This post is by Mark Suster, a serial entrepreneur turned VC at GRP Partners. If you like it, check out Mark’s startup advice blog and his tweets @msuster. And if you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. Thanks. – Nivi

This is the last in a three-part series about the 10 things I look for in an entrepreneur. In Part 1, I addressed tenacity, street smarts, resiliency, ability to pivot, and inspiration. In Part 2, I discussed perspiration and appetite for risk. I elaborated on each of the topics in my blog series on VC startup advice.

Most successful entrepreneurs have an attractive mix of skills, know-how and personal qualities that separate them from the herd. Today I cover three more of these critical elements and throw in a couple of bonus entries that didn’t make my top 10 list but are important nonetheless.

8. Detail Orientation

One of the easiest ways to rule out an entrepreneur is when he doesn’t know the details of his business. There are tell-tale signs, and discussions about competitors often expose them. You can tell whether an entrepreneur has logged into his competitors’ products, talked to their customers, read news coverage of them and gotten the back-channel info.

You can tell if the entrepreneur has a deep-seated competitive spirit. Can’t go a mile deep on competition? Buh-bye.

Let’s talk about your product, and let’s look at your financial projections. Can’t walk me through them on a granular basis? Did someone else pull your financial model together while you did “your job”? Not good enough. The best entrepreneurs focus on details. They can tell you the square-foot costs of their property, how much they spend monthly on Amazon Web Services, and the 12 features being developed for the next release.

Another big tell is a CEO’s grasp of the sales pipeline. I can’t tell you how many CEOs I’ve met who can’t walk me through the details of their sales pipeline. I want the names of key buyers, when you met them last, who the competition is, and what the criteria is for making a decision. You think we’re just going to talk about your largest lead? Sorry. Let’s go through the whole pipeline, please. I care about the details, but I’m more interested in finding out whether you do.

Along with detail orientation, I have a strong bias for “doers”. When I ask for a quick demo and the CEO suggests a follow-up meeting with a sales rep because he’s not “a demo guy,” I usually think to myself, “A follow-up meeting probably isn’t necessary.” Similarly, if you need your CFO to walk me through your financial model, you’re probably not the right investment for me.

Ask any CFO I worked with as a CEO: They did the hard work, but I edited the spreadsheets cell by cell. In fact, I usually built the first three versions of the financial model (but then my ADD took over, and I needed a great closer to make the model complete). Founders need to be hands-on. As I wrote in an earlier blog post: “You can’t run a burger chain if you’ve never flipped burgers.”

A startup seeking investment from me once put their “president” on a call with me. When I told him that “president” was a strange title for a startup, he announced they also a CEO. When asked about their different roles, the president told me the CEO set the strategy while he traveled to conferences evangalizing on behalf of the company. “So who runs the company on a daily basis?” I asked. “Oh,” he responded, “we have a COO.” The company had under $1 million in revenue and was burning $850k a month. It had a strategy-setting CEO, a limelight-seeking President and a COO who ran the company.

I gave that company one of the cheekiest responses I have given in my two and a half years as a VC: “You don’t want to raise money from me,” I said. “The first thing I would do is fire you. Then I’d fire the CEO. Then I’d cut the burn to a realistic level and build a company.” They got their round done anyway from a big late-stage VC. One of the large parts of the burn was PR, marketing, and conference attendance. There are VCs who are fooled by all of this, but it doesn’t equal success. A year later the president and the CEO had moved on.

Bad VCs funded this madness in the first place and weren’t close enough to the company to see what was happening. When the CEO of an early-stage startup tells me he plans to hire a COO, I’m usually not interested in another meeting. (Funny side-note: The company was recently nominated for a Crunchie Award. Unfortunately, money can buy you awards.)

9. Competitiveness

As I wrote in my previous post on perspiration, good ideas attract competition.

Everybody these days is fascinated by the “private sale” concept offered by companies like Gilt, Ruelala and HauteLook. There are some great companies in this category, but the initial category killer was a French company called Vente Privee (which translates to “private sale”). From what I’m told, the founders were in the Schmatta (Jobber) business selling other people’s excess, end-of-line inventory at a bargain. There wasn’t the same end-of life infrastructure that we have in the U.S. (think T.J. Maxx), so they had an early lead. When the internet part of their business took off, a number of competitors surfaced.

