Guest Author · December 7th, 2009
This post is by Mark Suster, a partner at GRP Partners. If you like it, check out Mark’s blog with startup advice 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
One of the questions I’m most often asked as a VC is what I’m looking for in an investment. For me I’ve stated publicly that 70% of my investment decision is the team and most of this is skewed toward the founders. I’ve watched people who went to the top schools, got the best grades and worked for all the right companies flame out.
So what skills does it take to be a successful entrepreneur? What attributes am I looking for during the process? Having been through the experience as an entrepreneur twice myself, I have developed a list of what I think it takes.
1. Tenacity
Tenacity is probably the most important attribute in an entrepreneur. It’s the person who never gives up — who never accepts “no” for an answer. The world is filled with doubters who say that things can’t be done and then pronounce after the fact that they “knew it all along.” Look at Google. You think that anybody really believed 1999 that two young kids out of Stanford had a shot at unseating Yahoo!, Excite, Ask Jeeves and Lycos? Yeah, right. Trust me, whatever you want to build you’ll be told by most VC’s something like, “Social networking has already been done,” “You’ll never get a telecom carrier deal done,” or “Google already has a product in this area.” You’ll be told by the people you want to recruit that they’re not sure about joining, by a landlord that you’ll need a year’s deposit or by a potential business development partner that they’re too busy to work with you, “come back in 6 months.”
If you’re already running a startup you know all this. But some founders have that extra quality that makes them never give up. At times it goes as far as being chutzpah. And I see this extra dose of tenacity in only about 1 of 10 entrepreneurs that I see. And if you’re not naturally one of these people you probably know it, too. You see that peer who always pushes things further than you normally would. What are you going to get further out of your comfort zone and be more tenacious? It is really what separates the wheat from the chaff.
I once had a debate with a prominent VC on a panel. The moderator asked the question, “if an entrepreneur writes an email to a VC and doesn’t hear back what should they do?” This VC responded, “Move on. Next on the checklist. He’s not interested.” Without much thought I shot back, “That’s the worst advice I’ve ever heard someone give an entrepreneur.” Doh. I almost couldn’t believe I had blurted it out, but what came out of my mouth was so heartfelt that it just rolled out.
If you fold at the first un-returned email what hope do you have as an entrepreneur? As an entrepreneur, people aren’t going to respond to you and it’s your responsibility to politely and assertively stay on people’s radar screen. You no longer work for Google, Oracle, Salesforce.com or McKinsey where everybody calls you back. You had no idea how important that brand name was until you left it behind. Your customers don’t care that you went to Standford, Harvard or MIT. It’s just you now. And frankly if you went to a state college in Florida you’re at no disadvantage in the tenacity column. Persistence will pay off.
2. Street Smarts
OK, so you’re a tenacious person — you never give up. Well obviously that’s meaningless if your startup idea sucks. I don’t think it takes book smart people to build great companies — sometimes it’s a hindrance. But you do have to be a smart person and I personally prefer street smarts. I’m looking for the person that just “gets it.” They know instinctively how customers buy and how to excite them. They have a sixth sense for the competitors’ weaknesses. They spot opportunities that aren’t being met and the design products to meet these needs.
Because they’re street smart, most great entrepreneurs tend to prefer getting out and talking with real customers rather than sitting in a cubicle all day doing beautiful PowerPoint slides. And when they walk in my office and present you can tell that they know what they’re talking about. You can practically hear the “voice of the customer” when they’re presenting their concept.
I often tell people that I’m looking for people who weren’t born with a silver spoon in their mouths. I like people who aren’t worried about the social consequences of doing something they’re not supposed to. That’s why I personally believe many immigrants or children of immigrants fare well in business. It never occurs to them to play by the same rules as everybody else; in fact, I’m not sure if they even know what the “rules” are. It leads many of these people to be more street smart than those defined by convention.
3. Ability to Pivot
I don’t like to invest in people that I’ve never met before who come through my office wanting to have a term sheet within 30 days. I don’t think most VC’s do. Yes, there is the mythical company you all heard about that walked into Sequoia and had a term sheet 24 hours later. I’m sure that happens. But in most situations a VC will want to be able to judge how you perform over time. It’s what prompted my post on how to build relationships with VCs.
