WHAT VCS LOOK FOR IN FOUNDERS AND TEAMS

I recently got an inside peek at how VCs evaluate portfolio companies and founders.  Anu Duggal, Founding Partner of Female Founders Fund (F3), shared some insights about what she looks for in people and teams.  F3 is typically making pre-seed investments of $1 million or seed round investments of $2-$3 million.  Before making any investment, Duggal looks for key attributes of the founding team in addition to the market size opportunity for the companies she is assessing.

SUCCESS DRIVERS: Here are the key considerations F3 looks at in founders and teams:

  • Expertise: What has the team accomplished previously? What have they demonstrated in the past that is an indicator of their potential success?
  • Motivation: What’s driving them? Why did they choose to pursue this path?
  • Referrals: What do references have to say about them?
  • Weaknesses: What areas do they need to develop and are they amenable to feedback?
  • Ability to Sell: Are they able to communicate effectively? Can they be succinct with their words and work effectively with limited resources?  Are they able to convince amazing people to work with them?  Can they motivate and inspire others? 

 

Anu Duggal, Founding Partner of Female Founders Fund, noted several red flags that would raise a note of caution about a startup investment.

  • Financial metrics: Founders who lack an understanding of unit economics and underlying financial drivers of their business.
  • Follow-up: Founders who appear to be unresponsive in their communication, for instance not reaching out within a few days might indicate a business that is not run efficiently.

“The best startup assessments are usually a conversation, not so much a sales pitch.” 

When evaluating prospective investments, while obviously having a pitch deck helps, Duggal is most interested in understanding who the startup is and their mission and what have they built to date, including the market analysis and business model.

I was struck by the importance of leadership and communications skills as the key determinants of success.  Of course, understanding the business fundamentals and numbers is important, but not enough on their own.  The most successful founders will be highly driven, have a track record of success and be passionate about their vision, in addition to being able to effectively convey what they hope to achieve.  Want to learn how to cultivate your leadership and communication skills, schedule a complimentary Growth Strategy call here

 

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