Colony Lab ESF Due Diligence Helpkit (1/8): Team

When evaluating a new project, the team is by the most important aspect. They are what makes or breaks a project; they make the plan, build it from the ground up, and they pivot when needed. The team has to be able to execute. If they can’t, you can forget it. All the pretty decor in a restaurant doesn’t matter if the chef burns the steak.

In this article, we will run through the important aspects to evaluate when looking at a team and the perspective to take. We will close it out with a framework with a set of questions/benchmarks to rate the team on.

You want the team to have all the necessary expertise and the fundamentals of the projects well-thought out. Strong fundamentals is half the work. Aside from hard skills such as experience and skills, you should also consider soft-skills; resourcefulness, problem-solving, etcetera. In a start-up, and especially in such a fast-paced industry as crypto, the team needs to be flexible and adapt to the ever-changing environment to drive the project to success. So, throughout your due diligence of a project, it is important to evaluate whether the team will be able to handle anything the market throws at them.

Qualifications, work history and experience

Let’s start with the fundamentals of the team. This is their background, and work history and experience to see what they bring to the table. More specifically, we want to evaluate how capable each person in the team is and what they do. While we first evaluate all members individually, we put them together in the end. That will indicate whether the team will have the necessary expertise to deliver.

Work History and Experience (Hard skills)

These should be the easiest to dig up. These are the actual knowledge and expertise of a team member on a topic and will determine what they are able to do and build. When going through a team member’s history, you should look for 1) whether the experience is relevant to their current position, 2) the duration of that experience, 3) the accomplishments during their experience, and 4) the company they have worked for.

Preferably, each member has substantial experience in their field, both in relevance and duration, with concrete achievements and their contributions. Some examples can be; years of experience, leadership roles heading up big projects, a strong growth trajectory, and possibly with a few companies. What you do not want to see is someone who has held a junior position for a few years without growth, only to quit their job and try to hit it big in crypto or AI.

Soft skills

These skills are problem-solving abilities, resourcefulness, and even networking. Where hard skills determine what a team can build, soft skills speak more to how they will be able to execute. That is, can they handle changing environments, manage a crisis, collaborate with projects or build a team. It’s the people-skills that complement their experience.

These may be a bit harder to find and there may not be much available. What you want to look for is any communications or behaviour from that team member. This may be recommendations from co-workers on LinkedIn, posts or threads on Twitter, and conversations on Telegram and Discord. A goldmine of information, although intensive, are interviews on Youtube where you hear how driven they are, what made them start the project as well as how they’re thinking.

Example of behaviour; when he or she is in conversation with someone and quickly adapts their perspective or offers various solutions to suit the discussion. That reflects communication skills, resourcefulness and ingenuity.

Thought leadership and contributions

These two aspects can offer you additional insights into each team member. It is the extra insight into whether the team is driving the space forward with innovative thoughts, or academic or technological contributions, or simply spurring thought-provoking discussions showing they are thinking ahead. These may possibly boost your confidence and impact the sizing of your investment.

As with soft skills, these may be difficult to find, but scrolling through someone’s socials may give you a clue. For now, socials such as Twitter, Telegram and Discord may provide you with discussions to evaluate, or Youtube for interviews which is much more in-depth.

If your team has one or more members that are contributing to the space in this manner that is surely a good sign for the potential of the project. It means that they are looking at the future and that they may offer something unique to the industry

Reputation

The reputation is the combination of all three sections above, plus their …well, reputation in the space. It is how they are perceived within the industry and community. If the reputation of the team, or specifically the BD team, is bad, then it will be harder to drive partnerships and integrations. On the other hand, if they have a large network with many frens, they are likely to be received well and gain traction more easily.

Consider the main characters you see on Twitter, you can distinguish the ones with a large network and good reputation from the ones with a smaller network or who often upsets others. Those criteria are the same for the team behind a potential investment.

Although it may not be apparent, it can be a big risk when the team has a bad reputation. An extreme example would be if the founders of Celsius were to create another start-up. Their reputation is in the dirt, which does not bode well for the start-up and may prevent them from ever gaining traction.

Diversity

Now we have screened each team member, let’s grab all their qualifications, skills, and personalities to evaluate the wider team as a whole. The first thing that you can see is the diversity of a team; different people coming together with different backgrounds that complement each other. This is important to have all the basics of a project covered.

E.g. If you have a project full of engineers, they will probably build a product that engineers will really like. The rest of the industry won’t even be able to get through the whitepaper and will not be using their product. This will hugely reduce the adoption of the project.

