Investing in Startups: Three Traits of Mission-Driven Founders
What Makes a Mission-Driven Founder?
By Ian Faison, Chief Content Officer of The Mission
Here at The Mission, we are obsessed with working with companies that have a strong mission (it’s in the name after all!)
As we speak to executives, investors, founders, and leaders, one topic comes up often:
Does it matter to have a mission? Does it make your team better or more focused? Does it make economic sense? Are mission-driven companies really better?
In the first installment of this series, we spoke with two venture capitalists about the type of founders they look for and invest in.
Brandon Shelton and Nitin Pachisia have different backgrounds and seem to invest in different types of founders.
Brandon invests in founding teams with military veteran founders.
Nitin invests in founding teams with immigrant founders.
But as it turns out, those founders have very similar traits…
Three Traits of Mission-Driven Founders
By: Brandon Shelton, Managing Partner, TFX Capital
At TFX Capital our motto is “Mission Driven, People Focused.” It is derivative of a Marine Corps saying of “Mission First, People Always.”
As investors, it is essential that you differentiate good founders from great early on. Top performing founders clearly articulate the company mission and drive results.
We have spoken with hundreds of investors to find what separates the good from the best. And they all come back to one thing: mission-driven.
Why? Because mission-driven founders are the ones who will produce results.
But how do you identify a founder as mission-driven? At TFX Capital, we pursue mission-driven founders who possess these three traits:
Empathy Through Adversity
They possess “Empathy Through Adversity.”
We know that every member of the Veteran community chose to serve, generally during the ages of 18–25 years old, and started off with a very different problem set than their civilian peers. Salaries were public knowledge and promotion schedules in the early days were set, thus, individuals have no other choice but serve the team, something greater than themselves.
Each individual also undergoes professional leadership and operational training with straightaway opportunities to manage risks, lead direct reports, and explore their decision freedoms within a framework.
The US military has been forcing these young leaders to fail early and often as part of that leadership and operational evolution. When we add the volume and uncertainty of the post-9/11 mission set coupled with unprecedented levels of technology tools and the complexity of real-time communications, these young leaders face adversity at a near constant tempo.
For some leaders, they begin to harvest an empathy through this process — a certain humility. Sheer willpower, smarts, effort or luck will not win the day. Rather, leading others and self while moving forward accelerates the leader’s learning at a very young age. This set of experiences is common with junior leaders in today’s military and hard to replicate in the commercial sector until after a period of many years or decades.
They are “Coachable” even without distinct feedback loops.
Founders of startups are already driving in a direction others would not. They have stepped out to build a company, solve a problem and take maximum commercial risk to do so. They have departed known feedback or management loops from the military or their last commercial role at a larger company. Many times they are quite stubborn and close-minded but generally due to a passionate focus on executing their vision.
These founders have investors, teammates and perhaps even a Board, but they lack traditional feedback loops due to structure and time. But their desire to learn, improve as leaders, and serve their teams does not stop because they are mission-driven to solve the problem.
Finally, they have “Domain Expertise” in the problem or market they are trying to solve.
These founders have felt the pain of the problem first hand which provoked the call to action. They believe equally in their hearts AND their minds that the problem must be solved —“if not me, then who?”
They are willing to risk it all because they understand the impact the solution could have on their network, their customers, and/or the issue at hand. They understand the landscape and confidently step forward to burden more than their fair share of the task.
Why Choose Mission-Driven Founders?
By Nitin Pachisia, Founding Partner, Unshackled Ventures
At Unshackled Ventures, we are fortunate to have partnered with many purpose-driven entrepreneurs in our young journey as a VC. We don’t actively look for purpose-driven entrepreneurs as a thesis, but we tend to align with them when we meet them. This is most likely because of our own background of how we started Unshackled Ventures. Mission is not the largest weight in our investment decision, but it’s one of the factors we view positively.
They Have Grit and Motivation
In my opinion, the biggest advantage purpose-driven founders (and by extension investors in those founders) have is that extra motivation to stay in the game, find a way to make things work, and not give up. It adds to their resolve, grit and adversity muscle.
Building a company is a long journey, and there are many adverse situations along the way. Having a mission or purpose provides the extra fuel to keep trying until a way out of the adversity is found. Since most startups fail, anything that improves the odds of success gives you an unfair advantage. Founders who are working in areas they are passionate about and feel connected by a purpose are more likely to succeed.
A Mission Helps with Recruiting
The purpose also helps with recruiting. In the early days of building a company, hiring great talent is a critical factor. Startups that offer a way to associate with a bigger purpose are not only able to compete with larger companies, but also find people who are self-starters, driven, and motivated to go above and beyond. This separates great startups from good ones. While purpose is not the only way to attract great talent, it is one of the more effective ways.
‘Why’ is More Important Than ‘What’
We are not impact investors, so we don’t seek mission-driven founders. But given that we primarily invest in people (we invest closest to formation stage, pre-product, pre-customers), we often get to learn why the entrepreneur is doing what they are doing. So there is more focus on why they are building the company, not what they are building. This exercise helps you understand what drives the entrepreneur, their analytical framework, and value system. When evaluating startups, we’ve found this knowledge to be extremely valuable during the investment process.