When we consider making investments in a startup, we are assessing the potential of the founder as much as we are their idea and business strategy. In-depth knowledge of the business sector where they intend to operate is, of course, table stakes. Beyond that, we are looking for someone not only with confidence, but also the audacity to think big and take on big challenges. Additionally, we want to see passion for the work they do and a clear ability to lead other people. In a word, we are looking for people with presence.
That audacity must come with resilience. We have found that EQ is as important as IQ for a founder to be successful. In the life of a startup, you inevitably go through many peaks and valleys. You need a high level of emotional intelligence to weather all that and keep your team on an even keel, focused on the end goal.
Often the realities of the market or discoveries the startup team makes along the way require a pivot away from the original vision. We need to see that a founder is flexible enough to be able to recognize and accept when a pivot is necessary. It also takes a considerable amount of dexterity to redirect a company. To be successful and keep a team motivated, the founder must be able to bring the same level of commitment and passion to the new direction.
We are also more confident in a startup’s potential when we see that the founder has skin in the game. It says a lot about their commitment when they take a pass on a lucrative position at a large company or, even more impressively, when they leave a high-profile job at a big firm because they are so committed to running their own business. That inspires our confidence and increases our conviction to support them. We like it when people have the courage and determination to act on that adage that if you don’t believe in yourself, no one else will.
Dreaming big is a good thing
While we always provide guidance on the appropriate scope for the business challenge founders are trying to solve, we like it when people dream big. Those individuals who have the urge to bite off more than they can chew, in our view, are more likely to succeed than those whose first temptation is to exercise caution at every step.
To succeed with a start-up, you have to be aspirational. It really helps if you get excited imagining all the possibilities, even if they seem far out to others, and you are not the type who will get bogged down worrying about all the restrictions and limitations.
A conventional background in business isn’t necessary for us. In fact, people who don’t have the typical business-oriented resume are often the kind of original thinkers we want to support. That being said, we also have to assess “founder fit.” As an investor providing capital for a new venture, we have to consider whether this person can be a credible champion for the business solution they are looking to offer and promote.
The relationship between co-founders has to be strong
It is the rare person who can successfully lead a start-up on their own. A strong relationship with a co-founder is usually critical. As with any partnership, it helps if the founders’ skills are complementary. It may be that one person is the visionary, while the other is the detail person who knows how to execute that vision. People’s skills do often overlap, but in the best cases the partners are capable of achieving much more than either of them could on their own.
We like it when founders have a longstanding relationship because it increases the odds that they will be able to work effectively together through all those inevitable ups and downs they will encounter as they build their business. Some tension and different ideas on how to tackle the issues along the way can lead to better results, but you want to make sure the partners’ bond is strong enough to handle the demands of what they are trying to do together.
You also have to look at the team the founders have been able to assemble. Do the leaders have the drive, charisma and skill to attract and retain talented individuals who can get the job done and bring the same degree of passion to it that the founders have? It’s not enough to attract top talent, though. As any fan of professional sports knows, you need to have coaches who create a culture that enables that top talent to work effectively together. With the best teams, it becomes obvious to outside observers that the whole is truly greater than the sum of its parts.
The idea must be big and impactful
No one gets excited by ideas that bring only incremental improvements. We are looking for founders with an idea that will make a big impact on the world. We ask whether an idea is simply another traditional approach to a well-known business problem or a true game changer that could disrupt an existing industry or create a market that people didn’t realize even existed.
The idea doesn’t have to be entirely regional. We work with founders who are taking an innovation that has worked in one country, like the United States, and then finding a way to introduce it and have it become effective in another region, like Latin America.
Once we see a promising big idea, then we ask all the practical business questions. Are there any companies already providing a similar service? How intense would the competition be? You must do the analysis to determine the business case for the idea. For example, what is the total addressable market for the product or service they plan to offer. Ideally, when the founders are dreaming big, they are going after a massive market.
If it is a truly original idea, then you have to ask how long could the company hold off copycats who might try to seize the same opportunity. Do the founders have a technology, service, or intellectual property that could remain proprietary and be difficult for others to duplicate? When the answers to those questions are yes, the sky may be the limit on the opportunity.
The execution strategy should be clear and achievable
It’s not enough to have a big idea, of course. You have to be able to make it happen. When we are interviewing founders, we want to see that they have a clear go-to-market strategy. Can they effectively leverage an advantage they may have and then scale up the business quickly? If they have already been able to launch their product or service, we want to see how much traction they’ve been able to gain. If they haven’t launched yet, we want to know what their plans are to get and maintain that business traction.
It’s an exciting endeavor, and we have found many talented and visionary people and businesses who exhibit all these qualities, but it is a very high bar to clear.
Manny Zareh is a Partner at Emles
Get in touch with Manny