Are you at the stage where you are wondering what investors look for in founding teams?
Your team is the most valuable asset your startup has. The team is the top factor most prospective startup investors will be evaluating when debating the ventures they will fund. So, what exactly are they looking for? How can you make sure you check all the right boxes?
What Are Investors Looking For In Your Startup Team?
Getting the team right, and presenting them right is the most important part of fundraising.
It doesn’t really matter how great your pitch deck, product, business model or the problem is, unless you have the right team.
Keep in mind that in fundraising storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
Here’s what they want, and how to serve it up well.
When thinking about what investors look for in founding teams keep in mind the odds are overwhelming that your startup will fail, or you will at least have to pivot, at least once. Investors are happy backing the best teams, and have proven to stick with those they really believe in through these trials. They’ve often even funded second ventures or left their capital in place after a first failure, providing the team is right and is truly committed to surviving and winning.
Show examples of your commitment. What have you sacrificed so far? What skin in the game do you have? How long are you willing to commit your life to this? How far will you go to make it work?
Grit & Resilience
This is going to be hard. Being an entrepreneur means signing up for a non-stop string of challenges to be taken on and solved every single day. Nothing you have done so far may come close to the challenges ahead. It doesn’t end until well after you exit the company either. So, what are some examples of how you’ve faced extreme adversity before, and pushed through it to success?
Big ideas are fun and inspiring. They mean little, especially from a business and financial or investment perspective if they aren’t backed up with real ability.
It is the best team who will win this sector. So, who is on your team?
Show your industry and domain experience. Show how your team harnesses well rounded business experience. How strong are you in operations, management, logistics, marketing and distribution? Previous startup acquisitions are a big plus too, but not necessarily a golden ticket to guaranteed funding.
As part of addressing what investors look for in founding teams, note that equity fundraising is even more about enrolling the elite experience of your incoming investors than the money itself.
They want to add value and leverage their resources to help this be successful. They can’t do that if you aren’t coachable.
No one knows everything. The big difference in startup success is in being able to listen, learn, seek out the best help, and even more importantly, implementing that advice. Your pitch deck may be the primary evidence of this quality, or lack of it.
Can You Get Along?
This is business. Yet, there are plenty of opportunities for investors. Life is too short to get married to someone you are going to loathe working with every day for the next decade. Peter Thiel has put it as he likes to invest in founders who he’d like to have a beer with. You have to be likable as well as capable and committed.
Will you do what you say? Will you be honest and act with integrity? Will you keep them out of trouble and their capital safe?
They are putting a lot on the line to invest with you, including their reputations and careers.
Don’t just say it, prove it. This is a critical aspect of what investors look for in founding teams.
What If Your Team Isn’t Strong Enough?
What if your team isn’t strong enough, or at least isn’t checking all of these boxes on paper or when investors start doing their research and due diligence on you?
Round out your team and strengthen it before you complete your pitch deck and start approaching investors. You don’t want to burn vital opportunities with the best fitting investors. Or they probably won’t tell you why they are turning you down, and won’t give you a second look.
Will the gaps by bringing in more cofounders, respected advisors, and hiring key team members to head up critical departments as well as bringing in high quality executives with strong resumes.
If you are still coming up short, show how you will use this round of funding to hire and fill these gaps or bring in the investors that can close the loop.
How To Convey How Great Your Team Is
Don’t just expect investors to know how good you are or to ask about perceived issues. They are typically approaching pitches from the mindset of this being another waste of time, a wannabe team that doesn’t know what they are doing and doesn’t have what it takes. Don’t get thrown in that bucket or give them another reason to back up their pessimistic assumptions.
Preempt their doubt by showing up well and demonstrating your strengths throughout your pitch deck and pitch. Use stories to show your grit and commitment. Use your team slide to highlight key accomplishments. Invest in professional copywriting for your resumes, LinkedIn bios and the executive profiles on your startup website.
Then prepare for the common questions you will get from investors and strategize how you will spin your answers around to establish your advantages as the team to invest in, in this market.
Hopefully this post provided you with some perspective as you are looking into what investors look for in founding teams.
You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.
I cover this topic in detail on the video below What Investors Look For In Founding Teams.
* * *
FULL TRANSCRIPTION OF THIS VIDEO:
Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about what investors look for in founding teams. Before we get started, make sure that you hit that Subscribe button, and this way, you will never miss out on any of the videos that we roll out every week.
The founding team is the most important element when you are asking investors, “What do you look for in a company before investing?” They always say, “Team, team, team,” and then the rest comes after. In today’s video, we’re going to be breaking it down for you so that you can understand what exactly the things are that investors look for in the teams that they end up investing in. So, without further ado, let’s get into it.
