Identifying the best (co-)founders is one of the trickiest challenges for start-up founders, company builders and venture capital firms alike.
Our approach to recruiting has always been based on sound methods and the first thing we tell companies planning to hire new employees is: “don´t rely on gut feeling”. We emphasize how important it is to define clear criteria based on which candidates will be assessed.
When it comes to founders, traditional approaches to defining a role and evaluating candidates often fail due to the complexity of the role and co-founder fit.
Inspired by a couple of articles (quoted below) and based on our own experience in assessing founders´ teams we decided to give this question a closer look.
We’ve worked with over 50 organizations (often directly with their founders) and have been involved in several projects focused on evaluating founders’ teams or identifying suitable start-up founders.
On this basis, we regard these traits as the top five characteristics we are looking for in a founder:
Why did we choose these?
Self-reflection: If they are understanding themselves well and reflecting on their emotions and actions, founders can leverage their strengths and work on their weaknesses. If they know that they have a blind spot, they can take measures to mitigate its effect on their performance. Self-knowledge and -awareness are starting points for developing many other important qualities and can support continuous personal development as it is required when leading a company through different growth phases. This trait can also be connected to showing the necessary humbleness as this Corporate Rebels article outlines.
Self-acceptance: At the same time, a potential founder can be troubled by too much self-reflection or rather self-questioning at the expense of emotional stability and confidence - both of which are also crucial for success. In German you would say: “die Person sollte in sich selbst ruhen”.
Smartness & hunger for learning: To us, a great founder is a quick thinker who is able to move from detail to the big picture as required and who never stops learning. They are exceptional at distilling the most important take-aways from a lot of data points and contextual information.
Drive & bias for action: In contrast to many other individuals who might bring the necessary smartness but get lost in their considerations and decision-making, great founders know when it’s time to act and execute efficiently driven by a powerful mission.
Empathy: Being an effective leader means being able to build and manage great teams, which is hardly possible without the right amount of self-reflection but also empathy. A good founder can put him-/herself in the shoes of their employees, customers or other stakeholders and adapts his/her actions and communication accordingly.
We know that this is a lot to be expected of anyone. But building a business is also not a small feat.
To add to our own judgement (based on a limited data set), we would also like to share with you the key results of a more empirical study conducted by the team at Basis Set Ventures.
They asked early-stage investors to rate 60+ founders on several dimensions including behavioural and psychological traits, in an effort to understand what makes a successful (i.e., IPO, raised substantial capital, large exit) or struggling (i.e., shut down, stagnant, small exit) founder.
The traits they focused on included, among others, agile thinking, confidence, founder-market fit, and storytelling.
Their research showed that there are a few dominant “super powers” that characterize excellent founders: day-to-day effectiveness, a results-driven approach and an ability to learn quickly (you can find out more about their study here). These mirror our traits 3 and 4.
HV Capital, a venture capital company from Munich, highlights the importance of self-awareness in their founder diligence process, which matches our trait 1.
Once you have defined your own criteria for a great founder in your specific context, you should devise a solid method for assessing potential candidates against them.
As Julius Bachmann points out in his article on the topic, in the best firms, evaluation happens in two stages: the individual stage which looks at the founder as an individual and the group stage which focuses on the founder team dynamics.
The evaluation process can rely on a whole range of methods: structured or unstructured interviews, diagnostic tools, personality assessments, referencing, etc.
A tool that might be integrated into the evaluation (or rather self-reflection) process is Fingerprint for Success which our team tested some time ago. It is an online psychometric tool designed to help (potential) entrepreneurs (and their teams) identify their strengths and uncover blind spots. They also get to compare and benchmark their results with some of the world's top entrepreneurs and start-up founders.
Although we believe that such tools need to be applied with a healthy dose of skepticism, they can bring some valuable insights and impulses for self-reflection.
Our recommendation is not to rely on one single method or tool but to integrate a couple of different ones in the evaluation process.
More than in other recruitment processes, it should be in the candidate’s interest to be open about their strengths and areas of development as building a company (with a co-founder you might not have know before) is a big commitment.
Having a sound framework and evaluation process is important not only to increase the probability of success but also to make sure that future founders are not chosen based on unconscious bias. Investors who trust their guts are highly predisposed to favor people similarto themselves. In 2020 85% of startup funding went to all-male founding teams. Unconscious biases can be one factor leading to this.
In sum, there is no perfect recipe for identifying the best founders, yet we should not dismiss it as an unsolvable challenge but rather see it as an opportunity to explore different approaches, methods, and tools. Developing best practices in this area will allow you to build more successful and more diverse start-ups.
What do you think about this?
Do you need to adapt your founder selection processes?
Or if you are a potential founder yourself: Do you have what it takes?
Photo by Markus Winkler on Unsplash