As investors, we meet and evaluate thousands of startups every year. Let us share some key common traits we come across in entrepreneurs that make us sit back and say, wow!
Impressive entrepreneurs have a deep understanding of the space in which they operate. They are setting up businesses to solve real problems and fulfil the real needs of their customers. They have done an immense amount of on the ground research to identify and understand the problem for which they are offering a solution. The passion and desire to solve any specific problem shows with every data point they share and every story they tell. They have stress-tested their solutions and ironed out wrinkles before sinking a lot of time, effort and capital into their business and seeking venture capital.
Impressive entrepreneurs have leadership qualities, and they show. They do not have illusions of grandeur about their capabilities and realise the importance of building their business with the right team on board. They usually, if not always, have one or more co-founders that bring complementary skills to the table. As investors in early-stage businesses, our number one critical criteria for investing is the team. We would always back the jockey (team) than the horse (business). We spend a lot of time understanding the team’s vision and alignment to the company and often filter out deals that may have a great underlying idea, but the team didn’t feel right. In addition to the team, external stakeholders like advisors, mentors and investors have to build the foundational pillars and ensure that a business has a strong foundation.
Impressive entrepreneurs understand the importance of timing. Our investment approach gives a very high weightage to timing, right after the right team. We have enough and more tales of businesses that failed because they were too early or too late. To quote Reid Hoffman, Co-Founder, LinkedIn, “If you’re not embarrassed by the first version of your product, you’ve launched too late”. While we agree with Mr Hoffman, startups have limited resources, especially human and capital. If a particular market is not ready for a solution, no matter how good the product, it will see limited adoption. For instance, the iPod was not the first portable music player on the market, but it was arguably the most successful. Its simple value proposition was that you could carry around thousands of songs rather than a single CD or cassette for your CD player or Walkman. Likewise, Apple’s iPhone was not the first time you could bring a calendar or phone with you, but it has outlasted the Blackberry and Palm.
Impressive entrepreneurs understand that their business has to scale up sustainably to have a more significant impact. If it’s not sustainable, it won’t go far. If it doesn’t turn in profits at some point in time, it can’t be sustainable. Hey, we VCs don’t have infinite capital. Not even the Fed can support something unsustainable, something to discuss at another time. A self-sustaining business proliferates and has a much broader impact than one that is supported by continuous infusion of external capital. It also gives all internal stakeholders flexibility and the opportunity to pursue new, exciting avenues without constantly worrying about making the next payday if the next round does not close as per timelines.
Impressive entrepreneurs who succeed are mindful that it’s a dynamic world. New hurdles and opportunities come up all the time. As much as entrepreneurs need to strive for perfection, they constantly analyse and improve on their business - processes, team, strategy, operational efficiency, etc. This ability is one of the significant factors determining whether a company can successfully create a moat around itself or allow competitive forces to destroy you. Disruptors often forget that they too can be disrupted, as evidenced by a few famous quotes:
“We’ve learned and struggled for a few years here figuring out how to make a decent phone … PC guys are not going to just figure this out. They are not going to just walk-in” - Ed Colligan (ex-CEO, Palm) on the news that Apple was developing a phone.
“You can’t get your hands around it. No one’s going to buy that” - Steve Jobs (ex-CEO, Apple), when Samsung and Google came out with phones larger than 3.5”
“Neither Netflix or Redbox are even on the radar screen in terms of competition. It’s more Walmart and Apple.” - Jim Keyes (ex-CEO, Blockbuster)
These are some of the essential common traits impressive entrepreneurs possess. We are sure there are many more qualities that lead to success. Picking up the right entrepreneurs for a specific business model at a certain point in time to create a highly successful business is more art than science. There is no magic formula, but we keep learning and sharing what works for us. That’s the only way to build a thriving early-stage community. Come, be a part of this movement. Sign up here to learn more