Genetics Of Start-ups
I have covered in a previous post the importance of diversity in the initial phase of the company building process and specifically how diversity of the founding team is a key component for a successful startup.
However, given how many times I have been discussing this with entrepreneurs across Europe, I want to spend some time to flesh out another key dimension of the founding team: what I call the DNA dimension.
The key thesis is that there is not such thing as the perfect team good for any start-up. On the contrary, I am a believer that there is such thing as the team with the right DNA to be able to successfully execute a specific business idea: the key therefore is the “fit” between the DNA of the founding team and the idea to execute.
In order to assess this “fit” I will refer to a methodology called the DNA matching test: fundamentally a test through which to assess the DNA of the team vis a vis the Critical Success Factor for Product/Market Fit of the business idea/start-up. This assessment is based on a three-steps process.
Define Critical Success Factors For Product Market Fit of the business idea/startup
What are the key factors of success that will allow the company to reach product/market fit? Note that these Critical Success Factors are just a subset of what will make the company successful overall.
Define DNA of The Founding Team
What are the key skills and motivations of the founding team?
The DNA Matching Test
What’s the level of overlapping between the Critical Success Factor for Product/Market Fit and the DNA of the Founding Team?
Contentful Critical Success Factors For Product Market Fit = technology + use case insight
Contenful is a next generation content management system that delivers content in the form of an API (therefore presentation layer/device agnostic). This is a very technical product that targets technical users. To be clear, there are many things that might or might not determine the success of Contentful, but I believe that scaleable tech and an insightful understanding of the use case are the two key critical factors of success to allow the company to get to product/market fit.
DNA of Founding Team = technology + use case insight
Sacha used to work in an agency and develop apps and mobile web sites and had to build a CMS for each customer. Basically Sascha developed the idea of Contentful out of personal business frustration!
The actual DNA of Paolo and Sacha is something that must not be confused with their skill set.
Paolo’s DNA is based on a passion to find the best possible technology to solve a problem (without any religious position). This is way more than system engineering skills.
Sascha DNA is a based on a unique understanding of the customer problem and a relentless will to succeed. This is way more than product definition skills.
The DNA Matching Test
Contentful is a very technical offering and both the knowledge of the use case, and, the capability to build a large scalable platform are the key to the success of the business. This is therefore a good example of a good DNA matching. Note that neither Paolo nor Sascha have any Sales and Marketing DNA. This was the missing peace. However, the conclusion was that in order to find product/market fit, given the market and the proposition, sales and marketing DNA was not a key dimension.
Again, it’s important to underline that the DNA matching test for Cotentful is not based on Sasha and Paolo skills. Skills evolve and change over time. It’s more of an art then a science and has to do with an effort to detect what will be the KEY founding DNA to allow the company to achieve product/market fit.
I often see both founders and funders to commit to startups without never really carrying out the DNA matching test. We all tend to fall in love with the idea and forget that the key is the execution of such idea. Yes it’s true that we can often hire our way out of a problem, but I do not believe is possible to hire DNA: there is a quid that is just a key element of the magic sauce of the entrepreneurial process.
Founders that fail the DNA matching test should look critically at the business idea and challenge if they are the right people to execute it. In some cases, I have seen founders evolving their initial ideas in areas with a stronger DNA fit, in other cases I have seen founders looking for co-founders in order to evolve their DNA and increase the chances of success.
Funders failing the DNA test often find themselves in the unpleasant situation of looking for a additional management soon after they have invested. In addition, it must be noticed that to identify the Critical Success Factors For Product Market Fit might not be an easy or intuitive task. This is really in my opinion the key skill of s good early stage investor. I will list all my mistakes in a different post ☺