Every venture capitalist looks for strong founders, but what makes a founder strong is open for debate. With limited time to interact with founders before making decisions, investors often over-index on potential signals like age, school, technical credentials and experience. Unfortunately, this heuristic often biases investors towards people already within their network and similar to themselves.
Over the last year, we’ve asked early stage investors representing north of $40 billion in AUM to rate 60+ founders on a number of dimensions including demographics, behavioral and psychological traits, in an effort to understand what makes a successful (i.e., IPO, raised substantial capital, large exit) or struggling (i.e., shut down, stagnant, small exit) founder.
As we dug into the data, we uncovered a perspective on founders that we feel has not yet been fully explored. Below we’ve made an effort to codify our learnings and share them with the community.
Against the Conventional Wisdom
Whether a founder/CEO is technical does not differentiate company success. Also, founders of all ages can be successful.
However, having a complementary cofounder, often a technical one, is correlated with success.
The best founders know their strengths and weaknesses and recruit a complementary team that maximizes the company’s chance of success.
Six Founder Archetypes (Aka Six Types of Superheroes)
We asked early investors, who have followed and supported founders from the initial stages, to rate founders on the following traits:
- Agile thinking: “Founder is able to rapidly seek and incorporate external market signals.”
- Confidence: “Founder shows extreme confidence."
- Day-to-day effectiveness: “Founder runs his/her company effectively day-to-day"
- Founder-market fit: “Founder has an advantage in his/her market.”
- Humility: “Founder shows extreme humility, whether he/she is confident or not.”
- Results-driven: “When making decisions under uncertainty, founder tries many possible solutions quickly and finds the best one.”
- Quick learner: “Founder learns quickly and doesn’t make the same mistake twice.”
- Scrappy: “Founder is scrappy and resourceful.”
- Storytelling: “Founder is able to tell compelling narratives.”
We discovered three archetypes of successful founders that cluster around certain characteristics…
Humble
Operator
Exceptional at execution, extremely humble while confident in themselves. They are resourceful and gritty. People who worked with them before tend to follow them.
Words VC used to describe them:
Disciplined Humble
Focused Resilient
Ambitious
Diligent Modest
Agile
Visionary
Usually first-time founders, they are young, visionary, and driven by a desire for greatness. They have a unique perspective on the market they’re going after and an intuitive sense of what their customers want. They test and iterate quickly to incorporate market signals.
Words VC used to describe them:
Multi-faceted Driven brilliant
Deliberate
Problem-solver
Intuitive
Seasoned Executive
Experienced older founders, they often have 5+ years of management experience and deep industry expertise. They are intrinsically motivated to build a company. They may have started a company before.
Words VC used to describe them:
Great-communicator
mature thoughtful
High confidence
knows business well
…as well as three archetypes of founders who have been struggling (or learning to master their superpowers).
Passionate Outsider
Usually first-time founders, they are humble and hard-working. However, they don’t have good founder-market fit and don’t have a complementary cofounder to rectify this gap.
Words VC used to describe them:
earnest young
driven
risk-adverse
Overconfident Storyteller
Charismatic, compelling, and have high confidence. They are likely to be solo founders and they are often not humble.
Words VC used to describe them:
condescending
bad manager
visionary
lacks focus
Stubborn Individualist
Slow to adapt to learnings from the market and not empathetic to what the customers want. They are not good at articulating a convincing narrative.
Words VC used to describe them:
stubborn
poor listener
robotic
The Dominant Superpowers
Strong Execution
Execution is the only aspect that is consistently correlated with startup success. Across all archetypes,
day-to-day effectiveness and whether the founder
learns and adapts quickly are most correlated with success. Other studies, such as
this one, concur with this finding.
Results-Driven
When making decisions under uncertainty, successful founders also tend to be results-driven. That is, they explore many solutions to quickly find the best one, which is advantageous given the limited runway that startups have to achieve their next milestone. Other founders tend to be process-driven at the expense of moving fast enough to find product-market fit.
The Nuanced Superpowers
Successful and unsuccessful founders often share many of the same superpowers — but like real superheroes, what differentiates them is how well they’ve mastered their powers. Storytelling, grit and stubbornness are all abilities correlated with success, if founders know how to thoughtfully use them.
Storytelling
Founders that tell compelling stories tend to have an easier time fundraising, recruiting, and marketing. When a company is not much more than a pitch deck, getting people to take a leap of faith is vitally important.
“The most powerful person in the world is the storyteller. The storyteller sets the vision, values and agenda of an entire generation to come.”
— Steve Jobs, Apple
Why aren't all great storytellers successful entrepreneurs?
We found that strong storytelling was associated with two other attributes: confidence and founder-market fit. For founders who are strong storytellers, highly confident, and uniquely advantaged in their market, why are some successful (Agile Visionaries) and others are less so (Overconfident Storytellers)?
Successful storytellers are also scrappy and agile thinkers. They execute day-to-day (Agile Visionaries).
However, when great storytellers get too enthralled in their own vision, they can’t adapt to market needs and often fail to find product-market fit (Overconfident Storytellers).
