Syed Javed Noor, Deputy Managing Director of IDLC Finance Limited, who leads the NBFI’s venture capital initiative IDLC Venture Capital Fund, suggests that he looks for three things in a founding team: enthusiasm, energy level, and coachability. Mr. Noor teases that if a founder has these three traits the rest of it is all about working hard on the right problem. In absence of them, it gets a lot harder to properly judge a startup.
The traits are quite encompassing and work as a proxy for many other oft-mentioned founder traits such as determination, persistence, optimism, flexibility, etc.
If you break down enthusiasm, it has elements of optimism and persistence, and determination in it. Startups are hard. Elon Musk once said it is like eating glasses. Unless you are super enthusiastic about your company, you will not eat glass. Thus enthusiasm communicates many essential traits necessary for building early-stage companies.
So does energy level. Energy level communicates hard work and being resourceful in the face of difficulties. Many experts suggest that individual productivity is key to early-stage startup success. And productivity relies on energy. A lot of success is unpredictable. You have to try a lot of different things before you find one model that works. Unless you are a high-energy team, you are likely to burn out before you reach the right equation.
Finally, coachability communicates flexibility and is often an underrated trait. But unless founders learn to learn, they will never grow and be able to build successful companies. Early-stage companies almost invariably go through a trajectory where almost every company should make some fundamental changes in what they offer to the market, how they operate, etc. Unless a founder is willing to listen, he will not be able to move forward. This listening is not limited to his mentors or the board, it is also to customers.
While speaking about traits he looks for in early-stage founders Mr. Noor suggests when these core character traits are there only then does he moves ahead to examine other areas of the company. “Enthusiasm and energy level,” says Mr. Noor in an earlier interview with FS, “these are the first two things we look for. The third is coachability: whether they can take feedback and work on it. The rest is the network: understanding of the problem they are trying to solve, and so on. If the first three things are missing, whatever the valuation or however great the idea is, we do not invest.”
It makes perfect sense because companies are built by people. People come with ideas. If people are not right, nothing will be built. That’s why most investors suggest they invest in people.
Trying to figure out the right founder traits is not new. “What do you look for in founders and startups before making an investment” is a common question VCs face.
Enough has already been written about the ideal founder traits. For instance, Mr. Noor’s list closely corresponds with what Paul Graham, YC founder and one of the luminaries of the startup world, has written about what he looks for in founders. Graham in an essay titled What we look for in founders writes that he looks for determination, flexibility, resourcefulness, and a few other traits. In other places, Graham also mentions the importance of enthusiasm and formidability of the founders. Of course, there are other lists of essential founder traits. While each list may describe some unique traits, there are overlaps.
The challenge with all these lists however comes from their cryptic nature. While it is simple to hear that you have to be enthusiastic as a founder, sometimes it can be hard to translate what it exactly means in practice. Moreover, how do you understand whether a founding team is enthusiastic or not? Mr. Noor offers several proxies to judge that. The first sign Mr. Noor says is whether a founder is willing to change course when necessary.
“If they want to raise investment, they should be excited about their idea and they should not shy away from pivoting,” says Mr. Noor. “Nothing is perfect in this world. Your idea will not always work, so you need to be open to taking feedback and change.”
Pivot is common in the startup world. Many companies go through a series of evolution before landing on their big idea. It is true for almost all big-name startups today. Uber started as an exclusive black limo hiring platform. Airbnb started as a bed and breakfast platform. Slack started as an internal messaging tool which later became the whole company. It is true for many of our local startups as well. iFarmer started as a vertical farming startup. Sohopathi started as a platform for finding missing people. I can keep going. The key message is that you have to be willing to change when it is called for.
Founders eventually have to build a product that people want. The only precursor to winning the startup game is building a product that people want. The path to that is not a straight line but rather a circuitous trajectory. To get there you have to be willing to listen to your customers, and your mentors and change course when necessary.
This ability to change is such an important trait because it is hard for founders to change course. Founders love their ideas. Founders are stubborn. Founders tend to believe that they know better. But when things are not working, founders should also be willing to listen to the feedback. Stubbornness is an essential trait in founders but so is flexibility. The difference lies in knowing when to be stubborn and when to be flexible.
The second proxy Mr. Noor explains is the truthfulness which he says can be communicated through compliance.
“When an investor is looking at your business, he is looking for scalability,” says Mr. Noor. “He is not looking for or asking the company to return the money in the form of dividends. What he asks for is to increase the value. In most cases, these investors are not based in Bangladesh, they are global investors. They will see you through your numbers. If there is any chance or indication that your numbers are not reflecting your true performance, they will not invest. Founders need to be truthful in terms of metrics management.”
Truthfulness communicates a lot of things. One of the things is confidence and trust in the self. Founders who are truthful are confident in their ability. They don’t need to inflate anything. It is also a proxy for determination and energy level. Compliance is a complex regimen anywhere in the world. It is more so in Bangladesh. When a founder maintains compliance it shows he has worked hard and is looking far ahead than the ones who are not.
One good thing about all these traits is that you can learn and develop them. And developing them can be a shortcut to building successful startups. You don’t build a successful startup right out of the gate. First, you become a person who builds a successful startup. When you do that, the rest takes care of itself.
We interviewed Mr. Noor early this year, an altogether excellent read, you can find the full interview here.
See you next time!