationship with his bosses and/or the BOD? 47) How do you rate his communication skills with professional audiences?

48) How do you rate his communication skills with the financial community, that is VCs, investment bankers, CFOs, corporate directors, research analysts, & others involved in funding or valuing companies? 49) Would you work with him again or rehire? 50) Is there anything else about Candidate that you could tell me to help me understand his strong points & possible areas for improvement both as an employee & an executive? 51) Finally, would you rate your overall reference for Candidate as Very Positive, Positive, Slightly Positive, Neutral, or Negative? Thank you for your time. I appreciate your help & professional courtesy. If you need to reach me again my phone number is 650-747-9554 and I can be reached 7AM to 10PM, 7 days per week, PST.

4 Hiring, Motivating, Retaining Key Employees “the CEO example” Introduction:

Many nanotechnology startups usually are based on the work of a scientist or engineer, often with no business experience. These entrepreneurs often have a standard set of weak spots in their management skills – a lack of customer focus, little to no background in launching or heading a corporation, or simply a lack of awareness that they cannot drive a business as well as develop a technology and get a product to market. Even companies with the strongest potential and IP can become an unattractive investment decision if the right management team isn’t in place and if a cooperative team environment is not established & maintained. A cooperative work environment depends on trust. Trust can be built by communication & commitment to make and keep agreements. And is in part based on personal styles and chemistry and the resolution of disagreements or miscommunications. Objectives: Upon completing this article, you will understand the key concepts & costs relating to hiring, motivating, & retaining key employees, with a focus on the CEO. 1. The CEO in a start-up or early-stage nano company has to earn the trust of the entrepreneur and team. This can be achieved in part by achieving agreement on plans, in part by advising & mentoring, and in large part by achievements. He or she has four primary outside goals: (i) close funding required – this is usually an ongoing process for the first 3-5 years of the company’s life (ii) evaluate customer opportunities – a startup has the advantage of being able to rapidly change direction and successful companies focus on clearly set priorities but change rapidly to adapt to market realities (iii) close deals with allies, customers, licensees, vendors – outsiders want to deal with someone they feel has professional business commitment, experience, and habits (iv) recruit top quality people to build team, BOD, BOA – winning companies have winning teams Trust is built each time progress on these four goals is achieved. In general the inside goals for the CEO are: (i) develop & monitor business & revenue models & plans (ii) motivate & focus team to achieve implementation goals (iii) financial oversight – “corporate governance” (iv) legal oversight – “corporate governance” Here trust is based more on communication and style, demonstrating competency, explaining thinking and approaches to problem solving, listening and responding.

However the first hurdle for a new start-up is to recruit a CEO. And the first hurdle when dealing with scientists and engineers is “letting go of baby”. To be totally clear a CEO is responsible for all aspects of the company’s operations and reports to – and is hired and fired by – the Board of Directors. Post funding this often means the investors. Entrepreneurs often resist hiring a CEO as they wish to retain control, do not see the need at an early stage, and resent the compensation and cash outlay that hiring a CEO entails. Investors, especially Venture Capitalists, insist on a CEO or at least a temporary CEO from the start of a project. Investors do not want to play “catch up” on professional management of any aspect of the business function. Entrepreneurs often see professional management as a waste of their time and money. The solution can be to define goals, priorities, and challenges that the new start-up faces and to carve out those that the entrepreneur / founder either is unable or unwilling to undertake or will undertake only as a last resort. These are often the initial CEO function, in particular as regards funds raising, business & revenue planning, and corporate governance. A focus on the challenges of launching and growing a new venture can often bring an entrepreneur to accept the need for a CEO. Especially when that CEO has a proven track record in bringing products to market and growing start-ups into successful companies. One other major mis-step we have seen is hiring the wrong CEO and too early – this by an entrepreneur, often and engineer or scientist, who wants to thrust responsibility onto someone else. A pre-funded start-up is best served by a “consulting CEO” or “temporary CEO”, with the actual hiring decision postponed until after funding and with the participation of the investors. 2: Hiring & retaining candidates in Silicon Valley is often difficult for two reasons, one of which is compensation. The other is the often self-centered approach of an entrepreneur, who does not consider the CEO candidate’s point of view. Aeon Consulting’s Radford Benchmark Survey is the “Bible” for Silicon Valley compensation. Compensation for each executive position, CEO, CTO, etc. is segmented by lower 25%, upper 25%, and middle 50%. Compensation is also segmented by how much money the company has raised, less than $30 million, between $30 and $70 million, and more than $70 million. As we work only with start-up and early stage companies, these numbers are substantially lower at funding levels typical for seed rounds – typically $500,000 to $1 million, A rounds – typically $3 – $5 million, or B rounds – typically $10 - $15 million. CEO candidates for seed round companies start around $160,000 annual salary, with a bonus around 25% based on closing A round funding or joint venture, strategic alliance, government grants, etc. That is a target compensation of $200,000 in year 1 of a company’s life post seed funding.