Humility, Scrappiness and Grit
Some of the most successful companies to IPO in 2019 were founded by the most humble and hardworking entrepreneurs such as Eric Yuan of Zoom, and Oliver Pomel and Alexis Lê-Quôc of Datadog.
“Working hard, that’s the only thing I know better than my competitor. There are so many more smart people than me here in Silicon Valley. […] If my competitors say, ‘I work eight hours a day,’ then I can work 10 hours. If you don’t need sleep, I also do not need sleep. Hard work is in my DNA.”
— Eric Yuan, Zoom
For founders who are humble, scrappy, and gritty, why are some successful (Humble Operators), and others are less so (Passionate Outsiders)?
When these traits combine with strong founder-market fit and an early team that follows a founder from a previous company, the companies tend to take off (Humble Operators).
Unfortunately, other similar entrepreneurs struggle when they do not have a unique advantage in the market they are pursuing nor a way to bridge this gap (Passionate Outsiders). They may be starting afresh, oblivious to the fact that they are not well-equipped to tackle the opportunity.
Stubbornness
For the sixth archetype, “stubborn” is the most frequent descriptor from their VCs. When stubborn is coupled with “not scrappy”, “indecisive”, or “not able to confront realities,” a company struggles.
However, some of the most successful founders like Steve Jobs and Jeff Bezos are notoriously the most stubborn. They run through walls to make an idea work. We found when stubbornness is accompanied by the following descriptors, entrepreneurs shine: “true visionary”, “effective day-to-day”, “results-driven”, “learn fast”, and “build strong teams”.
“We are stubborn on vision. We are flexible on details….We don’t give up on things easily. Our third-party seller business is an example of that. It took us three tries to get the third-party seller business to work. We didn’t give up.”
- Jeff Bezos, Amazon
Other Superpowers We Love
Customer empathy
It is great when a founder has high confidence, except when it prevents them from empathizing with customers. A great founder has a strong vision and is also incredibly empathetic to users to find product-market fit.
Agile thinking
Agile thinking, or rapidly seeking and incorporating external market signals, is an important quality. It is not in conflict with being principled and persistent in pursuing the vision. In fact, the best founders think from first principles and iterate quickly based on market feedback to find product-market fit.
Humility
Confidence and humility are two different dimensions. One can be very confident yet very humble. At the same time, low humility and high ego does not necessarily spell doom. Many successful entrepreneurs, such as Agile Visionaries, have big egos.
What is Your Superpower?
Our job as a seed stage investor is to look for brilliant entrepreneurs when their success is not yet obvious. As their partners, we hope to look beyond the most obvious signals and spend time with each founder to understand his or her unique journey and support them the best that we can.
We hope our research sheds some light on areas we can spend time to understand in order to be the best partners to a founder. Each founder is unique, as is his or her journey. We still have much to learn, so please help provide feedback and contribute to our future research.
2. Investors,
contribute to our research by adding data points of founders you’ve invested in
3. Everyone, sign up to receive practical resources that we will release next year, including a founder typing tool and a comprehensive report to help founders and VCs
Our Nine Takeaways
1. The technical founder requirement is a venture trope. Founders should instead focus on recruiting complementary skillsets that match the product being built and the market being disrupted.
2. It does not matter how old you are; founders of all ages can be successful.
3. Small day to day tasks add up and either paint a picture of a successful, fast-learning, results-oriented founder or a struggling process-oriented one.
4. Confidence and humility are two different dimensions. One can be very confident yet very humble (low ego). Humble Operators is one of our highest performing archetypes.
5. Lack of humility doesn’t necessarily spell doom—so long as the founder adapts to market feedback and iterates quickly.
6. Investors often over-index on confident storytellers, missing the importance of agility and scrappiness in execution.
7. Confidence is an asset for founders in fundraising, recruiting and sales, but overconfidence becomes a liability when it prevents founders from truly empathizing with customers.
8. Most successful founders work hard and have grit, but not all founders who work hard and have grit are successful. The difference between success and failure for hardworking founders often hinges on founder-market fit.
9. Blindly channeling Steve Job’s infamous stubbornness won’t make your company the next Apple. Persistence without agility and scrappiness is a path to failure.
More on our Methodology
Data Collection
- Data on 61 founders have been collected, including 70% enterprise and 30% consumer startups in SaaS, FinTech, PropTech, e-commerce, healthcare, and legal industries across all stages1
- Surveyed VCs represent $40B+ in AUM and invest in both enterprise and consumer companies. Majority are general partners of early stage funds or experienced angels
Definitions
- Founders that are doing well include: had an IPO, raised substantial amount of funding, large acquisition
- Founders that are not doing well include: company shut down, stagnant growth, getting acquired for a small amount of money
Data Analysis
- We asked 28 questions about demographic, attitudinal traits and experience
- Attitudinal statements are rated on a 0-6 scale, 0 being strongly disagree and 6 being strongly agree
- We performed a hierarchical cluster analysis to find
similar clusters within the data and discovered archetypes for founders2
[1] Questions identifying specific founders were optional, so that respondents would feel comfortable to be open and honest. These statistics are based on details that have been provided.
[2] We are presenting initial findings from an early and limited dataset. We are continuing to collect data to refine and update results regularly.
