Venture capitalists commonly evaluate several characteristics of startup founders before investing in startups, spanning age, education, humility, drive, ambition, leadership potential, and dominant skills.
Heaptalk, Jakarta — Investing in early-stage startups tends to be more challenging, primarily due to the lack of observable performance in the market. This causes a higher risk than investing in more mature startups.
When assessing initial deals, venture capitalists (VCs) usually consider a number of factors, including strong management traits, implicitly large market opportunities, a new product with competitive specs, and early signs of product-market fit.
Founder and Managing Partner at AC Ventures, Adrian Li, shares his experience in recognizing founder personalities. Adrian said, “I find that there is an aspect that many VCs have not quite paid enough attention to – which is taking time to get to know founder personalities.”
According to Adrian, companies and business models can be changed, rotated, and adapted from time to time while the founding team is usually the most permanent and essential element. Therefore, when it comes to early-stage investing, where the risk of failure is the highest, Adrian suggests VCs consider spending more time evaluating founders rather than focusing on the companies and their business models.
Technical skills are not mandatory
Every VC wants to partner with a strong founder. In fact, there has been no precise study of the definition or set of criteria to describe what a strong founder looks like. However, Adrian tries to explain certain characteristics that most VCs are looking for, including age, education, humility, drive, ambition, leadership potential, and dominant skills.
Recently, Bassiset studied the relationship between founder characteristics and the success of startups. Founders were said to be doing well if they: held an IPO, raised a substantial amount of funding, or had their company acquired for large amounts. Meanwhile, founders who were not doing well saw their companies shut down, experienced stagnant growth, or got acquired for a small amount of money.
The results were surprising that having a technical lead had no effect on company success and founders of all ages did. However, having complementary co-founders, usually technical ones, does show a correlation with success.
In conclusion, Adrian emphasized that VCs do not need to worry about whether the founder has the required technical expertise or not since there are other, more crucial aspects that influence startups’ success.
