I attended a startup conference in NYC last week. Some amazing entrepreneurs and very successful startup CEOs on stage. Lots of interesting issues discussed, but the most interesting conversation that stayed with me was a discussion among some panelists if people or ideas were more important in determining an investment decision? One very successful entrepreneur thought ideas were key (he did say people were important as well), while an investor made a strong case for investing in people. Yes, in general it is a combination of team, product, markets, exits, etc. But what is most important? What comes first?
I am firmly on the side of investing in people first and then in ideas. Our firm’s motto is “Entrepreneurs Investing in Entrepreneurs”. We love scrappy entrepreneurs who have a hunger, eagerness and capacity to build large, sustainable businesses. We want to back entrepreneurs who build industries, not just exits, and who are looking for real partners and not just financial investors. I myself invest in deeply technology focused businesses (cleantech, materials, industrial products etc), and find myself walking away almost every week from ideas that could otherwise garner Nobel prizes in the future but the team fit isn’t right. I spend a lot of my time looking for brilliant entrepreneurial talent and working with them over many months, sometimes years, to find good ideas and building companies from scratch. Given that focus on entrepreneurs at GC, it shouldn’t be a surprise that some of the more amazing GC portfolio companies were started by EIRs that we were able to attract to spend time with us.
But people-first is not just a GC mantra. Quite often we see investors backing entrepreneurs and entrepreneur teams because of who they are instead of a fully flushed out business plan or model. So what makes one a strong and ‘backable’ entrepreneur?
Often I hear people introducing an entrepreneur to me as “really smart”. Well, unless you can really bang on the table and tell me s/he is one of the smartest people you have ever met, describing someone as “smart” alone isn’t helpful. That’s too generic. Maybe I can share a few other things I look for in an entrepreneur to back:
- Their personal history. What motivates them?
- Where did their idea originate? Is there a personal connection with the entrepreneur, or did s/he just fall into it? Are they builders or renters?
- Do I believe they are capable of ‘writing the book’ instead of reading from it? Can they define what this company will be all about?
- Why does the entrepreneur’s opinion matter in the space they are in? What validates their view? Have they thought about the space/industry carefully and in detail?
- Are they resourceful? (see more here)
- Have they shown an ability to attract amazing people around them as team members, advisors etc? This is especially true for first-time entrepreneurs.
- Have they sold anything before? Do they understand that startups have to build AND sell?
- Have they shown an ability to take advice and learn?
- What is their decision making process? Internal? External? Consensus-based?
- Why do they think I/we can be a good partner for them? It informs me how they find people to surround themselves with.
Just this afternoon I spent a few hours with a brilliant scientist who is trying to get a company going on a new semi-conductor technology. We spent approximately 2 hours with the founder educating me on the complexity of the science, the competitive dynamics in the market place, and the value proposition of his idea. Afterwards he sought feedback. He was surprised that instead of focusing on the technical discussion points, I chose to focus on the team instead – i.e. who he might want to seek out as co-founders to help him launch the company. I think during our discussion he realized why having a strong team that’s a good fit for the task at hand would be so beneficial to him – may be even more so than the quantum efficiency metrics. Let’s see what he comes back with.