By then, Vente Privee was a powerhouse and they used that market power. They made it clear to suppliers that Vente Privee would stop carrying their products if they supplied the newly formed competitors. This was a bare-knuckle industry, and money was at stake. Good competitors fight.

Just ask Overture about Google (“Don’t be evil”) and how they competed in international markets. It wasn’t all smiles, hugs and “let the best man win.” A lot was at stake, and Google competed fiercely.

Have a nice little idea and think you can carve out a large market niche? Not if you’re a nice guy. I’m not saying you need to be an arsehole, but entrepreneurs hate to lose. They’re hyper-competitive in everything they do. I look for that fighting spirit in the individuals at my table. It doesn’t matter if they’re playing golf, poker, Ping-Pong, Scrabble, or Guitar Hero. Entrepreneurs play to win, and they take losing seriously.

Think Mark Zuckerberg doesn’t have some sleepless nights about Twitter despite having more than 300 million users himself? Steve Jobs isn’t a “nice guy.” Nor are Bill Gates, Steve Ballmer, Marc Benioff, Larry Ellison, Tom Siebel, Rupert Murdoch, or any number of people you’ll find who built empires.

10. Decisiveness

Being an entrepreneur is about moving the ball forward a few inches every day. What astounded me when I switched from being a big-company executive to an entrepreneur was the sheer number of decisions I had to make on a daily basis.

They sound so basic when you’re not the one having to make them. Should you go with Amazon Web Services (AWS) or have your own servers hosted at RackSpace? Should you build in Ruby, Java, or .NET? Should you sign a two-year lease or rent month-to-month? Should you hire an extra developer now or a business development resource? Should you take angel money or just go for a seed round from a VC? Is venture debt a good idea? Should we launch at TechCrunch50? Should we charge for a product or offer freemium? Should we ask for a credit card up front, even if we don’t charge for 30 days?

It never ends. There is no such thing as a startup decision with complete information. The best entrepreneurs have a bias for making quick decisions and accept that, at best, 70 percent of them will be right. They acknowledge some decisions will be bad and they’ll have to recover from them. Building a startup might be a game of inches, but you don’t get timeouts to pause and analyze all of your decisions.

I recently have been considering investing in an entrepreneur in Silicon Valley. He was deciding between taking another senior role at a prominent Silicon Valley tech company and starting his own business. I told him I didn’t think he needed any more resume-stuffers and now was the time to go do something big on his own. Within a week he delivered a deck outlining his strategy for a new company. A day after we discussed the possibility of him flying down to meet with my partners, he was on a plane.

He then booked tickets to China to talk with suppliers and promised to revise his strategy by the time he returned to the U.S. He is getting stuff done in entrepreneur years, which is a step change faster than dog years. By the time we speak again, I’ll be able to judge results by the quality of his thinking about the opportunity. But by that time, I imagine, he will have made so much progress that he’ll question whether he should take my money. I’m certain he will have talked with other funding sources. This is how it should be.

If you’ve been “thinking about doing something” and batting the idea around with your favorite VC more than six months, don’t be surprised if they’re not prepared to back you in the end. Entrepreneurs don’t “noodle”. They “do”.

Now that I’ve addressed the top 10 skills I look for in an entrepreneur before investing in them, I’d like to offer two additional qualities that can be critically important but won’t necessarily hold someone back from seeing success.

11. Domain Experience

This isn’t a “must” for me, but it’s certainly a huge plus when entrepreneurs have it. You can spend a year putting your hypotheses on paper while researching a market. But you never really have a handle in the minute details of the industry until you’ve lived in it. If you are launching mobile application and have sector experience working for Apple, Blackberry, AdMob, or JAMDDAT, then I know your product will have your experiences baked into it.

I learned this lesson when I launched my first company in 1999. We offered a SaaS document management in the cloud (we were called ASPs back then). I had no experience in document management systems beyond being a user, and nobody had SaaS experience because the market was too new. We were forced to make assertions about features we thought people would want, how to price them, and how to overcome objections to managing data in the cloud.

