The three qualities investors look for in startup founders

Getting backing for your startup is not just about solid financials and market opportunity — the founders steering the ship are just as crucial a consideration for Venture Capitalists (VCs). As our industry experts will attest, a strong and likeable founder who earns the backing of VCs can get the deal over the line, whereas an unfocused founder can have the opposite effect and put a previously secure deal into flux.

So, what are the green lights and red flags that investors are looking for before they sign a cheque? We asked founders, advisors and investors about their experiences to uncover the founder qualities that seal the deal for VCs.

Honesty and transparency

Perhaps the most common trait investors said they are looking for is trust. Being honest about your business, presenting the good and the bad and being realistic about weaknesses is key to getting investors on side. Aaron Silvers, founder of law firm Schilling & Silvers, has advised multiple early-stage founders and startups on legal and regulatory risks during investment, he says: “Investors don't just invest in ideas; they invest in trust.”

Being transparent and presenting a less than rosy picture can actually work in your favour. Silvers saw this first hand, “I remember a client who was very upfront about their potential legal hurdles — complex regulations and permits they were still working through. The transparency actually impressed [the investors] because it showed a mature understanding of what could go wrong. The investors respected the honesty and felt confident the founder wasn't hiding other issues.”

A founder who tries to gloss over details or isn’t upfront about potential difficulties will soon get found out anyway, suggests Jeff Kaiden, who has successfully secured investment from VCs and is CEO oflogistics business Capacity: “Investors can sense when someone is overselling their capabilities or oversimplifying the complexity involved. Investors notice founders who acknowledge that supply chains will inevitably break down, markets will shift quickly, and unexpected bottlenecks will appear. Showing you can anticipate these disruptions and already have contingencies in mind makes you infinitely more attractive to venture capitalists who want real-world resilience, not just optimistic projections.”

Angel investor Suzanne Donnovan agrees that failures aren’t a deal breaker, but what she’s looking for to invest is a founder who can learn from their mistakes: “Having a failed business behind you is not a problem — that may have been a timing issue for example — but did you fail fast and learn?”.

Leadership and team building

Even the best ideas won’t scale without the right team, so investors need to know that a founder can attract and retain talent and inspire people behind the mission. Early stage businesses are often built in part on the charisma and leadership of their founders, as co-founder of virtual food franchise Dish’d, Mohammed Rahman, observes: “In the early stages, people who join your business are taking a punt on you and your idea. You are asking them to take a leap of faith and leave a job to join your as yet unproven startup. To get the best people on board at this stage you need to be able to inspire and bring them into your vision.”

To scale their business a founder therefore needs to get buy-in from prospective hires and create a fun and inspiring environment that makes people want to stick around. They may also have to wear several hats while they build their teams, filling gaps and taking on a range of roles. As Suzanne Donnovan observes: “As an angel, I’m investing in the very early stages of a business so the founder is the CEO and they’re usually filling several roles at that stage.”

But if there are important gaps in the founder’s skillset, a VC might make you expand your leadership team to fill them, as Donnovan has, “I have required founders to bring in a fractional CFO or a senior commercial lead before I commit.”

Self awareness and coachability

Self awareness and understanding your own limitations is another key attribute for founders to focus on. But knowing your weaknesses doesn’t mean you then have to perfect every skill yourself. As New York entrepreneur and founder of ASL BPO, Zayed Ahmed told us that it’s just as important to know when to build those skills into your team or outsource:“Focus on what you do best and outsource the rest. Investors back people who know their own strengths.”

This sentiment was echoed by Darren Mercieca, CFO at Kiwi Bets who said: “I see a lot of founders who struggle with self-awareness. The best ones I’ve met know their strengths — but more importantly, they know their weaknesses. They don’t try to do everything alone. They surround themselves with people who fill in the gaps, whether that’s a technical co-founder, a strong operator, or someone who understands the financial side. The founders who struggle the most are the ones who won’t admit what they don’t know or refuse to bring in the right support.”

A key part of early stage investment is bringing in expertise as much as it is about funds. As a result, it stands to reason that VCs and angel investors like Suzanne Donovan want to partner with founders who can take feedback and are open to hearing advice about their business: “I consider their experience, drive, ability to lead, market understanding, business acumen and ask myself the fundamental question — do they listen?”.

Though the common picture painted of a successful founder is someone brimming with off the wall ideas or a maverick with a drive to succeed, it appears what VCs are really looking for is stability and reliability. Of course, you need a successful concept and the right amount of passion and grit, but the key personality traits investment experts call out all revolve around honesty, being humble enough to take feedback and being a good leader. It may be the big personalities who secure the headlines — but perhaps it’s the big team players who go on to secure the most funding.

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