Founders Part 1: Sam Altman and evaluating founders objectively
The other day, I had coffee with a pre-seed venture investor. Investing with conviction so early on in the investment process is not intuitive. Without company data, what information do investors have to be critical of? Market sizing might not be tremendously useful if the company is inventing a brand new technology or entering a saturated ecosystem. Product quality is irrelevant because, in the pre-seed stage, there may not be an MVP. In the pre-seed stage, sometimes there is just an idea and a founder. It makes sense that separating objectively good founders from the just okay is a main pillar of this VC’s conviction oriented investment strategy.
This weekend, Sam Altman was fired from his CEO position by the board of OpenAI. A day later, OpenAI’s investors (Thrive, Sequoia, Tiger Global, Microsoft) began a public push to bring him back. Microsoft, OpenAI’s largest investor, hired Altman in an act of solidarity. As of 11/21/23, 738 out of OpenAI’s 770 employees signed a letter threatening to quit if the board did not resign and Altman was not brought back as CEO. Sam Altman is such a good leader that 738 people signed a letter intending to uproot their lives as a result of his departure. One of the largest companies in the world, and three of the most prolific VC funds, have personally come to Altman’s aid against his four opposers. That is a 1:1 ratio of people on the board against Altman versus global institutions telling them to go f*** themselves… I know what side I’d rather be on.
This weekend’s mess is evidence of Sam Altman’s superhero status as a founder. OpenAI is a great company, but without Altman, investors are acting like it is a ship headed for wreck. Why? Is decent leadership really that scarce? As investors, we should study Sam Altman and founders like him with the goal of not only investing in future Sam Altmans, but to better understand the dynamics between investors, founders, and startups.
How can we evaluate founders more objectively?
We could theoretically use machine learning to deduce exactly what recipe of qualities lead to the most successful founders. What attributes would we train the model on? There are professional attributes:
- College degree, and from what college?
- Graduate degree, and if so, from what institution?
- GPA
- Corporate experience (related field, level of prestige of the institution)
- Number of promotions earned, and in what timeframe
- Additional startup experience
- Past founder experience
- Number of companies exited
- Success of past exits
- Technical abilities
We might also consider the following behavioral/personal attributes:
- Sports team experience
- Score on a personality test
- Number of siblings and birth order
- Ability to play an instrument
- Gender (important for understanding the bias of the training set)
- Race (important for understanding the bias of the training set)
- Religion (important for understanding the bias of the training set)
Upon asking ChatGPT, Altman’s own product, what made him such a great CEO, this was the model’s reply:
Strategic vision: Altman is a grand strategist. He knows that, like an organ transplant, the key to rolling out high technology depends on society’s ability to accept it. Moving too fast, regardless of OpenAI’s internal speed, will lead to failure. Sam Altman manages a hyper-scaling company. To the world, he is patient, measured, and in control.
Leadership skills: It goes without saying that effective CEOs need to be inspiring leaders. Altman developed his leadership skills as the President of Y Combinator and as a serial startup founder. He also played football in high school.
Innovative thinking: Altman’s expertise in AI is his foundation for thinking creatively about how it can be used and how it can be innovated. His own technical skills are the scaffolding for how he thinks about the future of his product.
Ethical: OpenAI’s founding principle is creating AI that is safe and benefits all of humanity. It is actually quite ironic that ChatGPT cites this as one of Altman’s virtues, because it is my understanding that his disputes with the board centered around an ethics debate.
Over a decade of experience: Altman dropped out of Stanford to start his first company, social media platform Loopt, which shut down in 2012. Was Altman’s early experience with failure conducive to his later successes? He went on to lead Y Combinator, where he was exposed to hundreds of startups across a variety of industries and witnessed their successes or failures intimately.
This is an interesting start — Sure, I would not expect ChatGPT to create an exhaustive list of Sam Altman’s best qualities, and these paragraphs do not sufficiently explain why his talent is priceless to OpenAI and Microsoft. This exercise also makes me realize that many qualities of amazing founders are undefinable. There might not be a purely objective way to evaluate founders.
In a later essay, I will discuss Part 2: Understanding how good founders operate.
