Startup Views
From a Founder
By GEORGE O’NEILL, MSc. Eng, MBA, ICD.D
eing the founder of a
business is one of the most
rewarding and simultaneously challenging undertakings one may encounter.
Identifying a market opportunity that
fulfills a real consumer need creates a
business opportunity, and of course
presents risk. Finding the right
financing structure to maximize that
opportunity and to minimize the
inherent risk is a dance that founders
and investors engage in. Founders
often talk about the importance of
achieving product-market fit for the
businesses we are creating. Another
key fundamental is also ensuring there
is founder-investor fit, and trust.
This article is based on my experiences
as a founder, with the aim to shed some
light on what makes us tick. Creating a
feeling of fit and trust early in investments is in my experience critically
important. Having founders fully
committed and motivated to serve both
you the investor and themselves, is
clearly the way to go. You do not want
the founder focused on counting his
days until he can refinance the business just to exit you. Instead the
founder needs to remain totally
focused on running her business to
benefit all stakeholders for the investment period already agreed to.
An article in Entrepreneur Magazine1
cited research conducted by the
Harvard Business School indicating
that up to 75% of venture capital
backed startups never return the
invested capital. One must assume we
all would like to find the secret sauce to
improve those odds. To that end,
responsibility lies on both sides of the
table, with founders and investors.
Understanding the founder’s mindset,
along with the investor’s decision
making process on where to place bets,
is paramount. It is important that not
only the criteria each use to find their
desired match is articulated and
explained, but there also should be a
cultural fit to ensure trust is achieved at
the outset and maintained. Money is a
critical ingredient to ensuring success,
but so is execution based on the human
feelings of fit and trust.
I am currently working in my fourth
startup NxtHm.com which is a mobile
platform to help democratize residential
real estate information. During my three
decades long career as an engineer,
management consultant, board director
and CEO I have worked for several
companies and have been involved in
four startup businesses. Two of those
were new ventures spawned from inside
existing large companies, and two were
pure startups sparked by opportunities
to provide better customer service.
Reflecting on the roles and experiences
I have gained throughout my career,
following are three lessons I have
learned as a founder. My hope is that
investors who wish to better understand
the mindset of a founder find these of
interest. Coincidentally, recently I was
speaking with a seasoned investor who
has a targeted strategy to fund mature
companies dealing with change of
ownership situations, and after several
years of investing even he is still striving
to better understand the mindset of
founders so he can not only provide the
capital needed, but also advice and
guidance to add more value during the
time his firm is invested in those
companies. My discussion with him
mirrored the notes below.
The first lesson is to ask questions to
fully understand the founder’s view, and
to not assume you know everything as an
investor. If you are dealing with an
experienced founder in a particular
vertical, that person will most likely
know more about that industry than you.
Money brings power but it does not
necessarily bring knowledge, so be
careful not to think that you know it all
because you are bringing money to the
table, unless it is understood you are
indeed also bringing specific expertise.
Experienced founders do not like to be
told what to do by someone in an
authoritative position who lacks a base of
solid experience from which to make
such recommendations. The reason one
is a founder is because they have the
confidence to break out from the pack to
be a leader, and they are more often than
not able to quickly size up people and the
value they offer. Brainstorming ideas is
fine, but providing direction with limited
actual relevant experience is perhaps the
fastest way to break down the trust
relationship, which I have unfortunately
seen happen. Stick to your expertise, and
let the founder stick to hers. Egos on
both sides need to be left at the door.
The second lesson is to ensure the
founder remains motivated to do a great
job, and through her all her staff as well.
As an investor you probably do not have
the time, desire or expertise to go in and
do the founder’s job, so you obviously
need her. Someone once told me,
“George I am totally committed to you,
you are my horse, and I want you to
succeed”. Although the suggestion that I
am a horse perhaps could have been
better crafted, the intention was genuine
as the investor was saying he had total
faith in me. You should have total faith
in your founder. If you do not then
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