VCs often tell entrepreneurs that they want to see “traction” before they’re ready to invest. What I believe they really want is longer to get to know you. And part of what they’re looking for is how you adapt to the business you’re building over time. Every entrepreneur starts with an idea that they believe makes sense. But then your customers start using your products, your competitors come out with new offerings and your business partners decide to launch a similar product rather than working with you. You’re forced to “pivot” on a regular basis. The best entrepreneurs get market feedback regularly and change their approach based on the latest information. The best entrepreneurs seek advice from everybody they need, learn lessons and make minor adjustments on a monthly basis.
This is the reason that I’m personally not that anal about your financial model. I’ve stated publicly that you MUST have a financial model because it serves as your ongoing compass and strategy but it will change on a regular basis during your first 2 years. So much so that your financial model 2 years out won’t resemble your starting model at all!
So, for me, seeing how you respond to market challenges, what you learn and how you adapt is one of the most critical pieces of information I can collect about whether or not I want to invest in your company.
4. Resiliency
I like to say that “being an entrepreneur is really sexy… for those who have never done it.” The reality is that it’s lonely, hard work, high pressure and filled with mundane tasks. It’s a gritty existence. In the grand scheme of things no matter how hard you work and despite your appearance on the TechCrunch50 stage, no one seems to really care. That next round of investment is proving difficult. Customers are harder to sign than you want. Journalists have just written an article that wasn’t favorable. Your competitors just announced positive news. You’ve got 8 weeks of cash left and one of your employees just asked you to fill out a form so she can buy a house.
Every day you go home and face self-doubt but you’ve got to come back in the morning strong. Your employees are looking in your eyes for signs of weakness and self-doubt. They believe in you and they draw strength from you. You’ve got to be able to come out of unsuccessful VC meetings, pull your socks up, and go into the next pitch. You’ve got to accept customer losses as learning experiences and see how you can improve next time. You’ve got to see your product weaknesses and plug them. You’ve got to hear all of the doubters, and the world is FILLED with doubters, and still not give up. Resilience is one of the tell tale signs of an entrepreneur.
As a VC, if I can tell that you’ve survived tough times and you don’t appear beaten down that’s a huge plus. People always think that the big, successful brands they know were huge success stories from day one. GRP Partners funded Starbucks and Costco. I can tell you both were less than 30 days from bankruptcy early in their lives. They were survivors. One of the most famous case of resiliency in the US history is Abe Lincoln. If you haven’t seen how many setbacks Abe had before becoming president check out the link.
Or, more succinctly, from Sir Winston Churchill, “Success is the ability to go from one failure to another with no loss of enthusiasm.” (quote via David Fishman)
5. Inspiration
As an entrepreneur you’re always under-resourced. You want to hire a crack team of developers but you haven’t raised enough money yet. You want that key marketing resource from Google but he’s on a fat salary that you can’t match. You’re trying to get your contacts to get you that introduction to Ron Conway to sprinkle his legitimacy on your company through an angel investment. All of these things are nearly impossible for most entrepreneurs. And tenacity alone won’t yield positive results.
Often entrepreneurs show me their management team slides with the names of the people who are going to join him once they’re funded. I usually jokingly respond, “maybe you’re not an entrepreneur?” This always gets people to sit up straight 😉 I say, “listen, nearly every successful entrepreneur I’ve ever met has a certain ‘X-Factor’ about them that makes people take notice. I know that these people who you want to join you are in comfortable positions at brand name companies and don’t want to take the risk of joining you. But when the right entrepreneur comes along they think, ‘I’ve got to join this person now. I think this is going to be hugely successful and I don’t want to miss the opportunity.'”
The best entrepreneurs are like that. When you’re around them it’s almost contagious. They are passionate about what they’re doing, they’re confident about their success and they’re driven to make it happen. Sure, they have self doubt when they’re alone looking in the mirror, but you’d never know it from seeing them in the office. And what you need to know is that for every chart you put up with the people who are going to join you when you’re funded, I see companies that have actually gotten the team on board with no more cash in the bank than you have.
Whenever I’m watching someone present to me I’m often thinking to myself, “Can this person inspire others?” And inspiration is so important because not only is it required to hire and lead your team, but it’s required to get customers to work with you when, by all means, they should not. You’ve got less than 6 months cash in the bank and your product isn’t really fully baked. But they have confidence that you’ll get there even if they don’t acknowledge this to themselves. TechCrunch is going to cover you. They probably shouldn’t because you’re a bit more hype than reality right now. But they sense your trajectory. They get a sixth sense that you’re going to pull this thing off. Inspiration goes a long way in business.
