Predictive cues that a founder is going to "make it"

Predictive cues that a founder is going to "make it"
"Even before you start, that was a pre-emptive “shh!”

I've always thought that evaluating startup founders is a bit like working inside the scouting department of a major league sports team. It requires both objective and subjective analysis, using quantitative and qualitative inputs, to project whether what you see today is likely to yield something that is transformed in the future.

One of the ways that VC investing is different, and more challenging, however, is that there is typically less of a "body of work" to evaluate. Whereas athletes compete and are evaluated in their respective sports starting at a very young age, first-time founders have to leverage their cumulative smarts, experiences and relationships to create something brand new.  So that begs the question: what signals should investors look for in trying to decipher whether a founder CEO projects well when they hit the majors (i.e. the cutthroat world of business)?

In meeting with a wide variety of founders over the years, I have been able to identify a handful of traits that I use as indicators for success. Of course, these are not fool-proof, and have not always proven true, but they generally have been useful as strong predictors:

Mindset: failure is not an option

I have met founders from various walks of life: highly credentialed colleges, state schools, Wall Street, Main Street, wine cellars and, well, just cellars. Whether it's pride, an uncompromising striving for excellence or the proverbial "chip on their shoulder", this type of founder refuses to accept failure. They will continue working on a problem until it's solved and then embrace the next one. Many of them have also placed most, if not all, of their eggs into the basket, whether it be their reputation, draining their 401K or postponing other life goals.

ABC: Always Be Closing

In order to succeed as a startup founder, you have to be an effective salesperson. You are always selling: to potential customers, employees, industry partners and investors. Being able to sell doesn't mean being the most charismatic person in the room, though that helps. It comes down to articulating conviction and that look in one's eyes when convincing someone else that what you are doing is going to happen and make a difference. This gravitational pull can come in different styles, from quiet confidence, to humor to sheer intelligence.

Not about the money

It may sound counter-intuitive, but most successful founders I've had the opportunity to work with did not get into founding their companies because of an obsession with wealth. While this is a by-product of building a great company, most founders hold dear other aspects of taking an entrepreneurial path. Motivating factors range from independence, creativity, legacy-building, curiosity and a lack of conformity. The financial outcome sort of happens concurrently with one of these other goals.

Understandably, the majority of time that investors spend with founders tends to be focused on understanding their market, vision, product and financials. That analysis is easy and straightforward. Less time, however, is typically spent probing these other founder attributes, though they can be very telling indicators of success.

Going forward, founders shouldn't be surprised if they start seeing more creative approaches that investors use to evaluate their potential. "Hey, let's scrap the intro call on Zoom. How about we meet at the 'escape room' instead?

"By founders, for founders"

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Jamie Larson