When I began hiring product managers, sales reps, and implementation staff, I benefited from what employees learned working at places like Documentum and OpenText. They brought the lessons they had learned in their companies
 over the previous decade. I know this stuff cold now. So when I launched my second company – which was also a SaaS Document Management company – we already had a vision for what would do well in the marketplace.

Domain experience also brings relationships. If you spent three years building relationships with senior executives at media companies, a starting point for your next business ought to be, “How can I exploit these relationships in the next venture I launch?”

One successful entrepreneur I know wanted to launch his next venture in financial services because it was a bigger industry. Fine. But I pointed out that he would be up against competitors who had spent years building relationships with the big financial services companies (as well as channel partners), and he would be starting from scratch. I’m not sure why you’d do that unless you had to.

12. Integrity

The most obvious attribute that didn’t make my top 10 list is integrity. It is very important to me. If I thought I could make a lot of money backing a dishonest person, I personally would pass. I know many private equity firms that would not. I’m proud that most early-stage VCs I know care about making money ethically. So you should include integrity on my personal list of attributes
 required to raise money from a reputable, early-stage VC.

Unfortunately, people with low integrity can be successful and can raise money from investors. So I left it off the master list. I personally know a billionaire CEO who I wouldn’t put high on the list of people with high integrity. But he built his company from scratch to become a very large enterprise.  He is well respected (but not liked) in his industry and in his company.  He spends a lot of money on personal marketing so the story is written the way he wants it.

But I’ve seen his actions up-close and wouldn’t claim that they are high on the integrity scale.  I’ve heard this about similar technology executives of some of the biggest names in history.

I also know him to not be a very happy man.  Money can buy a lot of things but, as the saying goes, it can’t, in and of itself, buy you happiness.  I believe that true happiness comes from a sense of fulfillment, giving, and doing what your moral compass knows is right.  Better that you be this person, whatever level of business success you achieve in life.

If you like this post, check out Mark’s blog and his tweets @msuster. If you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. – Nivi

Topics Entrepreneurs

17 comments · Show

  • Brian

    Thanks very much for this series Mark. While we’re very early stage and not looking for VC dollars (not yet anyways), your posts have given valuable insight into not only what VCs will expect when the time comes, but useful advice to entrepreneurs whether they are seeking funding or not.

    On Decisiveness: In a former industry I had a boss who told me, “You have to make 200 decisions a day. Your job is to make 180 good ones.” That conversation was well over ten years ago and it has stuck with me ever since. It gave me the room to make mistakes and take accountability for them without feeling like I would get walked out the door. Luckily, the lesson has stayed with me and served me well ever since.

    • Mark Suster

      Thanks for the feedback, Brian.

      re: decision making – your boss gave you good advice. Maybe the scale seems a bit high, but the reality is that you have to make decisions and move on. The best entrepreneurs do this naturally. 30% will be wrong. You need to spot those and correct. I’m always surprised at how some individuals get totally paralyzed by big decisions. This is much more common than people think.

  • Aleksander Soender

    Damn I love this blog. Thank you so much for sharing.

  • Startupguy

    Great post.

    So when are you starting to invest in Israel?

    Your points hit home. The best is that none of these skills can be faked, you either have them or you don’t. When I meet founders of companies I can always tell the quality from the lesser quality.

    Integrity is a tough one and the litmus test for that is when the founder is in a tough situation and feels guilty even when he is clearly right.

    • Mark Suster

      I’m not opposed to investing in Israel but it seems like you guys have a lot of great early-stage investors there already. If an Israeli startup had plans to have a team in California then we’d be super interested.

      • Startupguy

        There are a few early stage investors, not many are doing deals these days.

      • Whitefawn

        Hi Mark,

        Thank you for the blog writings.

        I agree with Startupguy. There are very few early stage investors, and angels went undercover.

  • sthomps

    Hi Mark,

    Just wanted to say excellent series of posts. It is nice to hear from a VC that has worked on both sides of the fence, being an entrepreneur as well. And thanks to Nivi for putting up this series, really valuable stuff.

