Three Traits I Look for in Founders
People often ask me how I identify great founders before deciding to invest in them. Interestingly enough, those questions typically come from people outside of the venture community. The reason why this is little talked about among VCs is that fundamentally most investors don’t really know. Some people just excite us, others not so much.
Most of our assessment of founders happen subconsciously. Deep down VCs have a mental check-list with 50+ traits they are trying to check off - but they don’t know exactly what those are. People outside the industry would call it investing with your gut. However, as a VC insider, you’ll learn to call it pattern matching, as it sounds less random and more like a skill that can be honed. Indeed I believe it can. There is a lot of merit to meeting +1000 founders that you can’t train with a traditional checklist.
Since I typically write the initial cheque for early-stage companies, I invest based on very little data. Pre-seed is not for the faint-hearted, especially if you like due diligence, data points, and control. Instead, my approach has been to invest in the best possible founders I can find. My thesis is that as you have a disproportionate amount of data around the team relative to the market, it makes sense to focus on the known factor.
But what does investing in the best founders actually mean? A lot of people rightly asks this question. Therefore, I decided to try to boil my mental model for evaluating founders down to the three core traits I invest in. It’s not a complete model, but it should give you some idea about how I think.
1) Empathy with the problem you’re trying to solve
This is one of the most crucial parts of my founder thesis. People start companies for a reason and it’s paramount to be able to emphasise with the people whose pain you’re trying to relieve. This is often labelled as founder-market fit or similar terms. The truth is that there are millions of people trying to solve problems by building cool products. Most fail. I believe those who have deep empathy with their users’ problems succeed because they understand how to build products that create real value, rather than just a killer UI.
2) Humility and self-awareness
I invest in lifelong learners who do not see themselves nor the world to be fixed. They understand their strengths but are equally eager to fix their deficiencies either through learning or hiring. In my view, self-awareness is one of the most undervalued skills any human can have. Greatness is engineered through gradual improvement, rather than just innate talent. I believe the best founders understand the journey that they are embarking upon as people, as much as they understand the journey of the company they are building.
3) Ability to get people excited about your vision
Let’s face it - if you want to build an outlier company, you’re not going to do it on your own. It requires VCs to put millions of dollars behind you, get boatloads of people to use your product while also being able to attract and lead a team of incredible talent. That requires not just a big vision that people can get behind, but also a strong ability to convince people that you will be the one to lead that vision over the next 7–10 years. Building outlier companies, typically, require an exceptional founder at the helm.
This is an attempt to crystalise my thoughts around something that is often a black box for founders and investors alike. Most investors don’t fully understand what they are looking for, so they default to investing in people that seem safe. Repeat entrepreneurs, good schools, etc. While some of those undoubtedly go on to build great companies, there is a whole host of people that are less obvious, but equally likely to build outlier companies - you just have to update your mental model.
If you’re a founder reading this, do not treat it as a guide. Going out to try to hone these skills as a founder is useless. Most of them are innate to your personality, value set, and past experiences, so it’s almost impossible to fake. But more importantly, because I am just one of the thousands of investors putting money into startups and different people have different opinions.