Evaluating Founders for Corporate Ventures
In Rainmaking’s venture studio, we work with incredibly talented founders to launch new startups with our corporate partners.
Evaluating and selecting founders to work with can be just as, if not more, important as the startup idea itself. Founders (and co-founders) are the captains of their ships; they set the vision and direction for the company and steer it through perilous waters. Statistically, nearly 90% of all startups perish, so finding founders with the intelligence, grit and determination to succeed is critical.
Through many years of working with amazing founders, and making plenty of mistakes, we have identified seven traits of successful corporate startup founders that we look for.
7 Traits of Successful Corporate Startup Founders
1. They have built something before
“The only thing worse than starting something and failing… is not starting something.”
– Seth Godin, Squidoo founder, author and blogger
Both data and experience tell us that founders who have started a company before are more likely to succeed again. According to research from Ali Temaseb from Data Collective Ventures, 60% of billion dollar companies were founded by repeat founders and 40% of venture capital backed companies are founded by repeat founders.
The founders of unicorns such as Uber, PayPal, and Stripe had all tried their hand at entrepreneurship in at least one other startup before reaching blockbuster success.
What is also clear, is that the success of the first venture does not matter as much, in fact, even starting a company is not necessarily the most important factor – what matters most is that the individual has repeatedly taken the initiative to create something of value.
We have worked with several great founders that had not started companies before, but had launched clubs or communities in their university, founded non-profits, or championed new initiatives in their corporate career. Even Mark Zuckerberg, who launched Facebook at 19 years old, had built Synapse, CourseMatch, and FaceMash as side projects first.
How to spot it:
- They have a demonstrated track record of building things and taking initiative.
- They are dissatisfied with taking a ‘traditional’ career path.
- They consistently look for better ways of doing things.
2. They are resourceful problem solvers & doers
“Ideas are easy. Implementation is hard.”
– Guy Kawasaki, Co-Founder of Alltop
In the early stages of a startup’s journey, execution is everything, and execution comes down to solving one problem after another. More than any other quality, a founder must be able to solve complex problems in an ambiguous, fast changing environment, with limited resources.
The best founders I have worked with are extremely adept at quickly understanding a challenge and breaking it down in order to solve it from first principles. It is this quality that enables great founders to innovate in a new field without previous industry experience and to pivot the business if it is not going as initially planned. This means that founders need to not only think a great deal about strategy, but also be able to go into the weeds tactically, and make decisive decisions.
In addition to the capability of complex problem solving, founders need to be willing to ‘do the work’ to solve problems with the resources at hand. In the early days, startups (even corporate backed startups) have limited cash, people and time. This can be a particular challenge for founders coming from a career as a corporate executive who may be used to commanding large budgets and teams.
How to spot it:
- They break down challenges into the most critical elements to address.
- They can explain, in detail, big problems they have solved and precisely how they were solved.
- They demonstrate that they have created value with limited resources in previous roles.
3. They are collaborative leaders
“No matter how brilliant your mind or strategy, if you’re playing a solo game, you’ll always lose out to a team.”
– Reid Hoffman, Co-Founder of LinkedIn
Strong leadership and people skills are crucial, but difficult to identify in early interviews with founders. Building the wrong team and team dis-harmony have been identified as two major reasons that startups fail. Good founders are not soloists, they are conductors, inspiring employees, investors, clients and partners to build out their vision by clearly communicating priorities and building a winning team culture.
The first job of a leader is articulating a vision and laying out objectives for a team to follow. This does not come naturally to most people, and in a very dynamic startup environment it is even more challenging. To manage this, founders must have clarity of thought that enables them to simply explain the business model and the strategy for execution to employees and investors. We often observe founders that are unable to very simply explain the business and throw their hands up in frustration thinking that other people “just don’t get it.”
Another element of winning startup teams is a unique and inclusive culture. A strong culture that rewards people for hard work is what enables hiring and retaining exceptional talent. After all, “culture eats strategy for breakfast.” Great founders understand this and are intentional about developing culture in their team.
How to spot it:
- They use inclusive language (we, us, ours) when describing previous teams.
- They can talk about how to intentionally develop culture and how it affects talent & teams.
- They can clearly, and concisely explain the strategy of executing a specific business model.
4. They have an intrinsic motivation
“Sustaining a successful business is a hell of a lot of work, and staying hungry is half the battle.”
– Wendy Tan White, MoonFruit co-founder and CEO
Startups are a roller coaster. Failure after failure and problem after problem. A founder needs a strong internal motivation that will power them through the ups and downs. This motivation must come from within, because there will be nothing else that can dig them out of a momentary low point. If a founder is in it just to make money, they will quickly realize there are far easier, less risky ways to make money. The reason needs to be deeply personal, and ideally a reason that others can rally behind. We are looking for missionaries, not mercenaries.
