Does anybody actually know what a good startup founder looks like?
While this has become a well-known cliché, the reason why it is true (or if it’s true at all) is rarely stated.
The obvious reason is that ideas are simply unreliable. Markets are complex systems, and predicting what would happen mid to long term is very hard. Moreover, a successful startup needs not only to predict the market but to disrupt it in some way, which is very unlikely, to begin with. After all, markets are shaped the way they are due to strong environmental and evolutionary forces. So, in order to disrupt them, you need to be in the right place at just the right time.
Because of all of this, it is hubris to think that the first version of your idea would influence the world exactly as you think it would. When new ideas meet the market they are subjected to creative destruction, and the ones who survive usually go through a process of serious iteration before they transform to self-sustainable, growing businesses.
Taking a startup from idea to exit is a very difficult and usually long process, which means that as a startup investor you don’t need someone to come with the right idea, rather you need someone who can manage this process and reshape their idea as they receive feedback from the market.
So, said more simply, good investors invest in people rather than ideas. Intelligent, competent, and driven founders are more likely to steer this process correctly, and flawed founders could easily squander even a good idea.
This notion is reinforced by the stories of legendary founders like Elon Musk and Steve Jobs, who seem to reliably achieve the impossible. The influence of these people in the tech industry has been so strong, that a lot of young founders try to imitate the successful ones, and a lot of investors are looking for people that fit the mold of the charismatic, visionary leader.
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While this is not necessarily a bad thing, it can certainly backfire, as demonstrated by stories like the one of Elizabeth Holmes or to a degree – Adam Neumann’s WeWork.
The truth is that there is no obvious formula for a successful startup founder – there are successful founders of all shapes and sizes. This should be quite evident by the two examples we gave from above – both Steve Jobs and Elon Musk, giants in the industry, are brilliant in their own way, and it is easy to see that the two of them are built quite differently.
This means that investing in people rather than ideas is easier said than done. What actually constitutes a good startup founder? You cannot go wrong with vague terms like smart, driven, knowledgeable, but as an investor, you’ll quickly find out that most founders in the industry fit this description, even the unsuccessful ones.
A more cynical person might say that in reality, what investors consider a good startup founder is a startup founder that other investors like. After all, investors are herd animals, and the fear of missing out (and the desire to protect yourself) is a major driving force in the industry.
If you want to make up your own mind about a founder, however, you’ll have to rely less on the judgment of others. And after thinking deeply on the topic, you could argue that the requirements for a good startup founder are more related to the circumstances surrounding the founder, rather than just the character of the person, which takes us back to the beginning of this argument – after all, one of said important circumstances is a good idea.
In reality, as is the case with all complex questions, there is no convenient simple answer. In complex systems, everything could be an important factor, which means that in order to make a value judgment, you need to weigh all the information you have – the character of the founder and the quality of their idea included.
Moreover, you need to accept that there is a high probability you’ll be wrong, which means that the amount (and diversity) of bets you make could be more important than their quality since quality is so hard to judge over a certain basic threshold.
