Investing in Founders

Taking up the topic from last time, this blog covers the first aspect of startup i.e. “The Founders”: The daring, go getters who dream beyond boundaries and create a new technology, product or service to capture the world. These founders are risk takers and yet risk averse people at the same time. What is it that investors are looking for in the founders of a startup? Is it the technical know-how, the ability to sell their product or the perseverance to keep working day in and day out without a decent compensation in the beginning? Well, it’s a combination of all that + much more. Some of the less obvious characteristics that matter to investors are:
a). The ability to adapt: Co-founders of any startup begin with a dream. Then they make a business plan to fit that dream and pitch it to the VC’s. The idea or concept is usually so new that no knows for sure how successful the initial business plan will be. Hence, it is crucial for the survival and success of the startup to adapt the business plan to the needs of the market.
b). The ability to let go: When a startup goes from early stage to growth stage, sometimes the co-founders are not the best people to remain as CXO’s of the company. Very often the investors bring in a new CEO for growth stage of the company. A founder needs to be comfortable with this.
c). Team-player: The founder (co-founders) need to be good team players. A startup is like a very close knit family. People need to work long hours together in a high stress environment. At the same time you need to manage the expectations of the VC’s and other stakeholders. In such cases, being only the guru in technology is not enough.
d). Reputation: The startup and investor circle in any geographic cluster is a very small world. News travels fast and reputation travels faster. A young entrepreneur needs to focus on relationships as well!
Next time, the focus will be on how geography affects the success of startups…..