Despite it being obvious, some deep tech entrepreneurs overlook the importance of the [founding] team.
Frequently it is the pressure to get busy and make sure you are going to be first in the market with a new product. Sometimes it is overlooked – “I have the engineers onboard to execute” – and sometimes it is pushed out – “We can look for the remaining team members when we get funded.”.
However, the absolute fundamental rule for any VC is the quality of the founding team, which includes a basic check of “is it a team”. Single founders will rarely be able to raise a (substantial) round. Not only is it the “bus factor” (the single founder being hit by a bus would basically “kill” the startup), but also the lack of proper discussion among the founders. Startup teams have to deal with a continuous stream of challenges, requiring research, discussion, and decision. Clearly, a single founder cannot have a discussion with him/herself meaning that any decision is basically made by a single person without any arguments or considerations of alternative solutions.
This also brings up another point: founding teams that are basically dominated by a single founder, will suffer from the same problem. If one founder dominates the discussion and drives all the decisions, it is basically a single founder team with all the associated risks. When pitching to a VC make sure all founders attend and where possible demonstrate the interaction between the founders. One of our observations in this is that it is fine to have emotional discussions/heated debates – startups are to the founders almost always an emotional undertaking as much as a business undertaking – as long as it is clear that the team can come to a decision while all arguments are properly weighed and reflected on. If there is a conflicting issue in the founding team, don’t hide it but demonstrate that you can come to a decision and, as part of it, demonstrate a solid decision process. This is also one of the reasons that VCs like to do business with returning teams (e.g., teams that have had previous startups) – they know how the team functions and that it can chart its course through the stormy waters that a startup needs to navigate.
If you are a single founder, you will have to build your core founding team while preparing to raise money. Finding your co-founder(s) should be your priority as it will also help you with the fundraising preparations. How to find a co-founder depends on what skill set you are looking for. For that purpose, it is important to first build your map of the needed skill set as the company will progress. Given that you are looking for a co-founder it is better to search based on the priority skill sets determined by the company’s growth/roadmap. Bringing in a supply chain expert will not be as useful when you are still 3 years away from your high-volume manufacturing point for your first product. Better would be a co-founder with an excellent track record in characterization and qualification.
There is one fundamental exception to the above rule: if you have successfully worked over a prolonged period (several years) with a person that would clearly add to the founding team profile, even though the skills might only be useful at a much later stage, then bring that person onboard as a co-founder. A founding team that has a history together is of sufficiently more value and significance to a VC.
Finding a co-founder can be challenging. Not only because finding people with startup experience and related profiles is difficult (often not traits advertised visibly on LinkedIn for instance) but if you have several candidates, how to approach them and how to select one. Even selecting one is not the end of the story because you need to vet this person. The best approach here is to work with this person for the duration of a few months, making sure your personalities are compatible and work synergistic and differences in opinion and insight are properly managed and brought to a satisfactory outcome. In general, the arrangement with this person should be such that if there is a reason to not continue the process, there is an easy and clear separation (and the company doesn’t lose any stock because of the breakup).
As a final word on this process, we often recommend the use of a (specialized) head-hunter if the founder is short on potential candidates. Using a head-hunter is advantageous from several perspectives: (1) they have people on their list they know are looking for new opportunities; (2) they often work with people they have helped over longer periods so have good insights on the person’s abilities and fit for the (demanding startup) job; (3) they can help you with the interview process and (4) if successful, you have a head-hunter which understands your company and in the future can help with some of the other hard-to-fill positions.
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