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Founder Evaluation

This session deals with how to evaluate founders. It was led by Alok Goyal, Stellaris Venture Partners.

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Founder Evaluation

  1. 1. Confidential | STELLARIS 2020. All Rights Reserved.1 9th May 2020 Founder Evaluation – Pi Fellows Program
  2. 2. Confidential | STELLARIS 2020. All Rights Reserved.2 Case Study CEO Evaluation Good vision High hustle Learning Agility Intellectual Honesty/ Integrity Network/ Pedigree Humility Intellectual smarts Has done sales in US, can hire teams Persistent/ driven/ tenacious Personable Good salesman Committed (paid for others from his salary) Growth mindset Experience of starting something from scratch at Company #2 Followership - team from Company #2 wanted to join him Customer centric 👍 👎 GTM Capability is not optimum CTO background not stellar - what does it say about CEO? Tendency to be defocused e.g. in product development Is the CEO bringing people like him into the team Remote working with his teams Will the CEO have a control issue given hardships Poor business judgment as per company #2 founder Ability to hire top talent Lack of clarity of thought Sales skills - pilots as opposed to annual contracts Lack of vision - very reactive to the market Does he have good product thinking Rushes to get the product in People management skills Did not demonstrate remote GTM in Company #2 Delegation skills
  3. 3. Confidential | STELLARIS 2020. All Rights Reserved.3 CTO Evaluation Hardworking and can do attitude Humble Learning ability Has worked on both backend and frontend 👍 👎 Poor pedigree No history of building teams Low on vision Questions on tech/ ML capability, may need to hire another CTO Can he be an engineering leader? Spark is missing Has not built large complex systems in the past Limited experience in running a large company
  4. 4. Confidential | STELLARIS 2020. All Rights Reserved.4 Both Together Have trust Both with tech background, can build product Do not need a CTO with a solid business judgment given CEO Good complement for each other 👍 👎 Would the CEO get a better CTO for higher equity? CTO has very low equity Were TDF and CTO actually founders, or just early employees? CTO not a peer to the CEO
  5. 5. Confidential | STELLARIS 2020. All Rights Reserved.5 Some Other Comments You can have an external CEO as a VC Is the VC too attached to the deal or space - important to remove that bias Referred by good SaaS founders CEO will be the primary driver of success Will we need a product leader soon? One man show Progress in 3 years less than what it should have been
  6. 6. Confidential | STELLARIS 2020. All Rights Reserved.6 So, What Does That Tell Us? There are no right or wrong answers Everyone will have a different take with the same set of facts You will never know whether it was the right call barring extreme cases
  7. 7. Confidential | STELLARIS 2020. All Rights Reserved.7 Key Questions? Do you judge the whole team or part of the team? Do you give equal weightage to each of the references? How do you weigh external feedback against your own judgment? What qualities do you look for in a founder? Do you give each of these equal weightage? How do you assess each of the qualities? What you look for – does that change based on stage or the type of business? How do we make sure our own biases do not seep into the evaluation?
  8. 8. Confidential | STELLARIS 2020. All Rights Reserved.8 Team or CEO – Our View A great CEO is worth his/ her weight in gold - Many other skills can eb hired for, CEOs are difficult to hire for - Most founding teams thin out over a period of time, but very few change CEOs Some teams, however, are different, and you need to evaluate the team - In deep tech businesses, CTO/ VP Engg can be as critical if not more as the CEO - Same is true for the product co-founder where building a product is hard
  9. 9. Confidential | STELLARIS 2020. All Rights Reserved.9 Core Beliefs Great people define new patterns. Successful entrepreneurs, by definition, are outliers that defy any attempts to put them in a box. Our job is to find the spark that defines every great entrepreneur, recognize its potential and help harness and nurture it There is no such thing as a perfect team Every strength is a weakness as well CEO matters a lot more than any other person in the team
  10. 10. Confidential | STELLARIS 2020. All Rights Reserved.10 A startup CEO Intellectual smarts Ethics, Integrity Strategic Thinking Leader Iterative & Agile Learner Growth orientation & Hustle Customer Focus Hygiene Factor Need spike in at least one of these Product & tech orientation Sales Capability/ Fund Raising
  11. 11. Confidential | STELLARIS 2020. All Rights Reserved.11 Next level details Area What to look for? What are the downsides? Iterative and Agile Learner • Curious to learn • Iterates/ runs multiple experiments • Ability to develop insights and learn from these experiments • Self aware of own strength and weaknesses • Thinks objectively/ argues rationally • Solutions are not perfect, processes are not in place • Things will break down • May appear that CEO does not know enough or it too humble Leader • Independent doer (doesn’t need others help to decide or act) • Strong emotional quotient • Can rally the team around • Hires for future and retains talent • Will not take your advice • While hiring, will look for passion as much as skills • Will not fire people objectively • Hires expensive resources Strategic thinking • Strategic thinker (gets the big picture, can envision where co fits as future changes) • Business judgment • Ability to see the high level picture but also the Monday morning view • Can come across as arrogant sometimes
  12. 12. Confidential | STELLARIS 2020. All Rights Reserved.12 Next level details Area What to look for? What are the downsides? Sales Capability • Inherently a great sales guy • Good story teller/ articulate in communication • Exudes confidence • Will not have a details on finger tip • Appears arrogant, conflicting with agile learner ability Growth orientation & Hustle • Ambitious • Strives to be market leader/ growth is metric CEO chases • Good growth hacking skills • Executes at fast pace • Figures out ways to get things done • Will be capital in-efficient • Will sacrifice other metrics over growth Customer Focus • Long term focus • Clarity on who the customer is and their needs • Can build right product for the customer • Doing what leads to customer success • May appear too idealistic • Difficult to judge at an early stage
  13. 13. Confidential | STELLARIS 2020. All Rights Reserved.13 Founder Market Fit – What do we need in a deep tech business Different businesses need different things - look for “founder market fit” – In a SaaS apps business, engineering is not the hardest skill; In a logistics business, operations is a core skill What do we need in a deep tech business? Need “off the charts” tech skills – need to benchmark against the best (mostly globally) You still need strong CEO skills unless one is investing behind a tuck in acquisition – leadership, sales, strategic thinking/ business judgment, customer focus – they are all as important in a deep tech business as they are in others Do not just go by pedigree, look at the evidence of what they have done Do not make the mistake of evaluating tech skills yourselves unless you are yourselves a deep tech person, find relevant people who can evaluate this
  14. 14. Confidential | STELLARIS 2020. All Rights Reserved.14 Learnings in Founder Evaluation Do copious references – many traits of the founder(s) cannot be assessed with just a few meetings, you need to speak to people who know the person well e.g. leadership, ethics Dig deep in these conversations…and read between the lines. Ask them “will you put your money as an angel” – the answer will tell you a lot On areas like strategic thinking, trust your own gut based on conversations Be cognizant of the stage of the business – all answers cannot be perfect given the number of unknowns at an early stage Avoid the temptation of evaluating a business as if you are the CEO – You are not!! Listen to the founder(s) and evaluate them, not “what you will do in the same situation”
  15. 15. Confidential | STELLARIS 2020. All Rights Reserved.15 In the end… …Back your gut

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  • NeelabhBahadur

    May. 13, 2020

This session deals with how to evaluate founders. It was led by Alok Goyal, Stellaris Venture Partners.

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