To be continued in Part 2 with perspiration, detail orientation, decisiveness, and more. 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
I agree. Most of my mentors and entrepreneurs that I admire have grown up with a chip on their shoulders.
Is that chip on the shoulder Worth It is my question… and is it normal to sacrifice a normal life and social life and, if so, for how long? My chip is getting heavier by the minute here! 🙂 But the question is legitimate.
How do you differentiate between genuine ability and naïve overconfidence?
Ability and “naive optimism” are two different things in my mind. You can can have one without the other. I think one of the reasons that investors love to invest in youth is sometimes it really takes naive optimism to change things that cynical people don’t think can be changes. Cynicism comes from years of seeing people try and fail.
Now, being naive and not hugely competent is a recipe for failure. Being competent and cynical can at least produce reasonable results in a company. You probably just don’t end up “changing the world.”
Failure! More importantly, their response to it.
Keep them coming Mark! Love the stuff you write – spot on!
Street Smart is the name of the game or in Yiddish : Chutzpah! If one door is closed, another is open…
Thanks, Net! I always tell people I look for Chutzpah. Luckily this is a known word in the US. But in the UK nobody has heard of Chutzpah. Every time I said it I got blank stares (other than in Northern London). 😉
I printed out your paragraph on “tenacity” and stuck it to the wall — but it fell off.
Is this a bad omen?
Hahaha Dave, I couldn’t help but feel a little teary eyed reading it as well. Nice move making it into wallpaper.
No omen. You just needed to be tenacious enough to stick that paragraph on the wall again.
Mark has a great way of describing tenacity, hope he doesn’t think my comment below is too much (features for ideal investors).
Excellent. LOL. The real question – did you make the effort to put it back up even after it just fell down!
Nah, I just convinced the chief engineer at Google to hold it in place for me.
Fantastic post, Mark.
Hey Mark – great post (as always). As a corporate attorney specializing in the representation of entrepreneurs, you are spot on with your comment that “[t]enacity is probably the most important attribute in an entrepreneur.” I played minor league tennis after college for a couple of years and I remember what my old tennis coach Harry Hopman used to preach: “it all comes down to one word – desire. How badly do you want it? How much are you willing to sacrifice?” Indeed, I love the quote from Ratan Tata (chairman of Tata Group, India’s largest conglomerate) in the Wall Street Journal a couple of weeks ago: “I really believe that there is a great strength in American capitalism that cannot be destroyed. It exists in the ability of anybody to be successful if they have the tenacity to do so.” Tenacity – that’s the word. Cheers.
I miss Disqus.
I love reading these “features of founders I’d invest in” — information rich stuff Mark. I remember reading your work before (and incorrectly interpreting that you had been influenced by Steve Blank’s customer development model), and several comments on AVC.
You’ve inspired me to write up: features of ideal investors I’d partner with. (Here’s the quick version.)
1) Open World View: I’d like to partner up with investors (Angel or VCs) who absolutely get what my team is working towards. Our business concept fits in perfectly with the investors own personal strategy/vision, and where they expect the market future may be headed.
2) Genuine: They play their cards openly (for the most part). I know and respect their other startup investments. I recognize great value in their judgment and don’t have any sense of duplicity or misrepresentation from the investor.
3) Fanatic: They will go out of their way to make sure the business venture grows relentlessly and rationally. This equates to going above and beyond capital resources. The great investors have deep networking resources to aid in recruitment, legal assistance, partnerships, etc. While our business is tearing through existing markets, or capitalizing on a novel need, our investors recognize the inevitability of the corporation as an emergent leader and don’t push us to an early and under-priced liquidation.
If I can get those 3 features to match with an investor, I’ve found a new partner.
Thanks, Mark. Great list. Alignment of “world view” is very important. And, yes, I sent Nivi an email requesting Disqus!
Great write up! Looking forward to part 2. In terms of the founding team being 70% of what you look for, it is clear what some positive traits are, but would you mind elaborating on a few “warning signs” that turn you off about a team? In other words, what are some of the top reasons you get turned off by a team?
Cheers!
How about if I save that for a separate post one day? But quick top-of-mind response: arrogance, feeling that the entrepreneur doesn’t listen, hands-off on details, questions about trustworthiness, hasn’t researched his/her market, wildly unrealistic plans, etc.