One of the first things that investors are going to look for is commitment. They want to know if you are going to be able to sacrifice the things that you need to do in order to be part of this journey and execute. There are going to be ups; there are going to be downs in the journey of building and scaling your company, and more specifically, during the early days, 95% of the days are going to be catastrophic.
But at least that 5% of the good days and the passion that you have in this is going to help push you to the top. You can’t fake passion and commitment. For that reason, the investors want to know if you’re going to be in this business for the long run because it’s all about persistence. It’s not a sprint; it’s ultimately a marathon, and this is what they’re looking for.
The next things are grit and resilience. What are some of the examples on how you have behaved during moments where adversity was present? Perhaps there are some clear examples that you can actually share with the investor so that they get to see that nothing is going to push you out of this journey, that literally, failure is not an option, and that you’re going to do whatever it takes to get this thing to the finish line. Again, you need to make sure that you’re able to convey that to the investor.
Next is capability. What makes you and your team capable? Those investors are looking at your space. They’ve made a decision of investing in your segment. They’re probably even meeting with your own competitors. So, what makes you different than others? Why do you deserve this money? Do you have the domain expertise, the experience, the network? What is it that makes you different, that makes you unique, and that really makes that investment more desired being placed in you and your company versus putting it in competitors?
The investors also want to make sure that you’re coachable, that you’re able to listen. Remember that the investor is investing in you because they believe in you, but they’re also investing because they want to help you in building the business.
Are you willing to listen? Are you coachable? Those are the things that the investor is going to want because, especially if they’re investing a substantial amount of money, they’re going to want to take some type of control and even be part of your board of directors in designing that strategy that ultimately you and your team, your management team or executive team are going to go out and execute and take to the finish line.
In terms of coachable, you need to be in a position where you can take feedback, where you implement it, where you report back, and you build that trust and integrity in the relationship where the investor is able to see that you’re delivering on your promise, that you’ve listened to them, and that you are actually taking that advice and carefully implementing it to see what’s going to be the outcome. Investors love that, so make sure that you’re enrolling them, and you’re making them be participating in the business via the feedback that they are providing you.
Can you get along? This is another big one. Do you see yourself with that investor? Maybe if you were to miss a flight, would you be okay having a beer with them, having lunch, having dinner, being able to enjoy each other’s company? This is critical.
There are people like Peter Thiel that have said that they would never invest in people that they can’t really get along with. Again, you want to have that connection. You want to build that meaningful relationship with the investor so that they really feel confident that it’s going to be worth their time, that they’re going to enjoy, and that they even learn from you. Those are critical aspects. Again, it’s all about having that meaningful relationship.
Are you trustworthy? Again, trust is built on integrity, and integrity is being able to deliver on your words. If you’re actually setting yourself or making the promise that you’re going to be accomplishing certain numbers or delivering certain types of milestones, you need to be in communication. If you are delivering those milestones, great. If you think that by whatever circumstances, you’re not going to be able to deliver on certain promises that you made, you need to be in communication as fast as possible.
The last thing that you want is that the delivery date comes along, and you’re like, “I’m so sorry. I’m not going to be able to do it,” because it’s going to leave people with a sour taste. So, you want to have that trust be present, and this is only going to be accomplished by having that nice streamlined communication channel between you and the investors that, at the end of the day, really builds the trust.
In the event that your team is not strong enough, that’s totally fine. The investors, especially the earlier that you are in the journey of your business, they’re going to be okay with the fact that you’re going to have to hire later on. At least what you need to showcase here is that you have a clear roadmap, that you have a plan, maybe even candidates that you can show with them, and perhaps even enroll the investor in that journey of hiring the talent.
In many cases, those investors have access to a great pool of talent, so maybe they know someone that they can bring in. Just be clear and be honest. If you are missing certain candidates in certain roles of the business, share what those candidates are and what you’re planning to do about it so that you can fill in those roles, and perhaps even the timeline of filling those roles.
How to convey how great your team is, is essential. It’s not just about the investor trying to figure it out. You’re going to want to make sure that you’re packaging the pitch deck well. And, by the way, below, there is a nice template that you can use for free that founders are using all over the world to raise millions.
On that pitch deck, essentially, you can put in bullet points what some of the accomplishments are. You can also update the LinkedIn profiles. That’s a critical component, and make sure that every profile of your team members is attached or connected to the company’s profile because that’s one of the things that investors are doing for due diligence nowadays. Again, make sure that on those bios, it is very clearly stated why those team members are adding that key value to the execution and to the roadmap that you have in front of you.
If you like this video, please shoot a Like, and then also leave a comment underneath, and don’t forget to Subscribe to the channel so that you don’t miss out on all the videos that we’re rolling out every week. If you are raising money, shoot me an email at firstname.lastname@example.org. I would love to help out. Thank you so much for watching.