You can call this the first episode of our series of posts trying to show founders or start up teams why their business is unable to raise outside capita especially from VCs. Today, we’ll be discussing the importance of your team or the founder to a business’ capital raising prospects.
Most VCs agree that they back teams not necessarily the ideas (at least on their websites). Most VCs don’t fund great ideas if they are not convinced that they are backing the right team to execute the idea. I personally have passed on few investments because of the founding team. This is particularly painful to me because I saw the opportunity (quite huge), the product is not new, but is being executed differently. I think the story is a winner, I just couldn’t get beyond the founders. I thought to myself, if this deal was presented by another founder, I will most assuredly put my money where my mouth is.
Some VCs will invest in the opportunity, fire the founding team (I mean sack the founding team), then recruit a new team to execute the idea.
This approach is largely hostile; hence most VCs rather decline an investment. Some other investors will listen to the idea, then fund a trusted entrepreneur to execute the project. Now, that is brutal. The point of this is that, irrespective of how low hanging the opportunity might be, I will still require a grade A team to execute it.
So, the question is, what does an elite founder or elite team look like?
Knowledge of the Problem – An Elite founder has a high fidelity understanding of the problems he is trying to solve, and they are committed to solving it whether you invest or not. It is not about having foreign degree, it is about having conviction and knowing how to communicate it.
Knowledge of the Customer – An elite founder knows who his customers are and understands the behavior. He knows where his customers live, their age group, where they work, how much they earn, their spending patterns etc. The elite founder lives and breadths his customers
Knowledge of the Competitive Landscape – He knows his competitors and partners. You can hardly mention a business in the elite founders’ space, and he does not know anything about them. The elite founder knows what everyone in his space is doing. He knows major, subtle and potential competitors. He knows everyone circling around his business model and idea. Gone are the days where you are safe knowing a little about everything, and elite founder knows everything about everything.
Knowledge of his Business – The elite founder knows his business. He has his business information at the tip of his fingers. He knows his business metrics. His Customer Acquisition Cost and how to bring it down. He knows is daily active users. He knows his margin on every product or services rendered. He knows every detail about his business and operations. The elite founder sees the big picture, but also knows the minute detail.
The elite founder listens – He knows a lot, but is willing to learn a lot more. The elite founder has strong opinions but loosely held. He is willing to change his mind in the face of a compelling argument or superior evidence.
It is built not Innate – Being an elite founder is an attitude. You can’t become an elite founder overnight. It takes years of hard work and consistency. It takes hours of study, learning and unlearning. The elite founder knows his weaknesses and strengths. He focuses on his strength while he seeks for help with his weaknesses. This is because the elite founder recognizes that he can only be great at something he is already good at.
He has History – The elite founder has history of successes and most importantly failures and restarts. The elite founder learns from the mistakes of others. You will always see the effect of these learnings on the founders’ new venture.
He is Human Not Superman – The elite founder is also human. He is frail and subject to further errors. The elite founder perfect and largely imperfect. VCs will learn to keep up with his faults and shortcomings.
It might be extremely difficult to find a single individual with these qualities, that is why we also love elite founding teams.
Mixing Business with Pleasure – They complement each other with their strengths. They are friends and business partners. The mix business with pleasure well! They are stern and jovial. They know their mission is to grow the business and they work together to achieve the goals.
Good Blend of Skills – There is no standard for founding teams, bit it is always useful to have a blend of Marketing, Operations and Technical co-founders, with each focusing on his area of strength.
Diverse Experience – We also love to see teams that have wide range of experience across careers, race, gender or territories. If all the founders have similar experiences, the team might not be interesting enough. But when a team can rely on their experiences across different markets in building a product, then, that will be interesting
Trust me, investors will see through if the founders are not aligned. Trust me, as an investor, I will rather deal with 1 founder than a team of divided co-founders.
This is the conclusion of the whole matter, irrespective of how convincing your business idea might be, we need to be sure that the team executing it is the best that can ever be. So, as you build your business, pay attention to who your partners will be.