    I would put integrity as #1. Your example of the billionaire CEO is very true, and that happens all over the place. I would never invest in a person that I did not feel 100% was doing it for the right reasons. Money makes the world go round, but nice guys can give VC’s the same ROI as an a-hole.

    I was just reading “Founders at Work” yesterday and something that Mitch Kapor said really stuck. He said that most entrepreneurs that are “green” compromise their integrity for VC’s. He walked out of their first real round of funding because the VC’s put clauses in that compromised the morals of the company. He just knew that it wasn’t the right way to run a company. He would rather have no salary than play by their rules. I think being unique and standing out in a world that is surrounded by such similar companies is a fantastic trait.

    I found this to be fantastic advice for new entrepreneurs (I am definitely green, being 18) and is not preached enough. There are only a handful of VC’s in the world that I would ever allow my company to take money from, based on what I have read. I also believe that the way the company is run from day one determines the kind of company it will be at exit. There are so many copycats in the tech industry that we are convinced that there is only one path to success.

    For a new entrepreneur, I want to say thanks again for publishing this, it is fantastic content.

    • Mark Suster

      Thank you for the feedback. To clarify – I REALLY value integrity. I tried to keep my points to “what it takes to succeed” rather than just “what it takes to get a check from me” which is why the integrity point was the final thought. Hope that was clear.

      I would also say that you need not be afraid of all VCs. There are many that have very high integrity that can be confirmed by many people over several years including: Gus Tai, Jon Callaghan, Howard Morgan and many, many more. There are many advantages to having capital as you grow or I wouldn’t be a VC.

      Good luck with the start of your entrepreneurial career.

  • Jordan Cooper

    Thoughtful post Mark. This could not have been written by a financier turned VC…the most value-add investors I know all understand the entrepreneurial nuances you describe.

  • Stephen

    Very nice to hear the other side of the story, what you think, and how you interpret signals. But these things are not set in stone, correct? I assume you make exceptions and ultimately decide on a case-by-case basis?

  • Anonymous

    I’ve been working in the IT industry as a programmer for three years, during which time I’ve learned that the qualities you say make a good entrepreneur are the same ones that also make a good manager. I didn’t realize this until I read this post. Thank you for sharing your insights as an entrepreneur as well as a VC.

  • Lee G Turley

    Mark, this really is great insight, especially for fledgling entrepreneurs. Could you give me a little clarification on “nice guy” and how “win win” (Stephen Covey) comes into play with competitiveness?

    Also, and more importantly, when a 24-year-old stands in front of you to present his/her first start-up and team, what are you thinking? How are you perceiving them in context of their age? Are you considering their age? Are you looking for experience in their team to compensate? If they have more experienced members on the team would you want them at the helm even if they are not the ones with the vision?

    • Mark Suster

      I like win/win solutions and I’m a huge fan of Stephen Covey. But win/win still means you need to win also.

      Regarding age, I’m always sizing up people’s age and how it might be a strength or weakness to them. But… there is no “right” or “wrong” age. In different people it may help or hinder.

  • JMS_Colorado

    Outstanding series, far more worthy of print, and even video, than the millions of the other self-help, how-to-run-a-business, how-be-successful, marketing hype (crap) out in today’s market. Practical, insightful, founded and proven while also so basic in many ways we ALL forget to “restate” and “rework” the obvious.

    To share and organize this all at no cost or even a “freemium” click is admirable. Through offerings like this, our great global economy will soon thrive again… even if only a small percentage of the readers you’ve helped take to action with most if not all of your skills recommendations.

    These 12 will be a barometer for the final grading our our soon to be released business plan.

    Great Work!

  • Alan White

    It’s intriguing that Mark uses the word “Skills” to describe these entrepreneurial qualities. Does that imply they can be learned or adopted? Some of the skills seem more like innate character traits. My takeaway is that these skills come naturally to some but can be learned by others. In any case, if you don’t have all or most of those characteristics, keep your day job or start a conventional small business in a market that isn’t hypercompetitive. I can do that!