How To Best Present Your Founding Team To Early-Stage Investors
The original article was published in Forbes on August 13 2019 - How To Best Present Your Founding Team to Early Stage Investors
The age-old VC proverb, “Bet on the jockey, not on the horse” rings especially true in early-stage investing. With limited data early on, evaluating teams is more art than science.
Understanding this and other motives and biases of experienced investors can help founders craft a narrative that puts their best foot forward. Below, I examine seven key factors that early-stage investors most often explicitly—and always at least subconsciously—consider when looking at your team.
1. Your Life’s Work
Investors look for founders who are pursuing their life’s work , founders who have lived and breathed the problem they are addressing and number among the few individuals on Earth in a position to solve it. I call this Founder Market Fit. Whether the problem stems from personal experience, such as the illness of a family member or from a technical challenge a Ph.D. devoted 10 years to solving, true passion can make the difference between a mediocre and exceptional outcome for an investor.
The Founder Story is vital to presenting one’s team and is key for investors in evaluating how devotedly a team might pursue an extraordinary outcome. A personal mission is fundamental. It can unify and motivate teams. This inspiration can help teams push through hard times and punch well above their weight in recruiting. Passion resonates and can be a deciding factor for those trying to secure phenomenal talent and further investment.
This is relevant not only to how you present yourself but also what company you form in the first place. There is a point at 4am where a financial motive is not enough. Try to tap into something that deeply resonates with you. You might spend the next 10 years of your life dedicating yourself to an extremely intense and consuming journey—make it one that has meaning. Investors will have more confidence in founders who have dedicated their lives to a field than in those who have undertaken recent pursuits purely for financial motives.
2. Wealth Effect
VCs love to back repeat founders, especially if they achieved a mid-sized exit. Here’s why:
VCs need multi-billion dollar outcomes and must ensure everyone’s incentives align. If a team living on ramen in a studio apartment lands an $50-100M offer for their company, the investor cannot in good conscience talk them into risking a $5-20M payday to attempt a bigger exit—this is life-changing money. On the other extreme, founders who have had a 9-figure exit are “post-economic” and the hunger to work 100+ hour weeks maybe in short supply.
However, founders who have taken some money off the table via a secondary or a small prior exit are comfortable but still want to build a legacy. Often they can ignore the temptation of a $50-100M exit for a chance to build a multi-billion dollar company that could change the world. Financially secure, they also often enjoy the support of their family and spouses to travel a riskier course.
Experienced founders also have a huge execution advantage. They have likely achieved product-market fit (PMF), scaled an engineering team, built a repeatable sales process, constructed a marketing and customer success platform, survived an M&A, among many other experiences gained. Frequently, they also have 10-20 outstanding former employees waiting for a call to join their team.
For founders who do not fall into this small demographic, it is even more important to nail “Your Life’s Work” as discussed above. They should also demonstrate that this is a journey they intend to take all the way. Their mission is to convince investors that because of their passion to fix this problem or their sheer confidence in the opportunity, combined with a tremendous drive to overachieve, they will not be satisfied with a modest 8-figure exit.
3. Storytelling
A founder once described fundraising to me as theatrical and I completely agree. When pitching their companies, founders must create a universe and invite potential investors, cofounders, and employees to enter. They are holding a space where they decide the laws of physics. This space must provide both inspiration and security. Inspire FOMO ASAP. Founders need to grab their audience early—start the pitch with the strongest elements of the offering. Too often founders crawl through several mediocre slides, saving the best for last. If they do not inspire attention in the first 5 minutes, they are digging a hole that will be hard to climb out of.
4. The Struggle is Real
Character counts. History shows us that founders who have overcome personal struggles often make more successful entrepreneurs. The rigors of building an early-stage company are not for everyone.
For those who have not done so before, having overcome another hardship can be a good indication of how a founder will function under stress. Founders who have overcome a significant personal or professional struggle should work it into their pitches! It is even better if other members of your team stood shoulder to shoulder with you during this trial.
5. Team Building
“Would I be excited to work for this CEO?” This is one of the most important questions investors ask themselves during a pitch. The founding team’s ability to recruit top talent is crucial for scaling the business. Founders should pitch their investors just as they would a key hire for their business.
The context, history, and camaraderie created by a tight team not only adds meaning and joy to the journey but it also significantly de-risks it. Do not just highlight team history, but show it. During the pitch—joke and compliment each other as much as possible. Conversely, toxic team dynamics are one of the top causes of failure in companies that may have otherwise been successful.
How to Best Present Your Founding Team to Early-Stage Investors.
6. Integrity
It may seem obvious, but we are constantly surprised by how many founders disqualify themselves through bad behavior. There is a fine line between being forward-leaning and being dishonest, which is to be avoided at all costs. If a company’s team or board loses faith in its leadership, those founders will land in a bad place that is hard to escape. Problems most often arise around the characterization of customers/metrics or the founders’ backgrounds. All good investors and potential candidates will backchannel as part of their due diligence. Thus, the best pitches proactively confront issues investors might flag instead of trying to cover them up or hoping they remain unnoticed. If founders put an issue on the table, not only can they control the narrative, but they can also gain credibility for being transparent and on top of potential challenges. Such demonstrations of founders’ integrity can greatly enhance investors’ sense of security.
7. Self-awareness
Founders should also aim to demonstrate self-awareness while describing their past and work history—including their own mistakes, how far they have come and how. And they should show they remain interested in personal development. The changes and evolution of a founding team, particularly a CEO, must undergo to lead a 5, 50, then 500 person organization can be staggering. Self-awareness—and a great executive coach—can help lay the foundation for effectively scaling a business at each successive stage.
This advice is aimed to help founders navigate the challenges of building an early-stage company. If you are a founder or investor that has any additional advice or feedback, please leave it in the comments below or share with us on Twitter: @timy0ung @eniacvc .