CEO candidates for seed round company are typically compensated with 10% - 15% of equity, 12% is average. This is usually based on the standard 4 year vesting and 1 year cliff, however there is often a sign-on stock bonus and accelerated vesting provisions based upon meeting or exceeding certain performance objectives – funding, customers, revenue, etc. CEO candidates for A round (first major funding round closed) companies start around $200,000 annual salary, bonus of 30% - 40%, and 4% - 8% of equity. What is often missing in the entrepreneur’s thinking is the CEO’s point of view. That is the entrepreneur is very aware of giving up control, stock, and money – and often to a CEO who has to be educated in the technology and sometimes in the business opportunities of the new company. The entrepreneur is often not conscious of what the CEO is risking. A CEO brings to a new venture his or her credibility, network of relationships among investors, customers, industries, and markets, and reputation. That is, the past performance of the CEO brings immediate credibility and value to a new venture – we believe a CEO adds at least $1 million to the valuation of a start-up nano company for funding purposes. Not only is the CEO risking his or her career but he or she is also suffering an opportunity cost – commitment to one venture means the lack of ability to participate in another. The entrepreneur has to sell and educate a successful, professional executive on the entrepreneur, the technology, the business prospects, and so on. Any professional investor in high technology will tell you that professional CEOs are the limiting factor on the deals that get funded – there is a lot of great technology, opportunities, and markets, but a shortage of CEOs. The entrepreneur’s “baby” is often not funded or funded for six months and therefore very high risk. Luckily CEOs are not lacking in self-confidence, but they still need to be sold and to stay sold. The entrepreneur’s and founding team’s behaviour is important in this process of getting to know, successfully working with, and motivating the CEO. These comments generally hold for other executive and senior technical talent. That is, these people have a wealth of opportunities and need to be sold on joining a new venture. And then working together to develop and maintain a coherent team.

3. Motivating & Retaining are key to business success, motivation is viral – it is communicated to each team member and to customers, investors, and other “outsiders”. Positive motivation can solve many problems and overcome many concerns and help resolve inevitable missteps, miscommunications, and so on. Retention is key to both implementation of business & revenue plans and can be a major cost savings. Losing a productive team member is potentially a failure of communication, reduces resources and can lead to missing company commitments or deadlines (or worst case can kill a company), and increases cost. Costs include replacement costs – whether paid to an outside recruiter or time and energy committed internally – as well as training / bring up costs associated with a new team member coming up to speed and achieving trust and productivity. “Success has a thousand parents and failure is an orphan” certainly is a major factor in motivation and retention of the team. And in recruitment of additional team members. Success at meeting product, revenue, market, and other goals is a major contribution to positive motivation and retention. Everyone wants to participate in success – friends, husbands, “significant others”, wives, all provide significant positive reinforcement to people who participate in a success. And financial success is one important aspect of stress reduction and happiness. Leadership by example, whether in hours worked, commitment kept, plans made – communicated – and achieved, and listening and responding appropriately to the problems and concerns of each team member – all these are key factors in motivation and retention. Communication – both about the company, expectations for each team member, recognition for contributions, etc. and social interaction – picnics, parties, etc. are key ingredients in creating and maintaining “we are working together as part of the same team” dynamic.

