“We invest in people not ideas.”
VCs , especially those investing in pre seed or seed stage, look for a certain type of management team to de risk their investments. They believe there are few characteristics that early teams have that will make them more successful than most. From conversations and my observations, here’s what I believe are the 5 types of teams that vcs get excited about making it rain on backing financially.
The A Team
They’ve done this before, they’ve built valuable companies and exited somehow. Whenever this group gets together, magic happens, predictable and wonderful magic happens. This next start-up they are working on may be super challenging to understand, or in an industry that has yet to be disrupted because of heavy gunned incumbents. A team with 3 or 4 notches under their belt are rare to find but when they are up to something, people get excited.
Team Credentials are Us
While most investors like to say they are apathetic to job and school credentials….Its an instinctive thin slicing gets your ears up when someone says they are ex-Google, ex-Goldman Sachs, Dartmouth Alum (not talking about anyone particularly) They’ve done what was required to get to those companies and schools and that means that they’ll do what it takes to make their idea work. It may also mean they have the connections for human and financial capital where others don’t.
Team We Lived This
They understand the problem they are trying to solve because they lived it. They worked in the industry, they know the customers, and they know the nuances to turn their idea into a valuable company. They have market knowledge that only insiders have and they have easier than usual access to their first customers.
All rookies have to start from somewhere but this team has proven to be something special early on. They’ve either acquired accolades, established great traction with customers and press, or they’ve developed game changing service or product that people are excited about. They may not have the experience to know what they are on to, but investors are interested to see where they go with extra support.
Like rising from the ashes of failure, there are teams that will come together from a failed business and have it figured out. They have the collective experience and combined discipline to hit gold with their new venture.
Granted, the best teams have a combination of these teams mentioned previously, but I think as a start-up team, you should have a good understanding of your strengths and weaknesses as a team because the company becomes a reflection of its management team, especially in the early days.
What type of team have you assembled?