Key Characteristics in Founders of High-impact Startups
“I am sure that in estimating every man’s value either in private or public life, a pure integrity is the quality we take first into calculation, and that learning and talents are only the second.” — Thomas Jefferson
In the Venture Capital world it has always been said that it is the people who are important because they are the ones who build the companies. It is their ideas that are executed according to their vision and experience.
Hampton Creek, a company founded in 2011 by Josh Tetrick, offers health and nutritional alternative plant-based products that are egg substitutes. In 2016 the company was accused of misrepresenting its sales using an independent network of contractors who secretly purchased Hampton Creek products across the United States.
Eight months earlier they had raised a Series C round for 90 million led by Horizon Ventures. In the summer of 2017, four of the five board members resigned, including Khosla Ventures, as they lost faith in the founder. As a result, in June 2017 the company changed its name to EatJust. Today it continues to sell vegan products across the United States.
Josh Tetrick attended Cornell and earned his law degree from the University of Michigan Law School in 2008. In the summer of 2004 he interned in the Clinton Presidential office (2 months), in the summer of 2006 he was an investment associate at the United Nations (4 months); in the summer of 2007 he was an associate at Citi Group (4 months); in late 2007 he was an investment advisor to the Liberian government (4 months); in September 2008 he joined the climate change practice McGuireWoods as an associate (10 months) and in September 2011 he co-founded EatJust. A great curriculum, but not integrity reflected in some decisions taken in his career. His LinkedIn shows no activity from June 2009 to September 2011.
As an investor it is essential to know the startup’s team starting with its founders. Who are they? Where are they from? Where are they going? Does their story make sense?
1. Personality: Who is the founder?
Personality is composed of two elements: temperament and character. The first is determined by inherited socio-cultural traits and is generally not moldable. Character is an individual trait that is completely moldable by the person. Values and principles are completely rooted in the individual and his or her actions. It is therefore important to consider:
a. Emotional intelligence.
According to Daniel Goleman, it includes emotional self-awareness, self-regulation, self-motivation, recognition of others’ emotions (empathy) and the ability to generate interpersonal relationships. We know one investor that even call the ex-girlfriends / boyfriends to understand the founder’s emotional intelligence.
Each individual is responsible for leading him/herself, being led and knowing how to lead. In addition, control is self-imposed; each person is responsible for defining his or her goals, observing them, rewarding and reprimanding himself or herself.
c. Mental flexibility
Change the thinking process, habits and behaviors under a context of dynamic and unexpected situations, mainly in stressful situations. It also requires being receptive to feedback and accepting constructive criticism. This adaptation must be quick and efficient.
2. Experience: Where does he/she come from?
The life history of the startup’s founder is vital. To visualize the future, it is necessary to understand the past. It dictates the experience he/she has in an industry, in a geography and in the business world. It also reveals mental, behavioral and complex decision-making patterns. These elements are decisive and complemented by the network of people who can support the venture.
This experience, especially in the early stages, can imply a higher probability of success in the development of the startup and in its success in raising capital.
3. Motivation: Where is he/she going?
The founder is very clear about where he/she is going, because she knows what she wants to solve. On her way there may be different methods, people, opportunities and situations. However, none of them is determinant in her process of developing the idea because her motivation comes from within. This encourages her to move forward and overcome all the obstacles in her way.
This element of motivation can be focused on the task per se i.e. on the project of building the startup. Another level is the focus on building relationships with the team and with external allies in the Venture Capital ecosystem.
4. Story: Does it make sense?
The founder’s story about herself, what she tells the investor, what others say about her and the actions she has taken over time reflect the entrepreneur as a businessman/woman and above all as a human being. This history must be consistent, complete and must reflect the values and principles on which the entrepreneur’s thinking and actions are based. As a Venture Capital investor, knowing and understanding the entrepreneur is fundamental. You are entrusting them with your money to use to build a high-impact startup. Perhaps the investment opportunity, the startup and the market are sensational, however, if you do not have full confidence in the entrepreneur, you should not invest in that startup.
Hector Shibata Salazar, adjunct Professor at EGADE Business School and Director of Investments and Portfolio at AC Ventures Fund
Ana Maury Aguilar, VC Investor at AC Ventures
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
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