4. Termination is the other side of motivation and retention, that is the out-placement of people who are inappropriate for the company. For both legal and team reasons outplacement has to be handled with caution. Of course the case of illegal activity is straightforward – the offending person should be dismissed from the company. Despite trial periods of initial employment and “at will” employment, the company needs both a formal process for out-placement and internal communication & documentation re performance expectations to avoid negative impacts on team morale. While a Reduction In Force (RIF), that is abolition of a job position, can be used for outplacement, in our opinion this should only be done as a last resort or as when forced by financial problems. The more general process is to (i) formal dialog with the team member which defines the problem, states what has to be done to correct the problem, gives a reasonable time period to correct the problem, and allows the team member to put his or her position on a formal record kept in the employees personnel files. If the problem persists then (ii) another formal dialog repeats (i), however a “drop dead” date is defined by which the problem must be cured or employment terminated. If the problem persists then (iii) the outplacement interview completes the personnel file and the employee is paid all compensation due and is terminated. This is often done with two weeks notice – if the relationship is cordial then the employee may be permitted the use of an office and phone while seeking new employment, if not then the employee permanently leaves the company, after returning all company assets and review with management of the relevant Non Disclosure, Intellectual Property, and other agreements. As a side note, the issue of references should be addressed upon initial hiring. That is, some companies will only verify employment dates and title and will not provide references. Others will provide references. This should be in the Employee Handbook, along with other company policies including Termination of Employment. As references can be an important factor in future employment, it is very important both for the company and the employee to define and implement a company policy. From the recruiter side we often have to go to outsiders – customers, investors, and vendors – or to other people who have left the company - for references of employment at some companies.

5 What Investors and Customers look for in New Companies Introduction: Often new high technology companies are started by scientists or engineers with limited or no business experience. We have worked with people who do not know what a “bill of materials “ or a “whole product” is. These entrepreneurs often have a standard set of weak spots in their management skills – especially a lack of investor focus or customer focus. Even companies with the strongest product/market potential and IP can fail to close required funding or fail to close or keep key customers, if the team does not include people who can “talk the talk and walk the walk” with investors and customers. Objectives: Upon completion of this section, you will understand the key elements in the team that a professional investor or a major corporate customer needs to see in order to work with the start-up or early stage new company. We include joint ventures, strategic alliances, OEM relationships, as well as direct sales in the customer category. Elements in common are covered in the section 1, elements specific to investors are covered in section 2, and elements specific to customers are covered in section 3. 1) Investors and Customers: Investors & customers know working with a start-up or early stage company is risky. More to the point, whether working with a venture capital fund or a large corporate strategic ally, someone on the other side of the table has to stand up and be your “champion” and risk their own credibility, reputation, and possibly career path by buying into your venture. Often “gate keepers” have to pass your venture as suitable for an investment or vendor status. And “decision makers” have to agree to funding your company, purchasing your product, or making other commitments to your company to move you into the fast growth development path. How can these key people be moved to engage with your venture in the first place? And how can you move them to a positive decision and positive action? It all depends on your team, how they position and present themselves, what they say and do and how they say and do it. It is all about building trust and reducing perceived risk and managing expectations. And about using all your stakeholders as part of your virtual team. Positioning and presentation are usually handled by PPT/PDF presentations, executive summaries, product data sheets, company brochures, company web sites and the like. We focus on quality presentations, clean layout and graphics, relevant information – different presentations for different targets from a master set, and staged presentations.

