I will soon be exploring funding options for a business plan. In order
to attract the needed VC funding, I need a seasoned management team.
Without adequate funding though I can not hire or attract the seasoned
team.  How should I address this conundrum? What are best practices?

Hi mhugo.

 Business planning is the key to success of your new venture and vital
to obtaining the needed captial. This is a challenging time to
complete the plan. After completing 3 business plans myself this year,
I know you have a long but rewarding road ahead of you. Let go right
to your question?

Your conundrum is fully realized by most VC's. According to
vfinance.com, the management team is critical to the companies success
but during start-up you typically lack the team. In order to best
address this issue, Vfinance recommends building a relationship with a
management recruiter to aid in determining salary levels and network
with the needed personnel. You can get these future executives by
giving up equity or offering performance bonuses.

Vfinance recommends a ..."second option is to seek key personnel who
would be willing to join your company once you have funding. These may
be individuals who are currently employed but see the opportunity of
getting in on the ground floor of a promising new company. Your
accountant, for example, might welcome the opportunity to come on
board as a comptroller or CFO once you have secured funding. You would
list them in the business plan as an "Acting Comptroller" or Acting
CFO" and their biography would mention their current position and
employment status. "  Finally you can assemble your board of directors
to add credibility to your venture. Go to
http://www.vfinance.com/home.asp?bps=1&ToolPage=bps_advice_management.asp
for more info.

 The best practices mentioned by Inc Magazine, Amex or other key sites
for business planning mention that it is important not to hide any
weakness in your management team and have complete skills and job
descriptions for thier functions. You can visit 
http://www.inc.com/articles/marketing/market_research/market_plan/16189.html
orhttp://home3.americanexpress.com/smallbusiness/Tool/biz_plan/mgt/descr/index.asp
for greater details.

Finally in closing, with a much tighter economy and limited venture
capital, your management team and recruiting is the one of the most
important items. As stated by ,Richard Winn the managing partner of
Richard Winn Human Resource Management Consulting in How VCs and Top
Executives Can Reduce Their Recruiting Risks and Improve Company
Performance  (Part 1 of 2)
http://www.vcapital.com/Primary_Navigation/ASK+THE+EXPERTS/Answers+From+Experts/062601RichardWinn.htm

"[If] HR strategies are correctly executed, hiring costs can be
reduced as much as 40 percent, turnover can be reduced to very low
levels and your probability of success (both in executive and
management hires) can increase by a factor of three or more"

  
  Search terms used:  vc + best practices + business plans 
  Also, searches under INC and Amex using business plans 

  Good Luck in your planning and success of your new venture.

 bizwhiz-ga

Great reponse and comments!!

Thanks all of you!

As an entrepreneur myself, I would be glad to add my .02 (two cents)
in addition to whatever advice the researcher might give you.

First and foremost, your management team will be the second most
critical piece to getting any form of venture capital.  The first is,
of course, a good idea thrown into a solid business model.

There are really two main avenues.  

You could offer potential management team members an equity deal. 
Give them a piece of the pie, so to speak.  This approach is good for
you, as a founder, two-fold.  It doesn't present much of a cost
upfront and it gives the people you hire a vested interest in ensuring
the company's (and your) success.

The other alternative is to seek out an incubator.  Usually incubators
will be able to provide you with people who will serve as interim
members of your management team, and allow you to reflect that on your
PPM or business plan.  Once you get some capital, you can replace them
with your own team, using the money as bait. :)

Also, I would recommend looking for angel investors, checking with
your Small Business Administration office for grants or loans, or even
striking out on your own.  Savvy investors will recognize a good idea,
and from there everything else falls into place.

There are some great websites on the Internet for small business and
business plans, including (but certainly not limited to):

http://www.sba.gov

hello mhugo -

With all due respect, you are the seasoned team. You are the one
writing up the business plan, and you are the one creating the method
of execution. Don't sell yourself short before you go into the process
if seeking venture capital.

Having written several business plans for my own internet ventures, I
can tell you what I have found in my own research.

1) If your business plan is well thought out, down to the most minute
of details - investors will HELP you put a management team in place.
You are selling yourself, and if an investor believes they can work
out an exit strategy, they will be there for you.

2) Part of your business plan should include funding for, or
outsourcing of management. If your business is already past the 'seed'
stage, and you have a working example for investors, they may be
convinced that outsourcing for a 'management team' is a great strategy
for them. They will get a little more control and feel more
comfortable working with a team that may have already in the past.

Keep in mind - you do not want to go to a VC firm or individual
investor and say 'I have this great idea but I need management.'
Reverse the roles for a minute and imagine what you would think. I
would think the person seeking investment has no faith in themselves,
thus neither would I.

Instead try to say something like this:

'Company has a working, revenue producing product in place, and our 1
year cost predictions (or whatever time frame you are using) include
external management resource expenses.'

Hope this can help you on your path a bit -

sgtcory

I think there has been some excellent comments already presented.

However, I think you have to be realistic that this is one of the
toughest environments to raise capital from a venture capitalist.  As
you may know, VC's are extremely tight in this environment and are
becoming very selective.  This means that their period to conduct due
diligence is much, much longer and they will likely take as much time
as possible in order to strecth you as far as possible in terms of
lowering your valuation.  That is, if you are lucky enough to get
not-only a meeting, but sustained interest when many are licking their
wounds and dealing with their existing portfolios.

My point is not to deter you from following the entrepreneurial path
but to make you aware that getting a VC into a seed stage round will
be very, very difficult.  However, this is a great time to start a
business.  Expectations are lower, it's easier to find talent (and
cheaper) and cash flow/profitability are king again (rather than
growth at all costs).  As a result, a different mentality of
bootstrapping, looking to friends and family for your first angel/seed
round, and talking to customers as early as possible in product
development (hopefully leading to paying customers and revenue).  My
experience from presenting to VC's recently is that they want proof
that you are earning revenue and that customers truly find your
product/service a must-have rather than a nice-to have and that the
sales cycle won't take forever.

In any case, Good Luck!