Saving that for another post sounds like a good idea, although your response was still very helpful. Sometimes knowing what to avoid is better than knowing what to strive for.
Cheers!
This was a great read. Bookmarked, printed out and on the coffee table. The “being an entrepreneur is really sexy… for those who have never done it,” really resonated with me.
Hard work and long, tedious hours doing things that usually take a team of people to accomplish. Yeah, it’s a blast!
Thanks for this.
Thanks, Jake. I used to use that quote about international travel. People used to be so jealous that I got to go frequently to Italy, France, Japan, etc. but I would point out that I spent much of the time in an airplane, a taxi, a subway, a nondescript office building, a hotel room or a dinner with people I barely knew and all the while jet lagged.
Somehow, I think all of that describes entrepreneurism. And you know what? I guess we wouldn’t trade either sets of experiences no matter the downside. 😉
Well, as long as one can kick back in a tropical resort every once in a while… 😉
But seriously, my main issue with modern high-tech entrepreneurship is that resources are distributed a bit too unevenly… In many areas of the world, not all being the so called “third world”, the best team and product can’t help you much since there is virtually no funding available, especially at the seed stages.
Once you have reached certain size, income, etc. you can always hop on a plane to London or even California and pitch a few VCs for further funding — but how to reach that stage when there are virtually no angels, seed funds or even FFFs within 100 miles from you (and literally none in your country)? If you can sell from day one you may bootstrap, but if you need any significant product development before you launch you’re doomed (which is probably the reason why there are so many local portals and so few globally-oriented startups in such a small market as Croatia)…
Yeah, it’s a shame. I think all countries and regions need to find a way to address the angel funding gap. Without it you’ll never have breakthrough innovation.
I agree with you 100%, Mark — but it is a vicious circle. You can’t have angels without enough wealthy techpreneurs, and you can’t become a wealthy techpreneur without angel support. There are only two solutions to break that circle — one is to export people, which we do right now; numerous smart engineers leave the country to work in UK, US, Germany etc; and the second is to import angels, which we’re trying but given the very local nature of angel investment it’s nearly impossible.
So I’ll invite anyone reading this to help. If you’re an angel investor (or a VC/seed fund) interested in new areas to invest, or you would simply like to meet smart techpreneurs from the New Europe, feel free to drop me an email to berislav (a) stellient.com
Berislav, DFJ, Intel Capital, Mangrove, Index, … all invest in the New Europe (Eastern Europe).
This is an great post. Human factors don’t get discussed often enough compared to hard IP or business model.
Further inspired and further driven by your words here Mark. I followed you and will be reading more from you in the future. Now I’m gonna get back to this prototype…
Thanks, Ben. Appreciate the feedback. Second set of 5 out soon on VH.
Interestingly, the Abe Lincoln link actually is trying to prove that Abe was a successful and precocious guy and his failures were actually quite superficial.
I guess my take away was that if he stopped trying after a few failures we’d probably never have heard of Abe Lincoln. He seemed to have more failures than most.
And of course they forgot to include his greatest success (winning the Civil War) and greatest failure (getting himself assassinated)…
I’m so pumped after reading this and I dont even have a startup to fund. (Maybe soon though…)
Really well written Mark, nice job!
Thanks, Denny. Was hoping to get the word out to people considering becoming entrepreneurs as well as those with current initiatives to get funded. Good luck in your endeavors.
@Mark Great post; I have more respect for you after reading this.
As young kids my brothers and I were passionate about baseball. At our own request, my Dad would drive us to the local high school to run hills. We’d ask him how many he thought we should do. He’d advise, “Run until you can’t do anymore…then do 1 more.” That advice is how I approach a startup.
One either has the ability to be absolutely tenacious and resilient, or he/she doesn’t. This can’t be taught.
I wrote a blog post awhile back with some related thoughts, entitled “startup junkies don’t know any better”: http://fundmystartup.com/2009/startup-junkies-just-dont-know-any-better/
This is a really powerful and refreshing post!
Fantastic post Mark. This really does address some of the most important factors of venture capital. Great stuff on Venture Hacks.
Great post. I find myself repeating some of these mantras daily. Belief that my persistence will pay off in the long run, etc. etc.
