Venture capital · Investments

What are the patterns that investors look for in early stage founders?

Martina Glorens Lead Copywriter bei MeMyselfAndI

September 25th, 2016

Are there any VC investors here that can share some thoughts on what they recognize as patterns of potential good founders when seeking exciting startup investments?
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Martin Omansky Independent Venture Capital & Private Equity Professional

September 25th, 2016

Roger: Thanks for your comments. We are definitely in agreement. I want to emphasize our own bias - recognizing that there are more ways to skin this cat - but we have chosen a particular way, which is the strength of the intellectual property. Money and care can usually buy talented, committed CEOs, staff, and advisers, and good management can usually adjust to changing circumstances. The rare commodity, in our view, is the scientific or engineering design breakthrough, which can lead to a plethora of applications that significantly advance the state-of-the-art and provide for the founders, employees, investors,and the society something that is a true and sustainable comparative advantage. As one would expect, there are not many of these out there. The history of science confirms this. We are fortunate to be in one of the locations (eastern Massachusetts and Rhode Island) where new, big scientific ideas proliferate. I do concede that there are significant deals that don't fit our criteria. We welcome such enterprises. They are just not suitable for our group, but I congratulate those who can identify the good ones in this category.

Roger Rappoport Partner, Procopio

September 25th, 2016

Martina, at my last fireside with Scott Kupor, managing partner and COO of Andreessen Horowitz, he said they first look at the idea, and if they think it's a good idea, do they feel that the founder or founders have the ability to execute. The product to them is secondary, as they know it's going to change to such an extent between the Seies A and Series C, so it's really a question about the idea and, even if it's just a single founder, whether they believe that the person has the goods to deliver on that idea. They have about 100 employees that help guide, mentor and help grow the founders and the company. It's a really interesting perspective. 

Take a look at http://accesssiliconvalley.net/ to see the full interview. I think you will find it very interesting. 

I am doing a fireside with Saeed Amidi ion Thursday and, if you don't mind, I'm going to ask him the question that you posed. He has invested in about 200 pretty good startups, including PayPal, Zoosk, Lending Club, Dropbox, etc  If you are in Silicon Valley and would like to attend, shoot me an email.  Here is a description of the event. https://www.meetup.com/sventrepreneurs/

Hope the a16z video helps answer your question (and take a look at some of the other videos, including Steve Goldberg of Venrock and Ann Miura Ko of Floodgate--also some interesting insights to your question).  

Regards,
Roger


Zia-ur-rehman Khan Co-Founder / Managing Director @ Media Business Services (MBS)

September 25th, 2016

I request the same as Martina Glorens asking. If there is any VC or Angle investors here to guide and lead us for our project. Should be explainary with example or if possible with slide.

Arthur Lipper Chairman of British Far East Holdings Ltd.

September 25th, 2016

The bet is not exclusively on an individual and the concept must be able to be implemented by other than just the present entrepreneur.

Roger Rappoport Partner, Procopio

September 25th, 2016

Martin, I think we are really saying the same thing, and you absolutely drilled down to some very real characteristics that go into making a determination as to whether or not they "have the goods" to execute. 

On a purely subjective basis, when I invest or when I make a determiation as to whether to take on a new client, probably the most important characteristic that I look for, and it's really difficult to articulate, because it's some of the characteristics you mentioned, but it's an overall sense that I get--as to whether or not, particularly as it relates to the CEO, the individual is, or over a period of time can become, an A+ CEO. Because, at the end of the day, it's more likely that an A+ CEO will hire A+ Team members, but a B+ Individual is unlikely to hire above him or herself.  And if the team isn't stellar, it won't be fundable, so whether it's in consideration of an investment or taking that company on as a client, the end result is probably going to be the same. 

Even if the individual hasn't matured into a stellar entrepreneur, at the the very early stages, a CEO with A+ CEO characteristics, that is passionate and believable, will be able to describe and articulate a vision that will make others want to quit good paying jobs and come to work with the individual for equity. And chase the dream. 


I think one of the characteristics that often shines through in an A+ entrepreneur is an unbridled passion to solve a significant pain deeply felt by the entrepreneur. I recently bet on an entrepreneur that quit a very nice six figure salary and option package, rented out the 5 bedrooms in his Palo Alto house, and he and his wife are living in the garage, bootstrapping development with the rent. That's commitment and what George Zachary of Charles River Ventures identifies as the almost self destructive desire to win/achieve. 

It's going to be interesting to hear Saeed's answer to Martina's question. Not only has he made pretty impressive bets over his 200 plus companies invested in, but he currently has, I believe, over 400 companies in Plug and Play in the Just the  Sunnyvale facility. 


Martin Omansky Independent Venture Capital & Private Equity Professional

September 25th, 2016

Agreed, Arthur. But the question posed was about the founder characteristics, not the deal. Obviously our group focuses on the totality of the enterprise, so we are ultimately on the same page.

Martin Omansky Independent Venture Capital & Private Equity Professional

September 25th, 2016

We look for founders with academic credibility, management chops, own financing at risk, flexible personalities, humility in the face of the profound intellectual challenges facing them, relevant experience, success in previous deals,technology and industry knowledge, willingness to listen, learn, and delegate. We also want people founders who understand and appreciate the interests of money investors. Admittedly, a long list. And did I mention creativity and realism.?

Arthur Lipper Chairman of British Far East Holdings Ltd.

September 25th, 2016

Prior success and amount of own money invested in project and on what terms versus those being offered to investors.

Martin Omansky Independent Venture Capital & Private Equity Professional

September 25th, 2016

Agreed. But, the question posed was specifically asked about the characteristics of founders, not the overall deal.

Arthur Lipper Chairman of British Far East Holdings Ltd.

September 25th, 2016

Professional investors will be concerned with the deal as much as the founder. Founders are not likely to be great CEOs and if they choose to play that roll they are likely to come into conflict with investors as projections are not met.