Some founders want to build a company that solves a personal problem and are bought into the mission of the specific venture. Travis Kalanick and Garrett Camp built Uber because they couldn’t get a taxi while at a tech conference in Paris.
Others come to Rainmaking’s venture studio because they want to make an impact. This is often the case for our portfolio of sustainability & cleantech ventures. Many founders want to do something meaningful in the fight against climate change and they will do whatever they need to in order to make the venture a success.
Some great founders we have worked with have something they want to prove. One founder we hired, when asked why he wanted to found a company, said that he wanted to be the best possible role model for his children, to show them through his actions that they could accomplish anything they set their minds to.
How to spot it:
- They have conviction about why they want to start a company.
- They want to solve a problem that is bigger than themselves.
- They would be doing this even if it is not with us.
5. They have intellectual integrity & flexibility
“There is something artificial when everyone is agreeing with each other. It’s useful to indulge people who don’t agree, and see their viewpoint or force yourself to explain things better.”
– David Sack, founder of Yammer
Intellectual integrity is always seeking the truth even when it means admitting that you don’t have the answer, and being humble enough to seek help when it is needed. Mistakes in startups are costly, so they require people who understand their own strengths and weaknesses and are willing to raise their hand and ask for help and openly admit when they have screwed up.
Many people believe that founders must be confident and self-assured at all times. But, the best founders have an ability to take in different ideas and process challenging questions in a way that is not arrogant or defensive, but is genuinely in the interest of overcoming their weaknesses and limitations.
How do you spot it?
- They listen and reflect on key questions. They don’t always go for the fastest answer.
- They understand where their gaps are and which talents and skills will complement their own strengths.
- They show a constant curiosity in and outside their domain.
6. They can manage corporate stakeholders
“No man or woman attains a top job, lands an extraordinary deal, or develops a significant following without this heady combination of confidence, poise and authenticity.”
– Sylvia Ann Hewlett, founder The Center for Talent Innovation
Unique to corporate ventures, is the need to interact with executives in the sponsoring organisation, and at times, influence these stakeholders to create opportunities for collaboration.
Founders must be able to communicate with corporate stakeholders effectively, and must be able to command trust and respect so that they are taken seriously enough for executives to dedicate time and resources to aiding the new venture.
Some call it executive presence or gravitas, but ultimately it boils down to integrity, communication, and appearance. Founders need to be trusted that what they say is backed up by well intentioned action and that they will act with integrity in difficult situations. They must be able to communicate in a way that captures attention and is easily followed. And, their appearance shouldn’t distract people from their professional competence, but should instead emphasize it – that’s not to say they need to wear a suit and tie, but first impressions are only made once, and what one wears can determine how others will perceive them and what they have to say.
How do you spot it?
- They are patient and tempered in response to challenges and criticism
- They can succinctly talk about how their plans align with a broader strategic agenda
- They are proactive in discovering the opinions and perspectives of others
7. They have venture specific skill sets
“It’s knowing when to lean on having the experience, but not letting that be something that hampers you and keeps you from thinking outside the box”
– Cindy Joseph, CEO of The Cee Suite
There is not much evidence that supports the idea that startups have a better chance of success if the founding team has a background in the industry. Ali Temaseb’s research shows that “Among billion-dollar companies, fewer than 50 percent of founding CEOs and fewer than 30 percent of founding CxOs had much, if any, work experience that directly related to their startups.” In fact, there are many examples of founders who disrupted industries without ever working in them, and the fact that they bring an outsider’s perspective is what enables them to be truly innovative. At the end of the day, soft skills such as communication, management and the ability to inspire a team are more critical than hard skills.
However, founders may possess complementary skillsets and backgrounds that can provide an advantage to help them execute depending on the startup’s business model and/or product. This is more acute when it comes to technical founders taking on the role of CTO/CPO.
For example, if looking for founders to helm a startup that will produce smart health & fitness equipment for consumers, it might be helpful if at least one founder has experience managing businesses with capital intensive supply chains for physical products, or has a deep expertise in IoT & data. Alternatively, it may help to have at least one founder that has experience managing B2C business models or with an existing network in the health & fitness sector.
When we evaluate founders, these additional skillsets are often used to supplement our decision making and can be an added bonus to the other factors.
How do you spot it?
- Do they have a discreet technical skill that is needed for the particular venture?
- Do they have previous work experience or requiring niche skill sets that would benefit the venture?
- Do they have side projects or hobbies that have given them a unique training ground in a technical skill set?
If you liked this article, stay tuned for part two – How to Find Cofounder Chemistry