Which is more important: The idea for a startup or the qualities of its founder? I am increasingly convinced that the founder is the most important ingredient for success. Of course, the idea is important; it has to be and compelling enough to warrant the gajillion hours it takes to build a meaningful business. But in the end, if you don’t have someone at the helm who can figure out what it takes to win a market or evolve as circumstances warrant, then you simply can’t succeed.
There are three key qualities I look for when mulling whether to back a founding CEO and these have served as the most accurate predictors of whether someone will be a great founder. I look for them every time I consider a deal and almost never get to ‘yes’ without seeing at least some combination of them. They are neither exhaustive nor non-negotiable, though they are key to the decision-making process around funding. So, in no particular order, here they are:
Up Close, First-Hand Knowledge and Understanding of the Opportunity
There is almost nothing better than a pitch that begins with a founder citing that a-ha moment, when he or she noticed a problem in a prior work role and realized that there was a big market opportunity if only if someone could solve it. This kind of real-time epiphany turns what might be just a good guess from another would-be entrepreneur into a tangible, actionable opportunity for someone who has the deep insights into what needs to be done to solve the problem and create a new market. What’s more, thanks to the experience gleaned from being in the right place at the right time, this kind of founder usually finds that he or she is uniquely qualified to go after the opportunity. They have lived the problem and therefore have a deep conviction about what to do. More than that, they have developed a passion about the proposed pursuit, which typically gives them the push needed to strike out on their own.
This is what convinced us to back Anil Kamath, the founder of Efficient Frontier. His pitch combined an impressive pedigree–he has a PhD in computer science from Stanford– with a definable ah-ha moment. Early in his career, Anil designed program trading models for the D.E. Shaw & Co. hedge fund. From there, he started a search-engine company that helped consumers compare products from different shopping sites. It was bought by Shopzilla. It was at Shopzilla that Anil realized the importance of search in driving web traffic. Since he had already designed systems for millions of stocks at Shaw, Anil figured he could build a system for millions of keywords and other Internet advertising tools that would be useful to anyone involved in ecommerce. Anil’s insight was what eventually led to the leading platform for digital media optimization, which was acquired by Adobe.
Unbridled Passion that Translates into Visionary Salesmanship
Before you start rolling your eyes, I’m not talking about the slick, transactional version of salesmanship–the form that is typically embodied in a successful sales exec that delivers against his quota from company to company. I’m talking about the person whose enthusiasm and conviction for an idea is so palpable that it’s almost infectious. This enthusiasm is deep-rooted, earnest and genuine, meaning he or she can harness it to convince anyone within earshot about the sheer brilliance of the endeavor being pursued. Let’s face it: You can’t fake what it takes to sell a vision, especially when you are repeatedly pitching everyone from business partners to employees to investors to customers or to anyone else who might be part of the solution.
Case in point: Omar Tawakol, founder and CEO of BlueKai. Finding an entrepreneur and leader like Omar is like winning the trifecta. He has extraordinary technical chops with CS degrees from MIT and Stanford. At the same time, he’s a natural marketer, having served as CMO at two previous startups. These two talents, combined with a deep appreciation for the importance of audience targeting in digital media gleaned from a previous role at Revenue Science, make Omar one of the most effective salesman I have ever met. He moves effortlessly from explaining the strategic potential his offerings have for the customer to the minute technical details of the implementation. Like Tom Cruise in Jerry Maguire, Omar has you at hello.
The last and possibly most important quality I look for in a founder is that he or she hasn’t done it before. Yep, I like newbies, albeit with a few important caveats. I don’t want an inexperienced first-timer. I am much more partial to someone who has been part of a successful team or played a meaningful role at a promising startup. But they were not the one who made it all happen. Instead, when you reference this person, you hear things like “always the hardest working or smartest one in the room,” “kept getting more and more responsibilities ahead of others,” or “hasn’t been a CEO yet but undoubtedly will do it someday.”
These virgin founders are recognized up-and-comers, hungry to take the next step in their professional paths. They are also sufficiently naive and don’t realize how hard building a successful startup actually is. Most first-time entrepreneurs dramatically underestimate the obstacles they will face. Lastly, these people usually have not yet “made it.” They don’t have a sizable nest egg from a previous exit, or the promise of another plum assignment if this one doesn’t pan out. These folks need their startup to succeed.
I can think of no one who fits this bill better than Mike Walrath at Right Media. Here is a guy with as unconventional a path to tech stardom as you can find. He started out as a personal fitness trainer who also sold gym memberships. He jumped to Doubleclick in a hiring blitz just before the dot-com bubble burst. As most folks received pink slips, Mike earned promotion after promotion. When he finally came up with the concept for Right Media, his Doubleclick boss was the first to confirm that Mike had what it takes to launch and lead a startup. He said he had always been the hardest working and smartest guy in the room. And he was hungry to prove it. Plus, he was obviously a strong salesman with a compelling vision. You can’t ask for much more than that.
We can all agree that startups are tough. But I have observed that founders with one or more of these qualities are even tougher. They are undaunted by the endless stream of naysayers who tell them their ideas will never work, that they will be crushed by the competition, or that better, more experienced players have already tried and failed to execute similar business plans. These are the winners, the over-believers who can overcome almost any roadblock in their way–and come out on the other side with an unmitigated success story.