That is, initially the person or team on the other side of the table wants to explain their interests and how you can help them meet their business goals. Your positioning and presentations should be focused on the space where your needs and business goals intersect theirs – so much information is available on line and through relationship networks that there is no excuse for not understanding the general positioning and interests of the other team. As you build your relationship your positioning and presentation needs to adapt to the specifics of the situation – you need to meet the needs of gatekeepers, identify and close with a champion, and move decision makers to your desired goals. Your relationships and those established via your stakeholders can get you in the door and help convince gatekeepers, champions, and decision makers to work with you. After that your success depends on your actions and behavior. Your stakeholders include anyone in your business network who will work on your behalf because they are engaged with your team, stand to benefit from the success of your business, or have prior knowledge & experience working with your team. Besides your founders, employees, and consultants, your stakeholders include your accountants, lawyers, board of advisors & directors, consultants in marketing, technical, & other areas, customers & vendors (including your landlord), as well as the business networks of founders, employees, and contractors usually who know your team. Introduction to investors or customers by a trusted source who references your company or team is the fastest way to start building a relationship. Ongoing support by a trusted source can help build relationships and work through problems, including miscommunications that occur in every relationship. You can cast a much wider net to establish relationships using trusted sources by setting up a formal process that includes: (i)

identifying stakeholders who can help you with targeted investor or customer networks – best done by profiling the investor or customers you are targetingnso you can ID who you know & who you want an introduction or referral to

(ii) working a process to discover who will help you – you will need to know the nature of the relationship and how much time and energy the individual can and will commit on your behalf as a reference and to get and keep their commitment to help as needed – including participating at “get acquainted meetings”, phone conferences, emails, etc. (iii) aggressively following up on relationship leads provided by stakeholders – this is a balancing act – especially at the beginning of a relationship too many phone calls, emails, etc. can position you as a nuisance while too few indicates a lack of interest. In general we recommend and use staged communications, that is new information should be provided in each communication “we just got our second patent issued” to help move the target towards your goal.

(iv) keeping your active references in the loop as you build relationships with the people they referenced – copying them on key emails, calling them or meeting them regularly for coffee, sending “thank you” notes, etc. Is there an easy way to do this? Ideally there is someone on your team who has worked marketing, sales, or business development and for whom the above process is part of his professional repertoire and for whom planning & implementation of this process is second nature. While this process may seem like a great deal of work, in our experience it is not because a few contacts will lead to the desired result, at least in Silicon Valley. For example with a recent start-up company we contacted 10 investors and 10 consultants we know who work investment networks. The 10 consultants referenced another 10 investors. We checked web sites, on-line biographies, and other publicly available information on the 20 target investors, narrowed the list to 7, and got strong investment interest from 5. The company actually pitched only 5 investors, 3 offered to lead and 2 to participate in any syndication. We work as consultants, either directly with the founding team as temporary members or with the founder, entrepreneur, or CEO to help with positioning, presentations, and networking to targeted investors and customers. We work on a retainer and transaction fee basis and are paid in stock before funding and post funding with a combination of cash and stock. There are many individuals and teams in Silicon Valley that provide business development and marketing services if the company team does not have an experienced individual on board. Of course we recommend the earliest possible hiring of a qualified CEO for funds raising and of a VP Marketing & Sales, VP Business Development or similar to augment the technical team. However the start-up often has to gain some traction with investors or customers before a qualified individual is willing to risk his or her career, credibility, or reputation to join a new venture, so consultants are often used to provide temporary help. Finally action and behavior are key to building and maintaining strong positive relationships. We recommend a team focus to stay “on message” re the current company positioning and presentation, to “under commit and over deliver” rather than to “over commit and under deliver”, to always address any concerns or problems from the other party directly and immediately, & to build trust with the other party & a reputation for professionalism and strong concern for the requirements &needs of the other party. “On time, on spec, & on budget” is the best bottom line summary for any business relationship.

