Just this year, after being a seed investor for five years, I have found myself evolving into a more founder-driven investor. I used to spend a lot of time analyzing the market and the idea as it was pitched. Now, I do less of this. I focus a lot more of my efforts on seeing if the founder is brilliant and then I spend (a lot less) time on the market.
I’ve come around to this approach for a few reasons. First, having been involved in 30+ investments over the past 5 years, I’ve seen how often founders pivot. Seeing this often enough makes you realize how shortsighted it can be to index on the idea that was pitched to you. Second, beyond the pivots, I’ve seen dozens of entrepreneurial journeys play out, which has fed my founder algorithm. I now feel more comfortable opining on whether I believe somebody is great.
I’ve always found it frustrating how vague people are when describing what makes someone “a top 1% founder” so I wanted to lay out some of my own rules and heuristics.
My heuristics on what makes someone a brilliant founder
- Does the opportunity keep making sense the more you talk to the founder? Does your initial excitement wane, or does it hold steady (or grow)?
- I have found that it’s very rare for the excitement to hold and for the opportunity to keep making as much sense as it did in a first meeting. It’s typically a sign that the founder and the opportunity are compelling
- Is there something about the person that is obviously brilliant and viscerally compels you to them? It could be their salesmanship, marketing skills, product marketing skills, product chops, engineering skills.
- This is so rare that it tends to be relatively obvious when you see it
- Bonus points for the thing they’re good at being directly relevant to their business
- Are you impressed with what they’ve done so far? For example, how quickly they’ve built software, the quality of what they’ve built, the innovativeness of their approach, the experiments they’ve run
- The more founders you meet, the more you should take this signal seriously
- Does their intensity scare you? Do they feel wise beyond their years?
- Particularly noteworthy when meeting young founders. Some young founders are on such a steep trajectory that it’s clear they are much more impressive than you were at their age
- Would you want to work for them?
- This tends to be a good catch-all question that similarly pulls from your intuition.
- Is there an early insight that you feel is true?
- It’s hard to have a real insight about a problem that the rest of the world thinks isn’t true. It can itself be a sign of a founder’s thoughtfulness and creativity
Other rules of thumb (for me)
- If you aren’t feeling strongly about the company, it probably means it hasn’t triggered a positive response to some/all of the above questions, and you should probably not make the investment
- Just because you get along well with the founder doesn’t mean you should invest. Agreeableness is not particularly relevant
- The best way to be able to invest in more spaces is to keep stuffing information into your brain and keep learning about new things. It increases the surface area where a random business or insight may click with you
- Just because you get a really strong reference on a person, if you don’t also feel as strongly about them, you probably shouldn’t do it