What I look for in today’s entrepreneurs

Remember when entrepreneurs had to fight tooth and nail for every last scrap of venture capital in order to get their startups off the ground? Those days are undisputedly behind us, as the crushing amount of (relatively) easy money to hit the market in the last ten years has upended the VC game. Unfortunately, I believe we’ve reached a point where many startup founders are taking the same kind of shortcuts that were common in the late 1990s, skipping over crucial steps that could have helped build a stronger foundation for their business.

Entrepreneurship has become glamorized by everyone from boot camps to accelerators to university incubators, many of which offer stipends to help founders develop a proof of concept. The allure of a windfall payout has unleashed a tidal wave of entrepreneurs, but many focus on checking boxes rather than showing that they’re passionate about their business and that they’re ready to leap into the void.

But enough on what I don’t like to see. Let’s talk about what I do look for in an investable opportunity.

Very often founders will ask me “What kind of deals are you looking for”?  My answer is consistently simple: “I invest in founders that either get me curious or excited.”  As someone who’s been through multiple technology cycles and thousands of founder interviews, I focus on clear emotional outcomes to the first meeting.

An entrepreneur who can challenge my (often biased) assumptions and defend their own theory of what needs to change is one that I can respect. Most founders I partner with generally don’t have a smooth first meeting with me. I tend to pepper people with very irritating questions that start with “Why?” And when I challenge their ideas and motivations, the good founders tend to push back and engage in debate, rather than tell me what I want to hear. I look for this sharp edge from the onset.

The strongest founders have faced and lived with a problem firsthand -- and decided to figure out how to solve it.  They’ve had to deal with a gnawing, irritating problem for which there was no easy fix or a solution in the market.  After working through a solution for the problem they find that solving that pain point is more interesting/fulfilling than their day job.  This strong sense of intuition is present from day 0.

Edith Harbaugh at LaunchDarkly, who we partnered with in 2017, is a great example of this in action. During her time working in product development at TripIt, she experienced massive pains launching new features and functionality released efficiently to the market. Because of this, she developed a toolkit to improve the delivery process and knew that other businesses with the same struggles would benefit from it. She didn’t rely on market forecasts and McKinsey charts. She knew LaunchDarkly had value because she had real-world experience with the problem it was solving.

“This is a billion-dollar category” is a habitual founder talking point but is misguided thinking. As soon as those charts come out, my brain turns off. Instead of growth charts, show me the customer journey of someone whose hair is on fire and how you’ll navigate them to a better place.   Do your homework by living with your future customers’ problems instead of dreaming about how big the market must be. Eighty percent of early-stage investing is identifying problems. I don’t really care how amazing your technology is. I care that, as an entrepreneur, you’ve done your independent research on whether there’s a real need for what you are trying to build. When good founders come to me with their ideas, their frustration and honest passion for solving a real need are eminently obvious. And when I can share in their enthusiasm and conviction, I often buy into the opportunity after the first meeting.