Image by Ha-Wee via Flickr
We recently encountered the phenomena in popular culture of "Too Big to Fail". Start ups can often appear to be - Too Big to Succeed -- when the management team size exceeds the need (and budget) at hand.
Now, let's consider that there are two primary jobs or missions within any start up. They are build/create product and to market/sell product. In truth these two can frequently be summarized as "Sell product". Any person who cannot completely and totally relate their job and everything in it to the two primary missions should change what they're doing so that it is matched to the missions. Otherwise it is time to leave the start up and go to a larger company where more esoteric contributions are valued and rewarded.
We typically see the assembled management team in venture capital pitch. Just as there aren't jobs in a start up unrelated to the product and its sales, there aren't non-speaking roles for company executives at VC pitches. If an executive doesn't contribute in one of these meetings to the discussion, they shouldn't be in the room. It isn't much a spectator sport nor was it designed to be one. It also doesn't convey good prioritization for an organization whose only real asset is the time and effort of its team. Silent Sam or Sara raises more questions in our minds about the team and its focus as well as its efficiency. Questions mean doubts. Doubts mean no deal.
So here's the point, start ups will often bring a full compliment of management team members to a meeting to impress us with breadth and depth. The intention is to strengthen their case but in the process they do the opposite by opening the door to suspicion that they may be too big to succeed -- or at least capital inefficient by using our investment to pay an over sized management team.
Plus, it can create an odd moment in time (read loss of credibility) when the start up CEO says "we are going to be lean and mean as we grow this" when that same CEO is accompanied to the meeting by 5 vice presidents. All for a company with an incomplete product and no sales. When does lean and mean start? Do we really think the addition of millions of investment capital will cause a company to become "leaner and meaner" than it was before the money? Capital comes from investors, capital efficiency comes from management.
When these 5 VP's don't all relate to the primary mission or speak in a pitch meeting or otherwise appear to contribute anything obvious - these team members look like a liability and cash drain for any invested capital. The team looks riskier for its size and less likely to be capital efficient. It looks Too Big to Succeed.