2) Investors: Investors understand that a start-up or early-stage company has more vision than reality, more flexibility than stability, and that the most important factor for success is the energy, focus, and perseverance of the team. That is, a strong team with a weak idea is more likely to succeed than a weak team with a strong idea. And investors also understand that the team is fighting the odds against success and therefore needs to be opportunistic, to rapidly shift gears when a major new opportunity is created, to use a business plan as a roadmap and not as a straight jacket. Sometimes teams do not understand this and stick to a business plan longer than useful or productive, so investors can act as a “reality check” at monthly Board of Directors meetings. Investors are most concerned with the ability of the entrepreneur, founder, or inventor to be able to clearly plan what the team will do with the money, their ability to implement the plan, and how the investor will achieve returns, usually by selling the company or taking it public. The team is focused on building a company, the investors on making an extraordinary return within a fixed time period – usually no more than 5 years. Investors see and invest in many deals, the team has only one company. Investors want to be as helpful as possible – including using their experience to prevent problems – the team often sees the investor as interfering, controlling, or trying to dominate the company without knowing the technology, market, or product details required for success. Clearly there are built in tensions in the relationship between investors and the new ventures and the team needs to have on-board or as a stakeholder people who understand and can work with these tensions in a productive manner. That is, someone who talks investor. Investors prefer not to replace the CEO or key team members but they prefer even less losing money. Entrepreneurs & inventors often under-rate the requirements for success as a CEO, even if they have the time & energy for that task as well as the technical & business building tasks they have already commited to! 3) Customers: Customers have a much more specific technology, market, product focus that can be in tune with a founding team. However, they also understand the time and costs of delivering a “whole product”, that is, commercializing a technology so that it delivers the whole package – customizatin, documentation, training, service, support, upgrades, drivers, interfaces, etc. And they also understand the time, costs, & difficulties of scaling up to the volume required to gain the market share that will earn the profit that justifies the investment. A start-up or early-stage company is risky to do business with. For example major corporations often require such a company to put into escrow the IP, technology, BOM, source code, etc. – all the elements required to produce the target product in case the small company goes out of business.

Start-up or early stage teams often do not understand product market dynamics – existing supply chains and value chains will react to new, breakthrough technology with defensive measures – from the large company’s point of view the issue is what the product market dynamic is when the new technology or product is in mass production, not the situation today. And start-ups are on a different time schedule – they need to show results fast – both to keep the team motivated and to keep attracting capital or market share or the other factors required for success. Fast for a major corporation may mean 5 to 10 years and for the nano venture 5 to 10 months. A middle ground must be found to make the relationship a success. A scientist, engineer, or similar founder without this knowledge or experience will have difficulty convincing a champion or decision maker to proceed with the commitment, investment, and opportunity cost to partner with, buy from, or work with the new venture. Once again, we recommend recruiting people who understand, can work with, and ideally have relationships with the established industry players who are your target customers. “A start-up cannot rely on another start-up for market penetration”. Negotiation of the joint venture or strategic alliance can be successfully concluded working with investment bankers, business development consultants, and marketing consultants and we have worked in these roles. At times it may make sense to enter into long-term relationships with consultants who have the required connections, experience, and knowledge and who only work part time for the nano venture. This can both reduce fixed costs for the team and bring on-board people who are too expensive to hire as full time employees. The last and final article in this series will address the tradeoffs between full time employees, part time but long-term consultants, and short-term contractors.

