The ability to assess startups without historical performance data is one of the key differentiators between pre-seed and seed investors and the rest. At Breakwater Ventures, we invest in companies that have been incorporated for less than a year before we meet them. When considering an investment at the pre-seed and seed stages, we have little empirical information to illuminate the potential growth of a company. The characteristics, past performance, and determination of the founding team take precedence over all other factors. In this piece, we will outline several key characteristics that we look for in founding teams.
Execution: Ideas are great; I’m pitched a lot of great ideas. But can you, as a founder, actually make them happen? We want to see a track record that says, "Yes, I turn caffeine and pizza into successful projects." Demonstrating the ability to turn ideas into tangible, positive outcomes is a key point.
Domain Expertise: We don't just want a founder who's read a couple of blog posts and thinks they've got it figured out. We're looking for the kind of person who can play their industry like a grandmaster plays chess. This isn't just about having a surface-level understanding; it's about knowing the game so well you can spot the pitfalls before you even step into them. Marc Andreessen’s famous piece “Why Software is Eating the World” holds true. Yet, we believe that software is eating the world with domain expertise.
Vision: I’m a sucker for a good pitch. We want founders with a vision that's more captivating than the latest Netflix series and a passion that's almost evangelical. Founders need to be so obsessed with solving a problem or seizing an opportunity that it's all they talk about at parties. But it's not just about being a dreamer; they've got to really understand the market they're diving into. Think less 'I have a great idea' and more 'I have a great idea, and here is where our product is going to fit into the market in 1, 3, and 5 years'.
Adaptability: This is the world of startups; things rarely go according to script. We select founders who can take a punch – metaphorically speaking – and adapt. We’re not looking for know-it-alls but learn-it-alls. Founders who can pivot faster than a politician in a debate, who see feedback not as criticism but as free advice, are the ones who get the gold star.
Building Teams: Startups aren't solo missions; they're more like assembling a crew for an over-the-top heist movie, where everyone has a unique, but crucial, skill set. We are looking for founders who aren't just gathering followers but are building a league of superheroes.
Humility: This one has a common theme throughout the rest but deserves to be called out. In the unpredictable game of life, success and failure are like those random market fluctuations – you can't predict them, and they don't always make sense. Thinking that one big win leads to another, or that a spectacular failure is just a stepping stone to success, is like believing in financial astrology. Both success and failure are like those tough but fair professors in the university of life, and guess what? You never really graduate.
The secret sauce to navigating this chaos isn't just about being skilled, persistent, or working hard. It's really about becoming a lifelong learner and staying humble. In the startup world, where everything moves at the speed of a high-frequency trading algorithm, this combo is gold. The real gurus here aren't always the ones hogging the limelight. Often, they're the low-key folks in the background, the ones who've learned their lessons the hard way and kept their egos in check.
