Editor’s note: Investor and entrepreneur David Gardner is founder of Cofounders Capital in Cary and is a regular contributor to WRAL TechWire.
CARY – Successful early stage investing is both an art and a science. There’s plenty of math and modeling but I think most venture firms are good at that. It’s the subjective “art part” that is really tricky. Does the team get along with each other? Is the offering a must-have or just a nice-to-have? Are the founders coach-able? The answers to these and many other subjective questions are just as important and even more so than the market size, competitor analysis and other things that can be objectively quantified.
Most investors will tell you that their evaluation of the founders is by far the most important factor in deciding to invest. I’ve often said that a great entrepreneur with a bad idea will make you more money than the other way around. What are these attributes that make some founders so appealing to investors? There are many but some stand out more than others.
Of all the attributes we assess as investors, none is more important to see in a founder than a sense of urgency. The word “business” is actually derived from the word “busy.” It takes a flood of activity to get a new venture off the ground. Founders who move and talk slowly generally run out of options and capital before their ventures takes off.
There are a number of reasons why slow equals death in a startup. There isn’t a procedure manual or established set pattern of what works. You start out with a set of assumptions knowing that half of them are incorrect. You systematically throw a lot of stuff against the wall to see what sticks…rinse and repeat. Tom Peters encouraged entrepreneurs to “make all the mistakes that you can as quickly as possible” in his “fall forward fast” approach to innovation. One never knows which conversation will lead to an insight, partnership or pivot that will be company-making, so you want to get as many in play as possible. With lots of pieces in play, the odds of what I call “good accidents” happening will improve exponentially.
Startup founders start with a small amount of seed capital and runway. That’s usually all they get to prove out their thesis. When the money is out, most often, so are their options. I compare it to jumping out of an airplane without a parachute. All you have is a bag of really ambitious silkworms and you are knitting as fast as you can all of the way down! Slow knitters just aren’t going to get the job done in time.
There are a lot of subtle clues that we look for when trying to assess an entrepreneur’s sense of urgency. Those that over-analyze and those that require a detailed twenty-step written plan before picking of the phone and testing a new value proposition with a prospect are just not going to show up for enough telling battles to figure it out.
Ironically, we like entrepreneurs that piss us off. When I say, “let’s meet again in two weeks to discuss this more” they say, “How about next week…is Monday good for you?” When I volunteer to participate in a single sales call with an entrepreneur to jointly test a few value propositions they schedule me in for three the following day. They are continuously emailing to ask me questions or to get more introductions. When I suggest they talk to a certain type of potential channel partner, they have met with three by the time we discuss the matter again.
We don’t look for perfectionism. We look for speed and efficiency. A bird never flew flapping its wings one perfect time per minute and an entrepreneur without a burning sense of urgency is about to lose your investment. Time is the fire in which an entrepreneur burns and those that don’t feel the intensity of that heat are generally not going to engineer an escape path in time.