How We Pick Startups

Updated: May 25

I need to preface this by saying that there are almost always "exceptions to the rule", so just because you don't meet the following criteria it does not mean that you will not be successful, nor does it mean that you have a 0% chance of being selected for our Founder's Program.

In just a few words, we look for founders who are resilient and can execute fast. That's right, I said founders not ideas. Founders are far more important than the idea itself. If you want to know why, read this post. So if the founder is so much more important than the idea, what do you look for in a founder?

A great founder is extremely resilient and highly determined, but is also able to learn quickly and adapt accordingly. There are a few traits we look for in founders, and a couple red flags we typically stay away from. I'll start with the red flags, and also cover a few "rookie mistakes" that founders often make.

Red flags 1. Slow progress: One of your top advantages as a startup is your ability to move quickly. If you don't move quickly, you're toast. A competitor will beat you to it, and the team morale will be hard to keep up, so early employees/co-founders will likely quit or lose excitement. If a week has gone by and there is no notable progress or update, it's probably not a good fit. If the founders have been working on the idea for 2 years and there is no significant progress or traction, the founders should have been able to make a judgement call to pivot or scrap the idea and start over. If you've been working on an idea for 3 months and haven't launched yet, that's not a good sign. If you apply to our program and don't have a landing page up (or a demo), that's ok. But if we ask you to have one up in a week and you can't do it, that's not a good sign.

2. Lack of communication skills: By no means do you have to be an expert communicator or public speaker. However, as a startup founder, you're always selling. You're selling your product to customers, your company to investors or an opportunity to potential co-founders or early employees. If you aren't able to convince any of your friends to join your team, that may be a red flag (not always). If you can't explain what your startup does clearly and concisely (in 30 seconds or less) then you either need to improve your communication skills or rethink what you're working on. There are definitely exceptions to this rule. Some deeply technical startups may take longer than 30 seconds to explain. But most should be able to explain what they do in 1 or 2 short sentences.

3. Lack of commitment: It's reasonable and quite common to have another job when you first start a startup. However, if you're not dedicating time everyday (or almost every day) to build your startup, there may be a lack of commitment. If you're not thinking about when you'll be able to quit your job and focus on your startup, you may not be serious enough about the startup.

Early mistakes These are just a few of the most common mistakes that we've seen inexperienced or early founders make.

  • Greed: Spending too much time trying to negotiate their valuation with investors. Not wanting to compensate early employees with equity. Not wanting to give co-founders a big enough piece of the pie. If you're not willing to give a co-founder a sizable share of the company, you should question whether you even want that person to be your co-founder (I first heard this from a YouTube video with Michael Siebel, co-founder of Twitch).

  • Being too secretive: Not sharing your "idea" with anyone because you're afraid they'll steal it. Making investors sign an NDA before sending a deck or speaking with them. Being scared that large corporations are going to "steal" your idea. This is not a completely irrational fear, it does happen, but it's extremely unlikely. And even in the off chance it does happen, you still have a pretty good shot at winning. Large corporations such as Google and Facebook would struggle to replicate your idea and execute properly on it. I would explain why, but it would take an entire essay and Paul Graham has already written about it here (section 4. Fear the Right Things..)

  • Spending a lot of time "planning": I know this sounds repetitive, but it's one of the most common mistakes and I think it's really important to hammer the point home. The real learning starts when you launch, because then you can start getting feedback from users. If you've spent 6 months preparing for your launch, it's likely you've just wasted 6 months, since you're going to have to keep iterating either way after you launch. Reid Hoffman, founder of Linkedin, said that "if you're not embarrassed by your version 1, you launched too late." Facebook's internal motto in the early days was "move fast, break things".

What we look for in founders

These are essentially the opposites of the red flags:

1. The ability to execute: The founders must be able to execute quickly. If you say you're going to launch by Friday, you better launch by Friday. You must be able to get feedback from users and iterate quickly on it. For almost all startups, you should not be spending more than 1-2 weeks per iteration. You also need to be able to learn quickly. In the first few years of a startup, the goal should be to learn as fast as possible and iterate on your learnings as quickly as possible. 2. Resilience/Determination: The founders should show some proof that they've either overcome something difficult or accomplished something impressive. It does not have to be tech or startup related. We simply want to know whether you're going to quit when things get tough or if you'll be able to stick with it. The founders of Airbnb notoriously had a binder filled with maxed out credit cards. While this is not necessarily a good thing, it definitely makes a statement about their level of commitment.

3. The ability to communicate: You must be able to explain your startup clearly and concisely. You need to be able to sell. You need to be able to hire. You need to be able to raise capital. All of these things are critical and require communication skills. Many of the most successful startups had to pitch over 100 times to raise their seed round. Kyle Vogt, the founder of Cruise (autonomous vehicle startup), said that raising their first $500k (seed round) was way more difficult than their latest round of $2.75b at a $30b valuation.

What we look for in teams History has shown us that 2-3 cofounders seems to be the sweet spot. There's a couple reasons for this. Having a sole founder is difficult because you have nobody to help you get through the low points, and startups are filled with ups and downs. Also, if you're a sole founder, you have to do everything yourself. It's very challenging to effectively do product development, gather user feedback, hire, and raise money all simultaneously. It's not impossible, just very tough. Having 4 or more cofounders is tough because it slows decisions down and can lead to many founder disputes simply because there are different viewpoints in the room together. There have been many successful startups that did have either a sole founder or 4+ cofounders. Although, I will say it's worth investigating these further to understand the different personalities, the dynamic between the founders, what each persons role was and so on. In the case of the sole founder, it often raises the question of "Why couldn't this person find anyone smart to work on this with them?" If you can't persuade one of your smart friends to be your cofounder, chances are you might struggle to sell to customers and pitch investors. The other thing that historically seems to have been important is that the founders have a history together. This means if you just met your cofounder on reddit last week, there's a lot of risk on the table. The reason is that a startup is like a roller coaster - when things are going great, everyone's happy. However, when things start to go downhill, what's going to keep your team together if you guys barely know each other? In many of the most successful startups, there were multiple near-death experiences (for the company) and almost always you hear the founders say what kept them going was not wanting to let their friends (cofounders) down.

To conclude While this may give you an idea of what we look for, this is not meant to be 100% concrete. This is meant to serve as guidelines and to help you understand what are the common traits & themes among the most successful founders. As we learn more from future cohorts, this post will continue to evolve, as will our selection criteria. Apply to our founder's program here Email for any questions about our Founder's Program.

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