What we look for in a founding team

At the seed stage there is usually not much to analyse. There may be a prototype, a few customers in a pilot, a spreadsheet with more assumptions than numbers. What there always is, is a team. Most of our decision rests on them.

Over fourteen years and five funds, we have got better at knowing what to look for. We have also learned to distrust some things that used to impress us. Here is where we have landed.

They know the problem from the inside

The founders we back most often have spent years close to the problem they are solving. They have run the warehouse, filed the insurance claims, sat in the plant control room at three in the morning. They know which parts of the job are painful and which merely look painful from outside.

This matters more in our sectors than in most. Industrial buyers, hospitals and banks do not buy from people who do not understand their work. A founder who has done the job gets the first meeting, and knows what to ask in it.

It is not a strict rule. Some of the best founders we know came from outside their industry and saw what insiders had stopped noticing. But they had all done the work of learning it properly before they asked anyone for money.

They have decided how to decide

Every founding team disagrees. What we want to know is what happens next.

So we ask. Who has the final word on product? On hiring? On whether to raise? What happened the last time you disagreed about something that mattered? The answers do not need to be elegant. They need to be the same from each founder, asked separately.

Teams that have never had a real disagreement worry us more than teams that have had a bad one and can describe how they settled it.

They change their minds for good reasons

We spend a lot of time pushing back on the plan in early meetings, and not because we think we know the business better. We want to see how founders take new information.

The pattern we look for is specific. A good founder holds firm on the parts of the plan they have tested and moves quickly on the parts they have not. They can tell us which is which.

A founder who concedes everything is as worrying as one who concedes nothing.

They can recruit

A seed-stage company is, more than anything, a recruiting operation. The founders’ first job is to persuade talented people to take a pay cut and join something that may not exist in two years.

We ask who the first five hires will be, and whether the founders already know them. The strongest teams usually do. They have a list of names, and some of those people have already said yes, pending the round.

What we have learned to discount

Some signals we used to weigh heavily, and now weigh less:

• Polish. A sharp deck and a smooth pitch tell us a founder is good at pitching. That is useful, but it is a small part of the job.
• Pedigree. Well-known employers and universities are a weak signal, and lean on them too hard and you end up backing the same kind of person repeatedly.
• Speed of reply. Fast answers to our emails say little. Thoughtful answers to hard questions say a lot.
• Certainty. Founders who are certain about everything at the seed stage are usually wrong about something important.

What this means if you are pitching us

You do not need to prepare a performance. Tell us what you know about the problem that others do not, how you work together, and who you plan to hire. Expect us to disagree with parts of your plan, and to listen when you disagree back.

Our pitch page explains how to get in touch.