All startups face the same issue when launched: Each strives to create the best product and achieve market compatibility, but not all startups are created equally. Without a doubt, focusing on product development and market entrance is important, but too much emphasis on these areas tends to eclipse broader foundational issues.
I’ve met hundreds of founding teams over the years. Some were ready for venture capitalist funding while others needed to keep percolating a bit longer. In order for startups to reel in venture capitalist backing, building and scaling a fundable founding team is paramount from the start.
There’s an expression: “Choose the right tool for the team.”
When that idea is flipped, it becomes a more inspired guideline that can be useful for startups: “Choose the right team for the tool.”
With this mindset, it becomes easier to see beyond the importance of the product and instead home in on the critical need for a team made up of individuals who have the strength, expertise, and resilience to carry the business through murky startup waters.
This mindfulness in team creation starts at the top and trickles down to every facet of the startup. As the CEO, you are the head of sales, and your founders are part of the sales team.
If your founding team fails to make a strong impression right off the bat, your product — regardless of how incredible it may be — will fall short.
If you’re in search of funding, take note of these four areas and how they relate to your current team before approaching investors:
While some entrepreneurs occasionally switch industries and find success, venture capitalists are more inclined to fund a founder or team who has worked in a specific industry for years. This is obviously a practical consideration.
Founders with deep domain expertise in a particular field are typically more aware of customer needs, market opportunity, and the competitive landscape, which makes them more credible to investors.
Venture capitalists look for entrepreneurs and founding teams who have demonstrated the ability to develop and launch new products and who have achieved success.
To get into this momentum, remember that nobody is perfect and that part of being an entrepreneur is being willing to take risks and make mistakes. In turn, venture capitalists appreciate evidence, such as a business upturn, that shows how a founder’s focus and resilient attitude has paid off.
A team of engineers can develop a knockout product, but when it comes to the sales process or other business areas, they are usually unfit to take on the challenge.
A vital component to a founding team is a diverse range of skills among its members. For example, a CTO will excel in product development, but a product manager has a better understanding of the changing market.
Company failures rarely come from the inability to create a product. Instead, the culprit is typically a disconnect with either the market or the customer.
With this in mind, the right balance of functional skill sets that help create a product, connect with market needs, and push growth to the next level will help founding teams stand apart from competitors.
People who are overly defensive and can’t take constructive guidance usually struggle in leadership roles. When venture capitalists make funding decisions, they look for entrepreneurs who have a desire to learn from mistakes and be coached to improve their business and management style.
If a team already carefully weighs feedback and guidance and then makes smarter decisions moving forward, it is in a solid position for potential funding.
Venture capitalists come into an opportunity with a coach’s mindset, and they are not quick to invest without looking for assurances. While it’s natural to want to hold your ground and defend your product, being too rigid can backfire when seeking funding partnerships.
Venture capitalists have seen plenty of startups come and go. They know what differentiates successful businesses from failures. Although there are no guarantees when it comes to starting a company, there are areas in building a founding team that will help it be more fundable than others.
With the right expertise, willingness to push through adversity, and openness to take guidance, your founding team can quickly turn into an opportunity that venture capitalists won’t think twice about funding.
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Promod Haque serves as senior managing partner at Norwest Venture Partners and is a Member of the Board of Directors at ProspectWorks, Inc. He has 27 years of experience in the venture capital industry and has been an investor in over 70 companies. Prior to Norwest Venture Partners, Promod spent 18 years in various operational roles ranging from product development, marketing, chief operating officer, and chief executive officer at various public and private companies. Promod focuses on investments across a wide variety of sectors including systems and IT infrastructure, healthcare IT, software, and services.