I do have a minor exception to make and that concerns inspiration. Your paragraph on inspiring others is well taken but leads me to believe that only younger, single people without kids would fit the description. I can inspire a person all day long to join my team and throw caution to the wind while helping me chase my grand vision but if his wife or her husband isn’t comfortable with the resulting change, there’s no amount of inspiration that I can provide that will overcome the stress that would inevitably occur in that person’s personal life. I’m invested in my vision to the end. I accept the responsibility of it, but I’d be cutting myself short of some real talent if I could only choose people that can take the risk, pre-paycheck, pre-funding… Not everyone can work for free simply because they believe in an idea. How do you reconcile that? I don’t believe the inspirational ability of the founder is diminished because many of the prospective hires will cut their personal life expenses to the bone to take the job but there is a minimum level of income that every family needs to support its current position in life. I couldn’t go back to living on a part time college salary with two kids and a mortgage but I know I can and will build the company I am pitching.
The dynamics of our project may be different than what you’re thinking about. We’re building a prototype for a retail product. Revenues don’t happen until the product is built so funding is the only way to provide that minimum salary for people’s personal lives to stay at home and not invade my startup goals. If you’re only invest in post product or post revenue companies then there’s something to work with that doesn’t require funding and I completely get what your saying.
Quick thoughts:
Startups aren’t for everybody. A person with 2 kids and a mortgage who can’t or doesn’t want to take the risk is totally understandable. But these people should perhaps either join companies after they’re funded or go for safer startups (e.g. with things like consulting incomes) until they can raise capital.
But the truth is that high-potential, high growth startups are mostly infiltrated with young people. Just like sports teams. It’s not always fair but it’s reality.
“I like people who aren’t worried about the social consequences of doing something they’re not supposed to.”
i think a one-word summation of that description would be “shameless,” and i have a good bit of it.
in our (shoestring) bootstrapped state, we have employed some truly guerrilla marketing tactics including actual “walking billboards” outside of concerts in order to emphasize the benefits of using our startup as a resource.
you know people are going to take notice, and i bet they’re probably asking themselves, “who put you up to that?” little do they know that the founder is one of the ones on the street. 😉
Yes. Shameless is a good word. So is chutzpah. And a healthy dose is helpful.
Still more good stuff, Mark! (And thanks, Nivi, for hosting.)
Resilience is crucially important for any goal-directed behavior… it’s the flip side of learned helplessness! (And even if you don’t have any serious setbacks, resilience is still the biggest predictor of whether you keep working toward your goals.)
One key diagnostic comes from Martin Seligman in what he labeled “learned optimism” – when a setback happens, do you believe instantly that it’s going to happen again or not? Are you going to learn from it or not? We all THINK we are resilient (and indeed we all have the capability) but do we really believe it? Interestingly, the best way to learn learned optimism is to go through adversity, for most of us only then can we truly internalize those beliefs.
It also helps to have the cognitive flexibility to get back on task after a setback (much like the ability to shift quickly from big picture to details). This is becoming a significant research focus in neuroscience (google “neuro-entrepreneurship”, e.g.).
Wish there were more people like you in Singapore and China giving good advice, to feed the circle.
Thanks, Ryan. One day I hope to live in China for a year. Let’s see.
Paraphrasing: successful entrepreneurs have bulletproof jockstraps. Entrepreneurs in training should develop a high pain tolerance in lieu of said equipment.
Sisyphus For Startups : Coconut Headsets // Dec 29, 2009 at 7:17 am
[…] the rock rolls back down the hill. They start the push over. Some VCs have even written that persistence is the #1 trait they look for in […]
Excellent post! @Mark… you are not nice! But I appreciate your, sometimes, brutal honesty. I look forward to meeting you.
Great post, Mark! It is good to be tenacious and resilient, but at what point do you give up?
I think that’s where the ability to pivot comes in.
Love your post, Mark, and I love being in the mix of a new startup even if it’s taken me the last 7+ years. Finally reaching customers with a product that is like no other is simply gratifying. Most would say I’m crazy for what it’s taken to reach a goal I never set, but I feel after losing more than 100K to shady investors five years ago, your post means that much more to me. My entrepreneur friends I’m sure will love to see this post. I will pass your link on.
To all posters above, don’t give up, but also do your homework on everyone and everything you do in your startup. You have the resources of the Internet and there are no excuses.
Great article. Been reading VentureHacks for a while. It’s tougher here in Southern California to meet people who really understand tech (here in Orange County especially), but persistence and devotion truly pay off. Even when things go horrible, you keep going. Love the articles – keep them up.