Founders: The Qualities to look For

We are going to be taking a little detour today from some of the initial content I have posted and just talk about founders – the entire reason startups and venture capital exists. As I continue to refine my thoughts as a writer and investor, I want to set a foundation from time to time about how I think. This is one of those times. And I’d like to start off by addressing what I believe is the most important determining factor of whether a startup will be successful – the founder. In particular, the qualities or traits to look for (or embody if you are a founder reading this) when deciding to invest in a nascent company. So, buckle up and brace for exposition while we explore the essential qualities truly great founders possess.

Oh, and to people that couldn’t really care less about venture or entrepreneurs – these qualities apply to being successful in any field. Just replace ‘founder’ with your preferred profession and it will be worth the read.

What makes a founder successful? A simple question really, yet every time it is asked you get some combination of incoherent word salad, platitudes, achievement rattling, or simply a shrug. I spend a lot of time contemplating this as I talk with incredibly accomplished entrepreneurs (and successful investors). I am going to try to answer this by looking at the individual and shying away from the outcomes e.g., money or fame, and avoiding qualifiers on the divergent fringe cases related to luck, pure brilliance, or the occasional sharp-elbow jerk that climbs to the top.

One final caveat – expertise, and startup experience are of course solid indicators for future success, yet there are many times this leads investors astray. This is why I will be focusing on the individual’s personality, which is applicable to both new and veteran founders.

Founder Qualities

If you have ever had the chance to talk to a successful founder, you start to notice something enlightening. There is a pattern that emerges – a unifying set of characteristics and principles that propel them. These individuals always have most, if not all, of these traits:

·       Passion

·       Charisma

·       Curiosity

·       Character

Passion

By passion, I simply mean they have an inherent drive to accomplish a goal. Sometimes called grit, or unbridled work ethic, these founders possess a sort of single-mindedness that allows them to persevere despite whatever seemingly insurmountable obstacles they encounter.  People like to assume that individuals stumble into success or were born into better circumstances. And certainly, this can be the case. I’d argue this is the minority and not the norm. It makes us feel better – simple Schadenfreude - to make excuses for our lack of effort and to put others down. The reality is that these founders usually heard no 263 times, were told to give up, and ate Top Ramen in their parent’s basement for years until their effort manifested into monetary returns.

Another way to look at it is, they practice delayed gratification and focus on long-term endeavors. These successful founders sacrificed fun and the safety of decent-paying jobs to embark on something they believe will change the world. Look, I get it, being a hedonist can be a blast, and there is definitely a time and place for that behavior. Yet, truly incredible individuals derive pride and satisfaction from the journey and strive for their dream. This isn’t a side hustle; they understand the tremendous sacrifice of their time and relationships.

Being an entrepreneur is one of the most difficult jobs there is and there is zero guarantees of success. It takes a special person to understand these odds and be confident that they are that 1 in 10,000 (or 100,000) entrepreneurs to identify an unmet need, solve it, scale it, and drive that company to fruition. This is the quality you will find in every successful founder - if as an investor you don’t see it in them … it’s probably best to walk away no matter how novel their idea is.

Charisma

You ever meet someone and walked away thinking, “Holy shit, that person has the proverbial It factor”? They make you feel included in their vision, inspire you, and you just want to be around them and see them succeed. That’s what I am talking about here. People say don’t meet your heroes, but maybe their heroes just suck? Because, whenever I have met successful entrepreneurs, they usually exude an infectious charisma that I just can’t help but root for. It isn’t always the suave Fonzie charm – sometimes it’s the subtle and compelling way they describe a problem, how it affects people, and how they intend to fix it. They make you believe that they are the only ones that can solve the problem and you’d be foolish not to support them.

This quality goes beyond the beer or airport test, you know, who you’d like to drink with or be stuck in an airport with for hours. It is an essential quality that enables founders to rally a team behind them. Founders can’t and should not do everything. They need to motivate highly skilled individuals to leave their jobs or forgo lucrative opportunities with potentially small equity incentives/modest pay in the hope of one day building a successful company. Founders need to communicate effectively with their board, negotiate partnerships, and the list goes on. This is especially important early on in pre-seed/seed companies that might lack anything tangible (even a minimum viable product) to show investors or customers.

