What VCs Look for in Founders

I recently found an article by Shikhar Ghosh in which he interviewed Nick Grouf. Now Shikhar is an angel investor and Professor of Management Practices at Harvard Business School. Nick Grouf earned his MBA at HBS, bootstrapped several successful ventures, co-founded a tech-based incubator, and started an investment firm. This article is so good I just wanted to talk about it. The bulk of what follows is my impression of the take-away points from the article.

Nick identified four things Founders should focus on

  1. Business Model
  2. Communication
  3. Intellectual Integrity
  4. Balancing Risk

Business Model

If you’re going to disrupt an industry, be sure to consider what that industry might do in response. Seems simple, right, but many founders ignore this.

Are you focused on the vision, the future imagining what it might look like? That’s great. But, if you’re not carefully considering consequences, then you’re setting yourself up to be blind-sided. Don’t do that.

Try to imagine you’re looking at someone else in your situation. Try to remove yourself from the story and view it at face value. This exercise can help give you some much-needed perspective.

Ask questions about buy motivation, economic value, and customer experience from this new perspective. Does your initial strategy still hold true or can you see ways to improve it?

Communications

Can you simply and clearly explain your business model to anyone? Have you explained it to everyone in your business, your investors, customers, partners, your neighbor? Can you do it in under 5 minutes? Can you do it in 60 seconds?

It can be difficult to communicate clearly, simply, in a straightforward and uncomplicated manner. It can be difficult to declutter your thinking so that fears, emotions, hopes, distractions, biases, and words (or the lack thereof) don’t get in the way. Try it. Practice it. Embrace it.

Learn to say more with less.

Intellectual Integrity

How well do you know yourself, your strengths, and your weaknesses? You will likely take on more than you can handle when you don’t know yourself well. You will promise things you can’t deliver. You’ll tend to turn away from the truth even when it’s staring you in the face. It will cost you time, money, resources, friends, goodwill, and maybe even your business.

Learn your limits so that you can ask for help when you need it.

Don’t try to take on everything yourself just because it’s a startup.

Some mistakes are recoverable, others are not. Stay focused on your success and be willing to get help to ensure that success. Don’t make an unrecoverable mistake.

Balancing Risk

Founders are notorious risk takers. That’s necessary to survive a startup, but it’s also bad if you expect others to have the same risk tolerance level. If you’re not obviously considering the risks you’ll come across as careless or immature and that’s not what you want. You need to demonstrate that you are aware of the risk, have plans for mitigations, and are actively engaged in managing the risks.

Risks exist in your business plan, your team, and your market. In the earliest days, the team is of top importance because it is on their shoulders to lift the company to the first level. Some team members will leave at this point, having done their best and opening the doors for others to move the company forward. It’s just the way it is. Not everyone will make the full journey. As a founder, you need to understand this and be able to identify who on your team will leave at what stage and plan accordingly. Even if the one to leave early is you.

Here’s the link to the original article.

Ready to start managing your risk? No problem, that’s what I’m here for. Contact me, and we’ll talk about what strategy makes the most sense for your organization. Whether you hire me or not I’ll give you solid advice and actionable recommendations. Charlene@fismacs.com

New Managing Risk Paper

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