Evaluating a founder can be just as, if not more, important as the startup itself. Founders (and co-founders) are the stewards and heralds of their ships; they set the vision and direction for the company. The fact is that nearly 90% of startups will fail, which means finding a founder with the grit, determination and willingness to power through walls to get things done is critical and often a rare find. Venture capitalists and angel investors alike need to understand how to evaluate the way founders drive their company mission, culture, and overall investment worth.
So, how can you evaluate a startup founder? There are a few key qualities that can help you identify a founder worth investing in:
#1 Industry knowledge
Every founder should know the industry they’re jumping into. This includes knowing potential demand, competitors and the market dynamics that exist beyond their company's vision. You want to look for a founder that has a clear and full picture of their industry and who understands and is actively looking to eliminate their company’s competitive weaknesses.
It’s also worth noting that knowing the industry is more than knowing their product; it’s about knowing the customers, the competitors, the other CEOs, the investors in the field and, most importantly, real awareness of other startups. No company exists in a vacuum. For a founder to truly understand their market, they need to be connected and clued-in to the larger framework of ‘who is doing what, why it’s working, and what is going on.’
While it helps to find founders with industry experience, any good founder will have a level of initiative that will compensate for weaknesses in their industry know-how. Look for founders that are displaying more than just knowledge – look for those going above and beyond in their initiative. Do they obsess over learning as much as they can? Can they adapt on a moment's notice to an unexpected delay? Do they openly look for feedback?
Startups are fast-moving and require constant adaptation, growth and attention to incoming information. A founder should be able to adapt and know (and be prepared to) to never rest on their laurels for a moment.
All founders need a particular blend of qualities – integrity, tenacity and grit being among the obvious. When you first start researching a founder, be sure to investigate how their team functions and the history of the company. Do they know their co-founders well? Have they worked together before? Does the founder have past management experience? Do they have a strong sense of company culture? Has there been a lot of employee retention or turnover? A good founder knows that hiring the top talent with the right skills to bring their vision to reality is critical, and they will do whatever they can to preserve that.
A self-aware founder is a strong founder; it’s not enough to be smart and motivated – a great founder will understand how they work with a team and are willing to take advice. For the company to thrive, a founder needs to be willing and able to trust their team and actively hire people who can fill their role better than the founder could themselves.
#3 Ability to execute
A founder may have the right personality and team culture to succeed, but that doesn’t necessarily mean they are positioned to scale. No matter how big or how small their startup is, a founder should be constantly thinking about staffing up. As a potential investor, you should as well. Does the company have a strong marketing presence? Do they have the people with the right technical skills on staff? What positions can they outsource? Put yourself in the founder’s shoes. Are they hiring in a way that lets them scale in their chosen industry? Do they have a vision for their future hires? If not, it may be a sign they need to reassess their market or that you may need to look elsewhere.
At the end of the day, founders don’t just make--they are their companies. After all, it’s the founder’s drive, determination and passion that birthed the startup, and it’s how they lead, adapt and grow that determines their success.
At Republic, we understand the important role founders play in their companies and we’ve dedicated a series on our blog to provide investors with more direct and personal insights into each founder’s experience and ideas. Check out our Superheroes stories to read some of our exclusive interviews with founders raising on Republic.
This educational article is provided by Republic to help its users understand this area of the market, it should not be construed as investment advice as it is impersonal, disinterested and was produced by Republic for Republic’s users, without remuneration received or expected.