Starting a business has never been easier. Technology has lowered the cost and skills required to find extraordinary reach. The entire political spectrum is backing programs to spur on entrepreneurs. And through initiatives like crowdfunding and the wide array of venture capital, there are plenty of options to find financial backing.
But from the other side, the investor point of view, not every idea is a winner and not all people are safe bets. We spoke to our panel of leading Australian entrepreneurs and investors to find out what they look for in a startup founder.
If you’re an existing entrepreneur, their insights will be good coaching material, and help you think about the type of investor you may want to work with. If you are thinking about starting your own business, this should help you think about whether you have what it takes. And for anyone working in an innovative business, this will give you an insight into how you can help build value in your business.
There are several important threads, like a willingness to learn, or having knowledge and great passion for the solution. But there are also individual ideas which are important to becoming a well-rounded businessperson.
The credibility question
Muru-D co-founder Annie Parker has three big criteria she looks for in startup founders:
- The ability to take feedback
- Credibility to be fixing the problem in the first place
Essentially, Parker is looking for the right personality type. Passion is the driver here, generally stemming from some experience in a field. The Passion drives you to want to improve it, to see pain points and have the determination to fix it.
“As an investor in startups, I want to work with people who want to learn and are open to taking constructive criticism. I’ve run out of patience working with founders who only want to hear opinions that match their own – how will you possibly grow as a founder otherwise?” says Parker. She continues:
“It’s important to have some attachment to the problem you’re fixing too. Typically it’s people who’ve worked in that industry field, or have studied the topic for years, or perhaps have lived the issue in their personal life. If you don’t have some experience in the area, then it’s really hard to convince others – whether that be employees, customers or investors – to come and join you.
Above all else though – it’s passion. The startup road is a long and bumpy ride, if you haven’t got a deep fire in your belly to build this extraordinary thing, then when you do hit multiple bumps in the road – it’s more than likely that the founder will give up.”
Parker’s criteria are similar to those of Blue Sky Ventures partner Elaine Stead. Stead’s wish list includes, grit, resilience, a track record in the industry, and and a willingness to listen and learn.
Desire to learn and the humility necessary to seek out and listen to advice is a running theme from all those in the panel.
SEEK co-founder Andrew Bassat also has a wish list of traits in a start-up founder, beginning with a deep understanding of the problem they are trying to solve.
Looking for founders with this level of understanding, Bassat has some basic questions:
- Why do they think their product or service is better than any offerings that may exist?
- Why do you think your solution is of value?
- What type of value are you creating?
A depth of understanding is closely followed by passion, perseverance, humility and boldness as desirable character traits for Bassat.
“As a founder, you will have to navigate peaks and troughs so you need to really believe in your “cause” and be able to bring others on the journey,” Bassat says.
“Perseverance ties in with passion, but it’s good to see a founder who has been through a few stumbling blocks and demonstrated the creativity and perseverance to get through them.”
“It is slightly contradictory to include [humility and boldness] together. In terms of humbleness, I like founders who know they do not know all the answers, who learn from their mistakes and give their people the room to grow. In terms of boldness, I like founders who also dream big and are not scared to fail or look stupid as they try to achieve the aspirations for their business.”
For Craig Blair, partner at AirTree Ventures, it’s all starts knowledge of the problem. Blair is looking for “a visceral connection with the problem they are solving”.
But this has to be coupled with a few other traits – “impatience (unreasonable expectations), ability to learn and take feedback, ability to evangelise an idea or a product, attract great people, resilience and no dickheads,” Blair says.
Benjamin Chong, partner at Right Click Capital, isn’t looking for a founder, he wants a team.
“When assessing businesses for investment, the founding team is critical. We look for the right combination of business, domain, and technical experience within a team,” says Chong.
“Some teams consist of one business and one technical founder. Others consist of one business, one domain expert, and one technical founder.”
But when looking at the individuals within the team, Chong also has a wishlist — experience, intelligence, openness, hunger, and the will to learn.
“We view founders with previous startup experience favourably. While it can be easier to back a founder with previous successful exits, we’ve realised that some founders who’ve had previous failures can be more hungry, especially if they apply the learnings from these earlier experiences.”
Chong and Right Click Capital have a system in place to uncover the traits they desire — they ask founders to sit a test. Chong explains:
“We ask founders to take a psychometric test, which helps us work out their level of entrepreneurial potential. We look for founders with high levels of fluid intelligence. Fluid intelligence measures the ability of a founder to adapt to change. Given the high likelihood of ongoing change in a startup, whether it’s a change of business model, customers, or staff, we believe this is a critical characteristic of successful founders.
We also like founders with relatively high levels of openness and agreeableness. Openness measures a founder’s propensity to assess feedback from multiple perspectives while agreeableness measures a founder’s propensity to get along with other people.”
Tyson Hackwood, head of Asia for Braintree Payments, has this message for founders: “Investors don’t expect you to have everything sorted. In fact, that would probably go against a smart investment for them as they’ll want to get in at the ground level to leverage their equity opportunity.”
So, you don’t need to be perfect out of the box. But there are some things that Hackwood says every founder should have down pat.
The first is a clear understanding of the opportunity, the problem that is being solved. “Investors respond to numbers. Do your homework and paint a clear rationale for who the audience is, why there is a current gap in the market, what are the competitive offerings available and how you’re differentiated.”
The second thing is experience. You and your team need to what what it takes to get the job done, and this needs to be communicated. “Ensure that you articulate what each member of your leadership team is bringing to the table and their experience and background that will help you get there.”
The last thing is a plan. You’ve got the problem, you’ve got the people and the solution to fix it. But how? “Equally, if not more important, outline a detailed plan of what success looks like, how you plan to scale and how you intend to get there,” Hackwood says. “This will form the foundation of your investment ask. You should account for every dollar being spent, supported by demonstrating a clear ROI.”
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