If you are a VC looking to invest in a startup, one of the most important factors to consider is the quality of the founders. But how do you evaluate founders and their potential to succeed? In this blog post, I will share some of the criteria that I use to measure founders and their fit for my investment thesis.
How to measure founders:
- Intelligence: Is the founder able to answer your questions clearly and convincingly, or does he dodge them or give vague responses? I find that many incompetent CEOs focus mainly on what they want to say, rather than what you want to know. A smart founder should be able to articulate his value proposition, market opportunity, competitive advantage, and growth strategy in a concise and compelling way.
- Hard work: How committed is the founder to his venture? How many hours does he work per day? When does he finish at night? When does he start in the morning? How long does it take him to answer an email? Does he forget to get back to you? Does he follow up with you proactively? A hard-working founder should be able to demonstrate his dedication, persistence, and responsiveness in his daily actions. Is the founder passionate about his problem and solution, or is he just chasing a trend or a market opportunity? A passionate founder may have a personal connection to the problem, a deep understanding of the customer pain points, or a strong vision of how his solution can change the world. An obsessed founder goes beyond passion and shows a relentless drive to achieve his goals, overcome challenges, and learn from feedback.
- Communication: How well does the founder communicate his ideas and vision to different audiences, such as investors, customers, partners, and employees? A good communicator should be able to tailor his message to suit the context, use clear and simple language, and engage the listener with stories and examples. A great communicator should also be able to listen actively, ask relevant questions, and handle objections gracefully.
- Team building: How did the founder assemble his founding team? Was he able to attract competent co-founders and early employees who share his vision and values? How did he get to know them and convince them to join him? How does he manage and motivate them? A good team builder should be able to demonstrate his leadership skills, his ability to recruit and retain talent, and his culture fit with his team.
- Focus: How does the founder prioritize his tasks and allocate his resources? Does he have a clear roadmap and milestones for his venture? How much time does he spend on sales and product development, versus back-office functions such as HR, finance, and legal? A focused founder should be able to show his strategic thinking, his ability to execute on his plans, and his discipline to avoid distractions and scope creep.
- Vision: What is the founder’s long-term vision for his venture? Does he have a clear and compelling mission statement that guides his decisions and actions? Does he have a positive impact on society or humanity in his vision, or is it just about being successful financially? A visionary founder should be able to inspire others with his big picture thinking, his sense of purpose, and his social responsibility.
- Willingness to admit mistakes: How does the founder deal with failures and setbacks? Does he acknowledge his mistakes and learn from them, or does he blame others or external factors? Does he seek feedback and advice from others, or does he rely on his own judgment? A humble founder should be able to show his self-awareness, his openness to learning, and his willingness to improve.
- Ability to share credit: How does the founder recognize and appreciate the contributions of others in his venture? How often does he say “we” instead of “I”? How does he reward and celebrate the achievements of his team members? A generous founder should be able to show his gratitude, his respect, and his collaboration skills.
- Experience: What is the founder’s background and track record in the industry or as an entrepreneur? Does he have relevant domain expertise or technical skills that give him an edge over competitors? Does he have previous successes or failures that inform his current venture? An experienced founder should be able to show his credibility, his knowledge, and his learning curve.
- Capabilities: What are the core competencies of the founder and his team that enable them to deliver their solution effectively and efficiently? Does the founder have a strong technical understanding of his product and its development process? Does he have a solid business acumen that allows him to identify opportunities and risks in the market? A capable founder should be able to show his proficiency, his adaptability, and his problem-solving skills.
These are some of the criteria that I use to evaluate founders before investing in their startups. Of course, there is no perfect formula or checklist for finding great founders. Each case is unique and requires a holistic assessment of multiple factors. However, by using these criteria as a guide, I hope to increase my chances of finding and backing the best founders in the market.
