What Makes a Successful Founder?
Every venture capitalist looks for strong founders, but what makes a founder strong is open for debate. With limited time to interact with founders before making decisions, investors often over-index on potential signals like age, school, technical credentials and experience. Unfortunately, this heuristic often biases investors towards people already within their network and similar to themselves.
VCs have many theories on what makes great founders
Over the last year, we’ve asked early stage investors representing north of $40 billion in AUM to rate 60+ founders on a number of dimensions including demographics, behavioral 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.
As we dug into the data, we uncovered a perspective on founders that we feel has not yet been fully explored. Below we’ve made an effort to codify our learnings and share them with the community.
Against the Conventional Wisdom
Whether a founder/CEO is technical does not differentiate company success. Also, founders of all ages can be successful.
Founder success by technical skills
Founder success by age
However, having a complementary cofounder, often a technical one, is correlated with success.
The best founders know their strengths and weaknesses and recruit a complementary team that maximizes the company’s chance of success.
Founder has a cofounder with complementary trails
Founder has a technical cofounder
Six Founder Archetypes (Aka Six Types of Superheroes)
We asked early investors, who have followed and supported founders from the initial stages, to rate founders on the following traits:
We discovered three archetypes of successful founders that cluster around certain characteristics…
Humble Operator
Exceptional at execution, extremely humble while confident in themselves. They are resourceful and gritty. People who worked with them before tend to follow them.
Agile Visionary
Usually first-time founders, they are young, visionary, and driven by a desire for greatness. They have a unique perspective on the market they’re going after and an intuitive sense of what their customers want. They test and iterate quickly to incorporate market signals.
Seasoned Executive
Experienced older founders, they often have 5+ years of management experience and deep industry expertise. They are intrinsically motivated to build a company. They may have started a company before.
…as well as three archetypes of founders who have been struggling (or learning to master their superpowers).
Passionate Outsider
Usually first-time founders, they are humble and hard-working. However, they don’t have good founder-market fit and don’t have a complementary cofounder to rectify this gap
Overconfident Storyteller
Charismatic, compelling, and have high confidence. They are likely to be solo founders and they are often not humble
Stubborn Individualist
Slow to adapt to learnings from the market and not empathetic to what the customers want. They are not good at articulating a convincing narrative
The Dominant Superpowers
Strong Execution
Execution is the only aspect that is consistently correlated with startup success. Across all archetypes, day-to-day effectiveness and whether the founder learns and adapts quickly are most correlated with success. Other studies, such as this one, concur with this finding.
Founder runs his/her company effectively day-to-day
Founder is a quick learner
Results-Driven
When making decisions under uncertainty, successful founders also tend to be results-driven. That is, they explore many solutions to quickly find the best one, which is advantageous given the limited runway that startups have to achieve their next milestone. Other founders tend to be process-driven at the expense of moving fast enough to find product-market fit.
Founder is results-driven
The Nuanced Superpowers
Successful and unsuccessful founders often share many of the same superpowers — but like real superheroes, what differentiates them is how well they’ve mastered their powers. Storytelling, grit and stubbornness are all abilities correlated with success, if founders know how to thoughtfully use them.
Storytelling
Founders that tell compelling stories tend to have an easier time fundraising, recruiting, and marketing. When a company is not much more than a pitch deck, getting people to take a leap of faith is vitally important.
— Steve Jobs, Apple
Why aren't all great storytellers successful entrepreneurs?
We found that strong storytelling was associated with two other attributes: confidence and founder-market fit. For founders who are strong storytellers, highly confident, and uniquely advantaged in their market, why are some successful (Agile Visionaries) and others are less so (Overconfident Storytellers)?
Agile visionaries and overconfident storytellers share several traits
Successful storytellers are also scrappy and agile thinkers. They execute day-to-day (Agile Visionaries).
However, when great storytellers get too enthralled in their own vision, they can’t adapt to market needs and often fail to find product-market fit (Overconfident Storytellers).
Agile visionaries and overconfident storytellers differ on two trails
Humility, Scrappiness and Grit
Some of the most successful companies to IPO in 2019 were founded by the most humble and hardworking entrepreneurs such as Eric Yuan of Zoom, and Oliver Pomel and Alexis Lê-Quôc of Datadog.
— Eric Yuan, Zoom
For founders who are humble, scrappy, and gritty, why are some successful (Humble Operators), and others are less so (Passionate Outsiders)?
Agile visionaries and overconfident storytellers differ on two trails
When these traits combine with strong founder-market fit and an early team that follows a founder from a previous company, the companies tend to take off (Humble Operators).
Unfortunately, other similar entrepreneurs struggle when they do not have a unique advantage in the market they are pursuing nor a way to bridge this gap (Passionate Outsiders). They may be starting afresh, oblivious to the fact that they are not well-equipped to tackle the opportunity.
Humble operators and passionate outsiders differ on two trails
Stubbornness
For the sixth archetype, “stubborn” is the most frequent descriptor from their VCs. When stubborn is coupled with “not scrappy”, “indecisive”, or “not able to confront realities,” a company struggles.However, some of the most successful founders like Steve Jobs and Jeff Bezos are notoriously the most stubborn. They run through walls to make an idea work. We found when stubbornness is accompanied by the following descriptors, entrepreneurs shine: “true visionary”, “effective day-to-day”, “results-driven”, “learn fast”, and “build strong teams”.