4 Traits Perceptive Investors Look for in Tech Startup Found…

May 9, 2018

5 min read

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Behind every successful startup are the people who had the vision and tenacity to build it. It seems that investors and pundits are on a never-ending quest to uncover an exact “founder alchemy” – a checklist of characteristics that will guarantee success. While there is no single formula for entrepreneurial success, the following traits are shared by the brightest and most successful founders I’ve worked with:

Curiosity

Entrepreneurship is always more about questions than answers. Seemingly simple questions like “How does this work?” or “Who does this help?” can give way to powerful answers that reshape entire industries. There’s a lot of poking and prodding of the status quo that’s necessary before an entrepreneur has a “eureka moment” — and the best entrepreneurs don’t stop there. Even after a goal is met, curiosity gives way to more questions, like “How am I measuring success?,” “How can this solution be improved?” or “How can I reach more people?”

Venmo was originally built by Andrew Kortina and Iqram Magdon-Ismail to connect musicians with mobile-savvy fans who wanted to purchase their MP3 files. The founders were curious if a similar model could work for mobile payments between any two parties. They asked the right questions around reaching more people and improving their solution and consequently developed the mobile payment app that transmitted $9 billion in the last quarter of 2017 alone. Curiosity channels out-of-the-box thinking and enables entrepreneurs to approach problems from different angles.

Empathy

In addition to being curious, the best problem solvers are empathetic and good listeners who seek to understand before acting and building. This is not just about intellectually understanding someone else’s point of view — it is about truly feeling the other perspective. The ability to recognize and share other people’s feelings creates not only effective products, but also powerful leaders. Teams put their trust in leaders who they believe have their best interests at heart. Demonstrating a keen understanding of stakeholders’ ambitions and fears builds an authentic line of communication and a strong sense of loyalty. People are more honest and open to sharing challenges and wild ideas when they trust that their leader will listen without prejudice.

The annual Empathy Index ranks companies based on the level of empathy demonstrated by their internal culture, CEO performance, ethics and social media presence. From 2015 to 2016, the top 10 companies in the index increased in value more than twice as much as the bottom 10 while generating 50 percent more earnings. There has also been a correlation as high as 80 percent between departments with higher empathy and those with high performers. Companies, and leaders, who demonstrate empathy are ultimately more successful.

Diversity

Not everyone can be a successful entrepreneur, but a successful entrepreneur can come from anywhere. Teams that embrace members of all races, genders and backgrounds are more innovative and achieve greater market growth than companies that are not inclusive. When I evaluate a team, I look for differences of perspective and thought. An ideal founding team will have technical expertise and visionaries, designers and computer scientists, product leads and salespeople — in short, people who look at life through different lenses.

In my experience, diverse teams improve group thinking and recast ideas. In addition to providing variety in perspectives and skills, diverse teams may also be more accurate. Proceedings of the National Academy of Sciences published a study that put financially literate people in simulated markets and asked them to price stocks; the participants were divided into either ethnically diverse or homogenous groups. Individuals who were part of the diverse teams were 58 percent more likely to price stocks correctly, while individuals in homogenous groups were more prone to pricing errors.

The study, and others like it, concludes that diversity facilitates friction, which upends conformity, which is necessary when you are trying to challenge the status quo. In other words, diverse groups are more likely to scrutinize each other’s actions, which encourages critical thinking. An entrepreneur’s willingness to work with people who are different from him or her indicates a willingness to challenge his or her own preconceived notions in favor of an objectively better solution.

Bravery

The best ideas turn tradition on its head, and that requires unwavering bravery. Change is hard. Putting everything on the line when others doubt you is scary. The bravest teams I’ve worked with aren’t immune to fear; they believe the promise of their idea outweighs it. Bravery is what carries entrepreneurs through hundreds of rejections and perceived failures before they ultimately succeed. When I ask teams about success, they often talk about their failures instead. A culture of courage breeds resilient team members who see failure as a tool for success.

The co-founders of Airbnb — before they put the hotel industry in their crosshairs with an idea that many initially resisted — were tens of thousands of dollars in debt. They paid their bills making cereal boxes with pictures of Obama and McCain to sell to collectors of political swag. Three years later, they had expanded into 89 markets, besting Marriott and Hilton in number of markets reached by several decades. The company is now valued at $31 billion.

Not every successful founder is inherently curious, empathetic, diverse and brave, but identifying and cultivating these traits can meaningfully impact their success. A brilliant idea doesn’t guarantee a successful entrepreneur. It’s the founder who never stops questioning, learning and evolving that is ultimately worth the greatest gamble.