June 30, 2023
One of the key advantages of launching a company out of our venture studio is that once we have identified a compelling problem and designed a venture-backable business model, we can pair that concept and funding with the ideal founding team suited to build and scale it. When we first started launching companies, we looked to our existing network to find great founders. Our team tapped the most talented builders we worked with at prior ventures whom we knew and trusted.
As our own operations scaled, we needed to figure out how to spot great founders in our ever-growing network, and confidently identify elite founders who may not yet live in our network. We’ve had the benefit of time for our portfolio to mature, and we’ve learned a lot about the attributes of founders who thrived as they grew their organizations, obtaining data points on the traits they had in common. Here are the six core qualifications we’ve identified that matter most in an early-stage founder.
Foundational Leadership Skills
The first quality we index for is zero-to-one experience or experience evolving through exponential scale in previous ventures. Ideally, successful founders have prior experience in scaling a venture-backed startup to a meaningful outcome. The reality is that zero-to-one can be the hardest growth possible–it is creating something out of nothing. Alternatively, experience as a leader in a successful scale-up, spin-out, or new product line can also be advantageous; it demonstrates the ability to execute and drive growth, and that builds confidence that scaling experience can translate into zero-to-one building.
Financial acumen is critical for a startup founder to ensure the sustainability and success of her venture. In the beginning, the founder is also the interim CFO. The founder must build and maintain sound financial models, enabling her to make informed decisions regarding cash burn, sales, and fundraising. A solid financial foundation enables a founder to effectively manage resources, assess growth opportunities, and attract investment.
Building, directing, and leading an effective and efficient team is another fundamental skill set in company-building. Startups thrive when teams work collaboratively towards a shared vision, leveraging their individual strengths to achieve collective goals. Founders must excel at recruiting top talent, fostering a culture of trust and innovation, and providing guidance and support to help their team members reach their full potential.
Venture Capital Fundraising and Board Management
In the venture studio model, founders report to a small board from day one. A great founder will proactively manage his board to ensure all stakeholders understand what is going on in the business while maintaining the board’s confidence. Founders need to remember their board is part of their team. They need to manage up, and will ideally leverage their board appropriately to get the most out of those relationships — be it customer intos, industry access, strategic advice or the ad-hoc problem-solving phone call. They should be able to foster conviction in the direction of their plans, as well as be coachable and open to the perspectives of the board to refine or pivot their strategy.
Our companies require venture capital to scale. An ideal founder candidate has experience raising venture capital. However, we may be able to get conviction in a founder candidate who has demonstrated experience in related fields such as sales or corporate development, given the parallels in fundraising. It’s essential fundraising founders understand the motivations of venture capitalists and the metrics by which their company will be evaluated. Founders should be able to tell a compelling story that instills confidence in potential investors, showcasing their startup as a worthwhile investment that solves an important problem in a significant market with the potential to capture value.
Go-to-Market Strategy and Distribution
CEOs of pre-seed startups must learn how to sell their solution before they can hire someone else to do it. Their main focus should largely be building conviction with early customers, investors, and the market, resulting in the day-to-day responsibilities of a founder looking much like that of a salesperson.
Founders of early-stage startups are not only responsible for generating leads and working through the sales and contracting process in the early days, but strategically testing pricing and packaging strategies, testing ideal buyer and user personas, and maturing those strategies as the company grows and pivots to ultimately lead to a repeatable sales process and product/market fit.
An archetypal candidate will have experience bringing a new product to market and owning or contributing to a full sales process. These criteria end up being a filter that results in separating out a significant number of our founder candidates; to the wrong candidates, the grind of early sales activities is unappealing.
Building a Software Product
For software startups, founders need to understand the concept of building a minimum viable product (MVP) and scaling a product effectively. They must strike a balance between tailoring the product to early adopters’ needs while maintaining a sustainable product roadmap. It is essential to resist the temptation to build custom software for early customers and instead focus on developing a product that appeals to a broad market. All founders must understand how software is built and scaled, though in our most typical founding team formula, only one is responsible for leading the execution of actually building it.
Industry and Subject Matter Expertise
Industry expertise can be a valuable attribute for founders, depending on the nature of the business and industry. Founders bringing subject matter expertise to the business are well-versed in the workings of their respective industry and possess knowledge from years of experience that can’t be learned quickly.
Founders with a background in the functional industry into which their product is sold also benefit from credibility in that industry. They have an intimate understanding of how to sell a product or service to customers and can speak their language to build rapport. Their extensive experience credentializes the team and company in the market, and their relationships with influencers, customers, and competitors give the company a competitive edge.
However, this is the attribute that has the widest variation in prioritization in our founder searches. In highly regulated or nuanced industries (e.g. healthcare), industry experience is paramount. For other ventures, industry experience can actually act as a barrier to seeing things in a new way. Regardless of their experience and expertise in the space, founders must be passionate about the problem their startup is setting out to solve.
The most nuanced criterion we screen for in our founder recruiting process is a core set of personality traits. Grit is at the top of the list. Founding a startup is hard, often unglamorous, and can be for a long time. Research shows that grit–or resilience–is a more reliable predictor of founder success than any other metric.
On the flip side of grit is coachability. The two characteristics are both present in successful founders. In the studio model, one of the advantages that benefit our founders is access to a team of coaches and advisors who are experts in many facets of company building. Our CEOs are not controlled or dictated to by the studio team. Those who are most successful are eager to learn and receptive to productive feedback. They are curious, not defensive, when someone challenges their solution, but also have intrinsic confidence and thick skin to push through.
Finally, our founders need to be able to prioritize ruthlessly. Startups fail from distraction, so founders need to be comfortable with ambiguity. Importantly, successful founders are able to help their teams ruthlessly prioritize too, and know what to say no to.
Of course, we continue to learn from the dozens of portfolio companies we’ve launched, and this criteria is ever-changing based on new data points. Every new launch demands a bespoke founding team composition, but from our findings, this is the core recipe we calibrate from when we set out to find our founders.
Does this sound like you? If so, we should talk. High Alpha Innovation will launch 100 startups in the next few years, and we want to work with founders who are ready to achieve amazing outcomes. Check out the co-founding opportunities that are currently available here, or join our talent network to stay up to date on founder roles and opportunities across our portfolio.
Up next, I’ll write about how we find these founders and align incentives to result in great partnerships and highly motivated founders. In the meantime, if you’ve got a question about anything early-stage talent shoot me an email at email@example.com.