A few key expertises that you want to see in the team:

• Engineering: The product needs to be built, requiring coding, design, implementations and further development.
• Business Development: These are the people that initiate partnerships, collaborations, and integrations with other projects. BD explores potential market opportunities which the project can seize in the future.
• Marketing: An often overlooked yet extremely important aspect of the business is marketing. Marketing encompasses everything about awareness, marketing strategies, social media, and promotional campaigns. Without marketing, there will be no users.
• Community management: Community managers handle all day-to-day questions and activity with the community. If a new user enters the Discord and does not get a reply from the team or an admin, they likely think the project is dead and will leave — it’s sad but true. If they don’t have admins yet, you will want to see a willingness to hire them when the time is right.
• Operations: This is the person overseeing the general operations to ensure the project is moving toward their stated goals and deadlines. They have a general birds-eye-view to maintain that everything is running smoothly. This is usually done by one person.

The above roles are all essential and play their part in the success of the project. A chain is only as strong as its weakest link. If any of these roles are missing, that will pose a risk to the project. You want to see each role clearly defined and filled with a qualified expert who can execute on their tasks to make the project a success.

Cohesiveness

On top of the diversity of the team, we also want to check for cohesiveness; how well the team is able to work together. It means both having the same end-goal in mind as their vision, and how well they gel together as people. It is not dissimilar to projects in school, a cohesive team will work and execute much better to drive success.

Evaluating the cohesiveness in the team may require some digging into the history of how all members got into crypto and how they met. Having this context will help you consider the relationship the team members have with one another. An example can be having worked together before, or even a lot of interaction on Twitter between the team members in the past. Generally, some interaction or history between team members is good.

It is important the team is cohesive and can trust each other. Only then will they be able to focus on the challenges that lie ahead. You don’t want a team to waste time discussing or fighting internally. Instead, teams need to be working towards the same goal to drive success.

Size

Although this is not a crucial part and the optimal size may differ, it is good to consider the size of the team. This will determine how much work they can do, but also how much it costs to finance the project and how it will impact their runway. In addition, the bigger your team is, the stronger you want the leadership to be so everyone is on the same page.

When considering the size of the team, you have to match it to the size of the project. A project focused on gaming will require a much bigger team for development, whereas a simple lending and borrowing protocol may only require 5 to 10 people. Even the “simple” projects can vary depending on their ambition and developments behind the scene.

Since the right size of the team is rather nuanced, the most important factors are whether the size of the team is right for the task at hand, i.e. what they are trying to build, and whether the team has enough runway to at least survive through the bear market. Money is not always as cheap as during bull markets and running out of funds during the bear market brings a high likelihood of failure.

Future plans

The size of the team only reflects their current position. You also need to keep in mind future plans they have for expanding the team. That means the extra people they plan to get on-board to scale the project when the time is right. This too will impact their runway, but it may also show the ambitions of the team and where they aim to grow towards.

The current team might consist of mainly engineers with one head of Business Development and someone on the operations side, which is fine. The cost structure may be enough for 2–3 years of development. However, in the future they will need dedicated Marketing, Community Management, and possibly expanding existing departments with BD or engineers. All of these extra hands will require resources, shorten the runway, and may be the difference between surviving the bear or perishing in it. Likewise, expansion of the team may also indicate long-term goals and building in the bear, rather than simply surviving it.

Therefore, it is important to look at the current state of the team and what is needed to build, as well as look into the future to consider what they will need to launch and scale effectively. It will take quite some time between the fundraise and launch, and even longer for your tokens to vest. You will want to make sure the project is still thriving in the end.

General conclusion

After you have evaluated all the relevant aspects about the team, the most important question you should ask yourself now is: “Do I see this team drive project success?”

The hard skills, and possibly the soft skills, determine the overall expertise of the team and indicate the fundamental skills the team has. These are an absolute must to start with. Additionally, the diversity of the team ensures a well-rounded project that is both technically sound as well as business-minded, while the cohesiveness makes for a healthy team environment where they can thrive. All these factors determine whether a team will be able to execute effectively or not.

Imagine that restaurant again. All the shining decor and good ambiance may impress guests, but it is the chefs and other personnel that prepare your food and get it to you for you to enjoy.

Ultimately, the team will be the people driving the project and are the deciding factor between its success or failure. Therefore, having confidence in the team’s capabilities is vital for your investment.

In the following document, you can find questions to evaluate a project with to help you do your due diligence. https://docs.google.com/spreadsheets/d/135AN4Pk2x-6m4Ldg-y3exbcuJPX_MkX-qqjQWk_U-ZU/edit?usp=sharing