It is almost impossible to have a discussion with an investor in Silicon Valley about “what they look for” without being told “we invest in teams.” I was reminded of this when I read an interesting article by Doug Clinton in TechCrunch titled, “Margin of Safety in Venture Capital.” In this article, Clinton states:
“A great team is resourceful, dedicated, persistent, curious and flexible. Those elements reduce the risk of a negative outcome when things don’t go as planned, because a great team adjusts and fights through it. Fighting through a difficult time. Pivoting to something else. Pressing on with a commitment to suffering. Sometimes things go too far off the rails for even a great team to recover, but better to invest in a team that can correct setbacks than an average team that crumbles under even minor deviations.
“It’s this reason that all VCs say they invest in team first. They are our margin of safety.”
A great deal has been written on finding the right mix of skills, experience, know-how. But the role of the founder’s mindset is starting to gain more attention. The Sutardja Center for Entrepreneurship & Technology (SCET) at UC Berkeley has been exploring the psychology of being an entrepreneur e.g. trusting, understanding the value in diverse teams, belief and ethics, risk assessment, communication, overcoming social barriers, rejection therapy, fail training, etc. They have embedded mindset training into the Berkeley Method of Entrepreneurship, which is taught at UC Berkeley and other universities around the world.
But there is a significant difference between an entrepreneur and a high-potential founder. I was introduced to this idea by Sandra Miller, the former Director of the Kauffman Labs for Enterprise Creation at the Kauffman Foundation. Based on research done at the Kauffman Labs, Ms. Miller identified six critical behaviors and personality characteristics that are common to high-potential founders. They are:
Coachability. The ability to effectively engage when provided constructive or negative feedback or perspectives different than your view on a particular aspect of your business. Entrepreneurs must constantly manage a wide array of views on any particular matter, then move forward decisively.
Adaptability. Lean Startup methodology expert Steve Blank often states, “no business plan survives first contact with customers.” Startups are highly fluid organizations operating with limited resources in highly changing conditions. Entrepreneurs must have a high tolerance for ambiguity to adapt to changing conditions. High potential founders will adapt to insights from customer contact and lead a team to innovate to achieve product/market fit, optimizing the potential for startup success.
Innovation and Creativity. Shows big idea thinking (thinks beyond constraints) and ability to articulate many approaches to solving problems.
Ambition balanced by Humility. Founders desire to be successful (can be financial, global impact on customers) and shows openness to alternative perspectives. Understands that they may not have all the answers or always be the smartest person in the room and that they will need others to achieve success.
Authentic Leadership. Recognizing that there are many styles of leadership, shows the ability to lead a company/team to achieve results, WITHOUT causing alienation of other team members.
Expertise and Experience. Founders possess the relevant technology, business or market expertise. Ideally, has sought out experiences beyond their specific sphere and has gained experience in their specific field that will benefit the startup in some way.
Applying this to your startup.
All available research shows that team with co-founders are more successful than solo founders. As you build your team and add co-founders, it is important to do the following:
Assess yourself based on these characteristics; and
Think about what characteristics your co-founders or potential co-founders have.