6: Identifying & Filling Gaps In Management Introduction: Many nanotechnology startups usually are started by a scientist or engineer, often with no business experience. These entrepreneurs often have a lack of customer focus, little to no background in launching or heading a corporation, or do not realize that they cannot drive a business as well as develop a technology and get a product to market. Even companies with the strongest potential and IP can become an unattractive investment decision if the right management team isn’t in place and if a cooperative team environment is not established & maintained both internally & with investors, customers, and strategic allies. Objectives: Upon completion of this segment, you will understand how to evaluate your management capabilities, gaps that need to be filled, and ways to fill those gaps with employees, long term & project contractors, boards, and advisors. In addition you will gain some understanding of two important tools, the Bell Mason Diagnostics and the Stage-Gate® Product Development Process. 1) Bell Mason Diagnostics The Bell Mason Framework is online at: www.bellmasongroup.com/framework.htm The start-up / early stage company has 12 critical dimensions to monitor, of which the CEO, the team, and the Board of Directors are the three critical people dimensions responsible for the three key business domains – product, market, and finance. The model covers four stages in a company’s emergence, vision & launch, alpha product, beta product, and market establishment & expansion. Progress is measured in each dimension by establishing key milestones and the incremental performance measures required to achieve these milestones. Spider graphs map the company’s status on all 12 dimensions. For the launch the key requirements are the technology, the CEO, the business plan, financeability (positioning & presentation of team, product/market goals, and operational plan), and cash (closing funding). The power of the Bell Mason Diagnostics lies in mapping the desired status in all 12 dimensions against the actual performance. For example, a new company that is technology rich, up to an including a beta product at founding, but lacks a CEO with business experience, is unlikely to succeed even with a plan & financeability supported by consultants leading to A round funding. Since all dimensions including financial controls are implemented by people, the diagnostics are a powerful tool for determining in-house capabilities and what capabilities need to be acquired at each stage of the company’s growth to market success.

2. Stage-Gate® Details on the Stage Gate process are at: www.prod-dev.com/stage-gate.shtml Stage-Gate® process is a conceptual and operational road map for moving a newproduct project from idea to launch. Stage-Gate® is a widely employed product development process that divides the effort into distinct time-sequenced stages separated by management decision gates. Multifunctional teams must successfully complete a prescribed set of related cross-functional tasks in each stage prior to obtaining management approval to proceed to the next stage of product development. The key components of the process are screens after every step from idea to revenue: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix)

idea / vision screen – establish & implement criteria for product implementation of technology – team focuses on product scoping – size, time to market, ramp time for each idea second screen – team focuses on product/market strategy building business case – resources required – time, people, money versus return to company over time third screen – team buys into business & financial model development of product(s) fourth screen – product testing & validation – product tested in market product launch fifth screen – post launch evaluation at times and against performance measures determined in second screen

As with the Bell Mason Diagnostics, Stage-Gate® requires people to implement each step in the successful product launch. Both can be very useful tools, especially for the scientist or engineer or other founder who wants to succeed but who is not ready to turn over the company to an “outside” CEO. While we strongly recommend hiring a proven CEO to lead & manage your business, we recognize that not always possible for a start-up nano venture, for financial, personal, or other reasons. Using both processes will help you identify the gaps in your people capabilities. These gaps can be met by employees, contractors or consultants, your Board of Directors, or your Board of Business Advisors or your Board of Technical Advisors. The following sections cover some characteristics of these different stakeholders in your venture. We strongly recommend that you reach out early in your company’s history to successful individuals who have relevant experience and work to recruit those individuals to one of your boards. The advice and networks of people who have “been there, done that” can help your company succeed and at a minimum avoid the most common missteps leading to failure of your venture.

