Great founding teams


I am always asked: what do I look for in founding teams?

Well, this is a summary of what I have learned from meeting and getting to know hundreds of founding teams (and from years of mentoring individuals and teams which I consider “investment”) – characteristics of the ones that are more likely to be successful in growing their companies (as opposed to those that fail or die):

#1: Determination and commitment.  Some founding teams are too opportunistic.  These founders will go and do something else once the market changes, a large problem arises, or something better comes along.  To some degree, a founding team that has a good chance of success usually has an obsession with either a problem or the product, and this sometimes results in a “paranoia” that Andy Grove of Intel refers to.  A determination often feeds into a drive to acquire deep domain knowledge, or a strong desire to know and learn about one’s markets and one’s customers.  We cannot run fast enough when we don’t feel the founding team feel strongly enough about the problem, the product, or the customer.  What is your cause and how committed are you to it?

#2: As one of my Venture Partners puts it, founders need a healthy and sustainable dose of “AQ” – adversity quotient – as much as IQ and EQ.  This is probably the case for all business leaders, but particularly so for founders.  One of the best books on this is The hard thing about hard things which is about the need for the founder(s) to manage the emotional roller coaster of startup life that Horowitz calls the “struggle”.  Things can get extreme.  But in reality, they are never as bad or as good as they seem.  One of my colleagues used the Chinese expression “平常心“ to describe the attitude – calmly “normalize” the ups and downs.

This translates into a persistence and the ability to take a long-term view that is required when a startup goes through hard times and has a lot of naysayers around it – as one of the world’s most famous football coaches, Bill Walsh, puts it in the title of one of his book, “The score takes care of itself” – a commitment to getting the process and inputs right (putting the right ingredients in, pulling the hard yard and not taking cheap shots) in the belief that the results will come.

#3: Having something bigger than the ego.  Companies get killed by disputes and internal fights.  A ship that is being steered in different directions cannot move in a single direction, let alone the right direction.  One of the biggest mistakes founders make is to have misgivings or reservations about their cofounders when they started the company and suppressing those negative indications.  God knows, I have made this painful mistake.  There have been many cases of cofounders disagreeing about a company’s direction and finding a resolution (one leaves and start a different company, for example); there are also many examples of cofounders discovering that they have different personal objectives and one reduces his or her operational role while remaining a shareholder (sometimes adjusting his or her share).

However, there are cases where a cofounder has an ego issue – this is when the startup is very vulnerable.  This personality trait tends to be correlated with a relatively low level of self-awareness, and oftentimes the cofounder is more preoccupied with ego issues (and the potential loss of face) than actually building the business or doing what is best for the business (or even his own interest).  Typically he or she would find others to side with their version of events, creating a me-versus-you type of situation.  These are the toxic situations – and companies in these situations almost always fail to survive the founder dispute or bust-up.  We sit together with cofounders individually and as a team and try our best to understand these dynamics as a matter of course when we get serious about a startup.  Does this person have the ability to think about something bigger than himself or herself?  Can he or she keep the ego-driven emotional need in check?

The other side of this is further down the line, as the company grows and evolves, are you able and willing to “change gear”:  this often means growing and adapting yourself to serve the needs of the company, a point highlighted by Ronald Cohen (#5 on this list though there is a longer book), the founder of Apax Partners.

Qualities #1 to #3 are usually highly correlated with founding teams that were created with and are driven by a mission.  Founding teams that are driven by a mission tend to be able to persevere.  They also tend to be able to attract the best talent.  As put by LinkedIn’s Geoff Weiner: Google built a team of missionaries and not mercenaries. It’s how you can get the best people and inspire them to be great.

#4: Deep domain knowledge and especially an obsession to know the customer.  Deep domain knowledge can help an entrepreneurial team get the product right, pursue a good channel strategy, know what the market wants.  Launching a product that nobody really wants or one that is uncompetitive is very costly, and doing it through the wrong partnership strategy costs a young company lot of time.  “How well do you know your customer” is a question I ask often, even if it is your first customer!  When I ask “who is your customer?”, I am asking a bunch of questions – do you know why he or she buys, do you understand why he or she buys from you and not others, what (factors) would make him stop buying and switch to something else, and so on.

