Collective entrepreneurship and teams: 3 questions to Cyrine Ben-Hafaïedh
France already had more than 1 million startups in 2021 and entrepreneurship and startups have taken an increasingly important place in the country’s economic landscape. As part of our next Corporate Summer Day (Université d’été), Professor Cyrine BEN-HAFAÏEDH will lead a round table (in French) on entrepreneurial teams – an important theme because entrepreneurship is by its nature a “collective” endeavor. Ahead of this event, she explains the importance of collective dynamics in the world of entrepreneurship and offers some advice for the creation of entrepreneurial teams. She also discusses the thorny question of how founders divide new firm equity.
Why is the collective element so important in the startup landscape?
The very etymology of the word entrepreneur is collective in nature! The word entrepreneur originates from the French verb entreprendre which literally means undertaking, or implementing for example through relations, exchange and reciprocity, etc. This therefore implies acting “together”. Even an individual entrepreneur does not work alone, in isolation from others. The figure of the heroic, demiurge-like solo entrepreneur is long gone.
Today’s entrepreneur is embedded in a network, with different circles of people and stakeholders involved in his/her project. Friends, colleagues, family, experts, mentors, investors, customers, suppliers, employees etc all participate in entrepreneurial adventures to different degrees. Entrepreneurship is therefore a collective endeavor. And in one out of two cases, this collective effort can even lead to the formation of an entrepreneurial team, i.e. a group of people who co-create and run a company.
Do you have any advice for creating an ideal team?
The first thing to know is that companies created as a team are more successful (in terms of growth in particular) than companies created “solo” as long as they survive. They have a higher failure rate than solo businesses and the team is one of the primary causes. In other words, the team can be the best thing if it can hold up. The advice that we often see in the media is to look for complementarity in terms of the team members’ profiles. This is not wrong but my research allows me to say that it is not the basic condition of a good team. Indeed, the most important thing is to have a compatibility of values and an alignment on the vision of the company’s future. Then come the important decisions such as organization (the distribution of roles, communication, etc.) and the difficult question of the distribution of equity.
Has there been any research on this topic (distribution of equity) that could provide useful guidance to entrepreneurial teams
Yes, there is. Noam Wasserman, from the Harvard Business School in the US even ranks decisions about the equity among the top three dilemmas for entrepreneurial teams (along with team formation and organization). He offers a series of tips on two fundamental questions: when and how should partners divide the capital? First of all, he advises founders to wait: wait until you know your partner(s) better and their real contributions. Often entrepreneurs tend to want to resolve this thorny issue from the beginning. This would not be the right approach. Secondly, this researcher explains that it is necessary to avoid a 50/50 ‘at all costs’ approach and that the distribution should be established according to a set of criteria discussed by the partners, such as who is at the origin of the idea, who will work full time on the project, who has the greatest opportunity costs, etc.
Cyrine BEN-HAFAÏEDH is passionate about entrepreneurship, innovation and social impact. She specializes in collective entrepreneurship issues (e.g.: entrepreneurial teams, corporate governance, etc.). She has published books, articles and case studies on these topics and consults with various organizations. On June 16th, she will lead a round table (in French) on entrepreneurial teams during the IESEG Summer Corporate Day. More information is available here.