If a founder doesn’t ooze charismatic prowess, should you punt their pitch deck out the door? No, of course not. Plenty of successful founders have lacked this arguably innate quality and managed to build great companies, but they did do one thing to mitigate risk considerably – they usually brought on a co-founder or charismatic CEO to facilitate and support their shortcomings. I’d argue if a founder does this, they understand the importance of charisma in launching a company and thus this shouldn’t be a concern for investors.

Curiosity

Certainly, this one has to be elaborated on. Dogs are curious … so are five-year-olds, yet I am not giving them a term sheet or $1 million to start a shiny toy factory. What I am getting at here is – founders should embody a learner mindset i.e., seeing every new experience as an opportunity to learn. Founders with this trait are fundamentally humble and understand they don’t know everything. There is a fine line between confidence and idiotic arrogance – successful founders tend to toe this line with aplomb.

Exposition break: I have always been incredibly fascinated and jealous of people that say things with 100% certainty, with zero evidence or experience to back up their claims. There is this interesting cognitive bias called the Dunning-Kruger Effect that explains this phenomenon – these people live on “Mount Stupid.” Basically, dumb people are too dumb to know they are dumb (dummy to the 3rd power if you will). Whereas smarter (or curious) individuals are aware of how much knowledge they truly lack and are always attempting to close that knowledge gap. This learner mindset is essential for aspiring founders. Back to your regularly scheduled blog post…

Perhaps you are wondering what this looks like in practice. Well, curious founders start this before they even have the initial epiphany for their product or service. They are looking for unmet needs and consumer pains, absorbing important information about their market, and seeking advice or help (the team) to come up with a solution.  Similarly, once the business has some runway and an actionable business model, they are talking to their customers, meeting with experts to learn, and willing to pivot should the potential arise for differential product applications or follow-on markets. Founders who are insatiably curious are always ready to adapt in times of trouble, whether that be company or market-specific factors. By nature of this trait, these founders find a way to be successful and tend to be a pleasure to work with for investors.

Character

I am not sure where this notion of being ambitious and being an ass became synonymous – the amount of time I have heard, “You have to take care of # 1, no one has your back,” or some iteration of this – is simultaneously astonishing and depressing. The majority of successful founders I have ever met or read about are kind, generous with their time, want to help others, and have built a community/network of similarly good people around them.

The point – and why great founders generally have this quality – is that business is about people, and frankly, so is life in general. Ultimately, your goal as a founder should be to attempt to better the lives of people, not to get rich or famous. Losing this perspective and forgetting the inherent purpose of business likely means you won’t be able to understand your consumers or rally the support system necessary to manifest your dream. There is a reason we root for the protagonist and didn’t cry when King Joffrey was poisoned in GOT. Being an ethical person opens doors, makes people root for you, and it’s just the right thing to do. What’s the point of building an empire if you have no one to share it with?

I will admit that this quality is a little harder to ascertain. It can be considerably difficult sometimes to know if someone is “good,” as people are prone to put on a front in the public eye. But I believe we all have a better BS radar than we give ourselves credit for, and usually that annoyingly potent gut feeling we get when we meet someone lacking character is screaming at us. Other times it’s pretty easy to spot a bad actor: outright rude, obnoxiously arrogant, lies during screening, dodges calls, or says “hella” before every word and insists on asking for purified-passion fruit spring water before every meeting (joking on this last one, but also kind of a red flag, right?). Ultimately, we all want to work with and support good people, it would be prudent for founders to remember this.

Final (Iceberg) Thoughts

Whether you are an investor screening a founder and their team, or a founder looking to fundraise – look for these qualities or try to embody them. In my (unsolicited) opinion, the founder makes a company, and barring some outrageously poor product, path to market, business model, and the like (unlikely, given they possess the qualities I listed), they will find a way to pivot, adapt, and thrive. I can list a plethora of revolutionary products that never found traction with a weak founder/team, but I’d have a tough time finding a great founder that didn’t find a way to be successful. As always, don’t ignore the fundamentals: valuation, product/market fit, unit economics or monetization dynamics, macro-environment, and your firm’s investment thesis. But the founder makes the company at early stages – it’s what we are investing in, and it’s the reason the innovation exists in the first place.

- Brian Romain