When it comes to building a great company, there are many factors that come into play. Of course you need a great idea and a market opportunity, but the most important thing you need in order to build a great company is a great team.
“Founding team is more important than the idea itself,” said Kevin Kinsella, the founder of Avalon Ventures. “The business plan can (and will) change. The founding team has to be able to adapt quickly.”
It’s true, many angels and VCs invest in people, not products. That still begs the question of what kind of people they invest in. I’ve written about how to choose a co-founder for your startup, but sometimes it is difficult to know why investors target certain founding teams over others.
Here are the top three traits that venture capitalists look for in founding teams.
For most founders, the odds of success are stacked against you from the beginning. According to Ben Brooks, a founding partner of Southern Capitol Ventures, a sense of fierce determination enables you upset those odds.
“I don’t think most casual observers realize how hard it is to be an entrepreneur,” Brooks said. “Your determination has to exceed the practicalities of life. Imagine going without pay for six months. Imagine hiring and downsizing in the same year due to macro or micro influences. Imagine investing 90% of your personal assets in your company. Fierce determination enables you to be irrational.”
It’s true that there will be internal struggle to simply exist as an entrepreneur, giving up everything for the pursuit of a dream. But, there will also be an external struggle too. Once you are able to reconcile the pain points within your personal life and company, you have to face the pressure of a hostile market. Venrock’s Doug Dooley calls it grit, the determination to play David against incumbent Goliaths.
“The reason why grit is so important is because startups are really difficult; you have so much adversity,” Dooley said. “Usually you are trying to disrupt an incumbent who has far more people, resources, brand, sales, marketing, etc. than you have. So, to have the odds against you, a lot of times the reason why startups win is because their founders just have so much determination that they can power through all the adversity.”
This may seem obvious, but VCs are looking for an intelligent founding team. Investors are looking to stand behind people that are the best at something. Being a world class developer, for example, and having the experience and skills to fully back it up go a long way to convince investors that you have what it takes to get a company off the ground.
“In Avalon’s part of the tech/biotech universe, there is no substitute for exceptional expertise,” Kinsella said. “Being able to do something faster, cheaper, better all stem from being ‘smarter than the average bear.’ We think the smarter bears have a greater chance of success and those are the ones we back. We spend a great deal of time assuring ourselves that we have identified the A Team to execute a business plan.”
This can manifest itself in a variety of ways, but you have to know you are the best at something in order to prove it. Dooley calls this the superiority belief — something in an entrepreneur’s background or experience that makes them believe they are exceptional at what they do. According to Brooks, intelligence also plays out it knowing your limits and acknowledging your faults.
“The competition is fierce and you never know where the shots are coming from,” Brooks said. “You have to be smart enough to pivot at any moment. You have to be able to recognize your shortfalls and visualize the opportunity. Common sense is invaluable, but superior team intellect allows [you] to stay two steps ahead of the competition.”
It’s no secret that passion sells. Building and selling a product or service is much easier if it is something that you get excited about. Harrison Miller, a Managing Director at Summit Partners, said that one of the first things he looks for in a potential startup investment is a “passionate will to win.”
“Building a great company is incredibly rewarding but really hard,” Miller said. “We look for people who are fiercely committed to succeeding, and bring huge energy to that mission every day, as do we.”
Passion is necessary to build a great company and it is necessary to get other people on board with your team’s vision. Passion is electric and, like moths to a streetlight, it attracts customers and investors alike who wish to share the energy that it generates.
“Facing the long odds against success, an entrepreneur must marshal a vision, get other co-founders to share it, convince relatives or venture capitalists to back it financially and implement it, working day and night and on weekends to make it happen,” Kinsella said.
Obviously, this list isn’t exhaustive. But, it is a gut check for any would-be founders looking to start a company. So, make sure you’re determined enough to push through, smart enough to give yourself an edge, and passionate enough to make your dream attractive to other people.