The vast majority of startups fail. This is for a number of reasons, from lack of investment to poor market fit to the struggle to scale up in what is an extremely competitive market.
Whatever the reason, startup founders can find it difficult to get investment which for some leads to a delay in growth and for others can ultimately cause the business to fail.
A report from London-based venture capital firm
Concentric found that 62 percent of startups fail due to conflict amongst the founding team.
Within the tech industry, VC firms tend to invest more in the founder rather than the technology in the initial stages as the founders are the main person that shapes the startup’s culture.
Investors often prefer second-time founders thanks to their experience, but there are plenty of occasions when betting on a first-timer can pay off, according to Concentric.
“Of course for any business, investment is needed. Startup founders need to be able to convince investors to take an interest in their startup and there are many levels that they need to pass. They need to be able to communicate well, to work well.
“May I also add that it is key for startups to build their network early, because for a long time you can build a profile and you can build stronger opinions and you can also see how they behave and react over a longer period of time,” Kjartan Rist, founding partner at Concentric told Techworld.
Founders will only secure investment if they can pitch their startup effectively.
According to Concentric, investors tend to look for founders they feel can adapt with the company. They should be able to climb through economic and business hurdles.
Motivation is also a core quality for any startup founder. Investors like to understand why the founder decided to set up the business, and if they are doing it for the right reason.
“Founding your own company is really hard and not everybody is cut out to do it, and not everybody is very good at it. They will experience tough times and they will have to show the perseverance in order to get through that,” Rist said.
Another founder quality sought by investors is the ability to solve problems. An investor wants to know why customers would pay for the product, and what problem it solves that is not being solved in the market already.
A founder needs to be curious with what is going on around the world and the problems people are facing, explained Rist.
“One of the trends is that the quality of the founders is getting better and better. I think we work in an environment and an ecosystem that there is now an increase in the number of third time founders, who have experience of previous companies they’ve worked in and they’re now launching new companies.
“Everything is just stepping up to the next level, and you can see now that a lot of the founders are a lot more ambitious and this is rightly so because the tech industry is becoming more open for every vertical and is about trust for everybody,” he added.
Research from Concentric found that alongside motivation and curiosity, resilience, ability to convince, humility, vision and honest stakeholder management are the traits which make a successful startup founder.
Concentric also identified a pattern of ever-younger startup founders, who need to show maturity by putting long-term gain over short-term profit.
These younger founders tend to be more drawn to innovation and welcoming of diverse skills sets. VCs tend to be more focused on personalities within the founding team. They are partnered with the business for a long period it is crucial for them to consider the type of people they will be working with.
“A lot of these founders have that ambition and you tend to see founders that want to go all the way,” he said.
“They want to build companies that will stay in Europe and become the benchmark for future tech companies and for future entrepreneurs, so I think it is a perfect time for startup companies and it is a perfect time to launch and grown a European tech company,” Rist added.