#5: Getting the funding part right.  Entrepreneurs, bring on financing partners that share your values or vision!  At the same time, treat them truly as a partner.  I always say, I put both my money and my value-add on your side of the table.  What I look for in return is honesty and an understanding and appreciation of my commitment.  In other words, I will do everything to help you become successful.  I understand you are the founder and CEO but you must also understand that I’ve seen many founders and CEOs and know many companies from the inside.  This means I am in the same boat as you, but I see different things, and because we are in a race, my input is sometimes useful (and in some instances, critically so) in the journey to winning or doing well in the race.  Make sure the investors in that boat are adding more value to the business than they are taking time away from you.

I am always happy to expand on this with founders and CEOs who ask me about this.  Most don’t.

A common proximal reason why a startup fail is that it runs out of money.  This is often related to one of the factors #3, #4 or #5 above.

In summary: what do I look for?  I look for founders who have a passion for a mission that is bigger than their own interest, who is committed to this, is solving an interesting, important and meaningful enough problem.  And then there’s the other part: personal chemistry.  You want to like this person and look forward to engaging in a dialogue with them about markets, people, products, technologies and sometimes, the the world.

When one of my teachers asked me what I do, I told her, we are in the same business, both of us invest in people.

See also “Great founding teams – a revisit”.

P.S. It must be stressed that the question of “what do you look for” is slightly different from “what makes them succeed or fail”.  Some companies succeed but self-fund or get the funding from other sources.  Yes, I have seen many companies fail – by definition, I have become better at calculating the probability of success, and at understanding the things that drive it.  This in turn drives what I look for.  Yes – I am in the iteration or “trial-by-error” business par excellence.  One of my mentors told me that venture investing is an apprenticeship business and will takes years to master.

P.P.S. Our recommended reading for founding teams is on our website, and we would also recommend reading Ben Horowitz’s piece on the value of founding CEOs – this is a particular case of adapting oneself to the needs of the team, and LinkedIn founder Reid Hoffman also penned a wonderful piece highlighting how bringing in professional CEOs can work and that there can be more than one founding moment in a young technology company’s life.

A post-script as at 3 March 2016: “Top traits of startup founders, according to tech’s most unlikely venture capitalist” is a wonderfully insightful take on essentially the same question.


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  • David Rickards says:

    Good piece – keep it up Sylvia

  • Catherine says:

    I agree most of what you said here as they are generally top traits you are looking for. In reality though, you hardly find the “perfect team” at once or you may not be able to afford to know if they have all you are looking for. For example, #1 and #3 can be well co-exist, etc. Therefore, I’d normally look for the “weakness” or the constraints of the founding team to see if they are acceptable or worth my time anymore. I’ve also learnt that people can behave completely different under normal or “extreme” situation. I echoed completely that venture investing is an apprenticeship business as I started to get a “six sense ” of it after reading so many!

  • Sylvia says:

    Catherine, thanks for your comments which add to the conversation. Like you, I enjoy so much interacting with so many founding / entrepreneurial teams and trying to gain quick-read on them and on their business. I think about what I can help with and what I cannot help with. Agree also that it’s not easy to get what I am looking for all at the same time. Sometimes, there’s some gap and as a relatively early investor you try to make up for it and become part of the team almost. I love having to “suss things out” (ideally fairly quickly) every time we get close to investing, and that every time what needs to be done is a little different.

  • […] As venture capitalists, we are in the business of seeing and reviewing hundreds and thousands of business plans of young tech companies looking for their first or second round of external funding for scale-up.  How do we make the decisions with so many options, so much potential, so much uncertainties, and so much (often reliable – by its nature) data?  As I hope to continuously improve my filtering abilities, I have developed this short list of the most important things we look for in the founding team. […]

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