3. Employees The company needs a “permanent” team of employees as the base platform to close funding, develop product, and build relationships with customers. The issue with startups is that they are usually long on stock and short on cash. Often the most desireable people are very hard to get because they have other opportunities that pay more, are less risky or just plain less work – established ventures, large corporations, academic or government labs, etc. At a minimum this team includes the key technical to commercialize the product plus an entrepreneur, founder, manager, or CEO – the business lead who talks with investors & customers, manages the team, & is responsible for meeting the payroll. In general employees should be hired when needed and should be people who clearly can commit to 3 to 5 years full time (often including evenings & weekends) employment with the company. Past performance is the best predictor of future performance – a candidate who has held 3 jobs in the past 3 years is unlikely to be able to commit long term to your company as an employee. We recommend that, if possible, a trial period of employment is included in employment agreements, say 90 days, where the CEO can terminate a new employee at any time and for any reason. This gives the team the flexibility to part ways with a new employee when, for any reason, it does not look like the new employee will be a successful and productive contributor to the company. Ideally employees could be first engaged as consultants to enable management and other relevant team members to determine how productive a working relationship is. 4. Contractors & Consultants Generally contractors are temporary workers while consultants have an established business in sales, marketing, financial services, etc. The advantage of working with contractors as temporary workers includes: (i) you need people skills only short term for a task (ii) you want to evaluate a candidate before offering full time employment (iii) the skills are too expensive to afford full time & you only need part time (iv) you only need part time but on a long term basis The advantage of working with consultants for marketing, sales, fund raising, etc. is that these people usually have an extensive network of existing relationships that can benefit your business. Of course you need to inquire regarding possible conflicts of interest with other clients. And as with contractors you need to make sure that you limit access to your key information on a “need to know” basis and under an NDA (nondisclosure agreement) to protect your trade secrets & intellectual property. At the end of a relationship these agreements should be reviewed with the contractor or consultant and all company property, documents, computers, etc. should be returned to the company. Bo Varga  Copyright 2009

5. Boards of Directors and Advisors The general goal of a business lead, CEO, entrepreneur, or founder is to recruit the largest number of quality people to his or her goals while limiting the compensation in cash or stock to industry normal. Board of Directors represent the stockholders in a company and hire & fire the CEO and contribute to corporate governance. Usually the business lead, CEO, or entrepreneur is on the Board and often the chief scientist or engineer. And of course investors will want board seats. Usually there is one to three board seats that can be filled by industry figures who can add credibility to the company. Board of Advisors usually provide either business or technical advice. The business board has either significant business experience and/or industry specific experience. The technical board has relevant technical experience. Both advisory boards consist of people who can be called on for information, advice, and connections. Both Board of Directors and Board of Advisors people can you access extensive networks of investors, customers, and people who can help your business grow. But in both cases you have the problem of recruiting people of high professional status who usually gain some stock in your venture but risk their reputation and credibility on promoting your venture. In our experience the best way to build boards is to start with someone who has reputation & credibility they are willing to risk on your venture. In turn you can leverage this person to recruit a second person and so forth. That is, you can build a network of influence by recruiting the first board member if you choose wisely. As with employees, contractors, and consultants, past performance is the best predictor of future performance. Proven success as a director or advisor, preferably with a mix of large and small companies is one important criteria for your board members. Their resume will clearly reflect this proven success – often that resume should be available on-line based on prior board membership or other accomplishments. Other criteria are relevance to your venture – which can be established through several personal interviews – as well as time availability. A member of the Board of Directors would normally commit one half day per month for regular board meetings and then probably one day per quarter for strategic meetings. And of course be available when needed for phone dialogs or face meetings. Directors who represent professional investors often expect to commit significant time with management, especially during the start-up & early stage phases of a new company, to help management achieve agreed on goals. Board of Advisors normally would be available for an annual meeting and then for phone or personal contact for an hour or two every month.

Angel & Venture Capitalist investors can often be tapped for more time. In our experience this time can only be utilized well if the companyâ&#x20AC;&#x2122;s business leads has clearly defined goals & needs and communicates well and follows up to get what he or she needs from the investors. Investors want to help but are bandwidth limited - usually they are involved with five or six companies as well as with their funds and the investors in their funds. We strongly recommend that you contact your investors with both opportunities and problems and ask for there help â&#x20AC;&#x201C; and in fact tie them down to a time commitment, if needed, when they invest in your company. Contact: Please address comments & inquiries to: Bo Varga, +650-747-9554 bvarga@USnano.biz, skype siliconvalleynano. Bo uses transaction focused marketing to close business deals, fundings, and to recruit top quality people.