3 Key Things Investors Look For In a Founder Before Signing a Cheque One thing that determines the success of a startup is its founder. And, that is why it has become crucial for investors to bet their money on the right founders
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With over 99,000 startups today, India is one of the fastest-growing markets for emerging tech companies. The startup boom is so big that it has motivated many to embark on an entrepreneurial journey as early as they can. In fact, we are seeing children take up entrepreneurship while they are still in school. However, entrepreneurship is not for everyone. For the simple reason that entrepreneurial journey is one of the toughest professional journeys one can undergo and failure is a huge part of it. That is why it has become very crucial for investors to bet their money on the right founders.
Here are the three things that some of the prominent venture capitalists (VCs) in India look for in a founder before deciding to invest in her or his business.
Anupam Mittal, founder and CEO, People Group:
Passion: "First and foremost, they have to be passionate about the problem they're solving. If you are just doing it because your friends are building a company and you also want your name in the newspaper saying, you raised a Series A and so and so, then you are not going to last. So if you are doing it because you are really passionate about solving that problem, I think that's one box that's checked off. "
Business Acumen: "The other thing that I look for is business acumen. Good products do not necessarily make good businesses. People often mistake good product managers and good storytellers for good businessmen. And that's a big red flag, particularly in the last cycle that we have seen, where liquidity and capital has been available. You have seen a lot of storytellers and product builders raise a lot of capital but are struggling to build businesses. So that's something that I care for a lot. I try to examine that."
Co-founder chemistry: "And finally co-founder chemistry. It's important that the founders have known each other for a number of years and have worked or studied with each other. This whole fad of finding a co-founder that we have seen in the last six months or a year and then raising capital is a disaster. I know some cases where it has worked. But nine times out of 10 it's heading straightforward disaster."
Sandiip Bhammer, founder and co-managing partner, Green Frontier Capital:
Passion: "First and foremostly, passion in what they're doing is most important. We want to see a genuine commitment to their idea, which often means they'll work hard to see it succeed. "
Resilience: "Next, would be resilience. Startups face numerous challenges, so founders need to demonstrate the ability to bounce back from setbacks and keep pushing forward."
Coachability: "And, finally, coachability is key. While it's essential for founders to be confident, they should also be open to feedback and advice to refine their approach and business model."
These three qualities – passion, resilience, and coachability– are the guiding 3 pillars of our investment decision in any founder, said Bhammer.
Abhilash Sethi, Investment Director, Omnivore
"Omnivore assesses startups based on the four Ts—team, technology, total addressable market (TAM), and traction. A startup must have founders with relevant work experience and understanding of their sector, a good grasp of the problem in focus, a defensible technology to solve it, strong early traction, a product-market fit, and a robust go-to-market strategy. When we hear a pitch from a founder, we typically look for 4 things - simplicity in delivery, the authentic story of how the founders developed the product, a deep understanding of the problem statement with a clear explanation of the proposed solution, and a good understanding of business finance."
Nupur Garg, founder, Winpe
Clarity of thought and vision: "This can turn a business idea into a success story. I seek founders who can confidently articulate their mission and the essence of their product or service, showcasing their understanding of the problem or gap that they seek to address. Start-ups are constantly faced with choices, decisions and trade-offs. It is this understanding that anchors them and provides the foundation of sound decision making."
Motivating factor: "I also like to understand what motivates the founders on their entrepreneurial journey. So whether the founders are driven by money, passion for solving a problem, commitment to making impact, or a personal connection to their mission - and how honest they are about it."
A balance of values and business pragmatism: "For me, the alignment of values is very important but one needs to balance idealism with business pragmatism to yield success. The "why" provides me critical insights into their long-term commitment and ability to make the venture succeed and make it a meaningful investment opportunity for investors."
Rohit Sood, partner, Bertelsmann India Investments
The founder-opportunity fit: "In evaluating a founder, we emphasize the symbiosis between the individual's past experiences and the current opportunity. A crucial factor is the founder's relevant past experience, indicating a closeness to the problem at hand. Combined with raw intelligence and an in-depth understanding and articulation of the opportunity, this forms the cornerstone of our assessment."
Founder's charisma: "Founder's charisma plays a pivotal role. Beyond the present, we assess their ability to magnetize future capital and attract top-tier talent. This charisma augments their potential to navigate the complexities of fundraising and assemble a team crucial for the startup's growth."
BII-Founder alignment: "We dedicate a significant amount of time cultivating relationships with our founders, fostering a closely bonded, founder-centric team. We, further collaborate with our portfolio, offering enhanced support, engagement, and opportunities for more effective ideation."
"Of equal significance are the shared convictions, guiding principles, and reciprocal esteem that underpin our interactions. A harmonious co-founder relationship forms a foundation of stability and a unified vision, thereby making a substantial contribution to the enduring success of any startup," Sood added.