(Editor’s note: We asked Ryan Floyd, venture capitalist with Storm Ventures, what the traits are of the most successful entrepreneurs he’s backed. Here is his response.)
I am not sure there is a stereotypical entrepreneur right out of central casting.
The following are some common characteristics of the entrepreneurs that we have funded and will fund in the future. However, these traits may not be the ones that some entrepreneurs think venture investors value.
(1) Gritty determination and commitment. For anyone that has been in a start up, most will have had similar experiences — it can be a roller coaster ride for even the best funded companies. When companies are small, the risks and challenges are tremendous and it’s easy to get discouraged. To expect to grow a company without these obstacles would be a fairytale. Entrepreneurs and founders need to have the gritty determination and commitment to succeed no matter how high the hill. Commitment is beyond passion for a project or idea. It’s about knowing that failure just simply is not an option. The best entrepreneurs I have worked with I know work incredibly hard and are committed to themselves, their employees, and their investors. Up until several years ago, I spent a significant amount of my free time climbing in Yosemite. The concept of commitment in climbing is very analogous to a start up. Once we were on the wall we were committed regardless of weather, injury etc., especially on multi-day routes. We had to put 100 percent of our emotional and physical energy into being successful because, as climbers will tell you, usually the first instinct after going up a wall is to immediately want to come down. Living with gravity has that effect. With startups, many smart people will tell entrepreneurs and founders that they won’t be successful, the bigger companies will crush them, etc. The great entrepreneurs listen, reflect,and keep climbing.
(2) Intellectual honesty and integrity. As an investor, I like to think that I am part of any executive team – an extension and a resource. I see the venture business as a service business where we are there to accelerate growth but not to run companies. As a result, we are sometimes not as close to all the details of the business and are dependent on the executive team to effectively communicate with us about problems and concerns. Entrepreneurs that sugar coat results and do not deliver straight relevant answers are doing a disservice to all of their stakeholders. While some may believe that intellectual honesty is in conflict with passion or belief in an idea, I think that the greatest entrepreneurs find that constantly questioning their assumptions and maintaining a healthy dose of paranoia about competitiveness and value creation pushes individuals and organizations to achieve more with confidence. It also helps to make the never ending small course corrections in a business that lead to success. By the way, entrepreneurs and founders ought to expect this from their investors and board members as well. At one portfolio company of mine, I have found that the two founders often deliver good news about progress with engineering or customers and immediately make sure to deliver a set of thoughtful comments about the risks and issues. They are constantly looking for critical inputs to help them make better decisions. It is a remarkable trait and one that has undoubtedly made them both successful.
(3) Know the details and domain expertise. One of my partners once told me that when he walks out of a board room and feels as though he knows a lot more about the business than the team, he knows he is in trouble. Many entrepreneurs reading this may find it comical that a venture investor could resist trying to prove he or she is the smartest person in the room. The best entrepreneurs I have worked with always make me feel like I am the one trying to play catch up. Entrepreneurs and founders should make it their business to know more about the individuals, the competitors, the customers etc. that make up their industry than anyone else. It may seem obvious. Founders that are investigating new businesses and markets where they are unfamiliar will find it difficult going because there are no shortcuts to building experience. Deep domain expertise is one of the most important characteristics and the most successful entrepreneurs in our portfolio run circles around the Storm team in their specific domains. That’s the way we like it.
Clearly this is not an exhaustive list. This may all seem very obvious to some entrepreneurs and founders. Probably even more so to many venture investors. Notice however that I did not include traits like leadership, ability to build a team business experience, prior successes, or the ability to understand their customers and deliver a compelling product or service. This is not to say that these are not very important qualities – they are indeed – but without the three I list I would argue the founders will not find success on the same scale.
16 Comments
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Tarunesh said:
Hi Ryan
I am talking about your third point; ‘Know the details and domain expertise’. I agree that you shorten the learning curve if you have some one in your team who knows the business.
However, do you see there is a downside of this element: that is bias for ‘what has worked in the past’ - Constrained by your knowledge and imagination.
I have see, in many cases outsiders have done better in a industry than insiders and one of the reason that I can think of is fresh perspective and no baggage.Thoughts?
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Ryan Floyd said:
Tarunesh
You are right there is a danger that one becomes biased to what works (which by the way is a good thing most of the time)and might not be open to new approaches. I would argue this is probably not someone who would also be a founder - its not the same personality. One needs to understand their customers and understand the technology in order to be successful. To illustrate, if one has never sold into the telecom/service provider market it would not make sense to pitch a next generation solution for those networks. Said another way, there are very few successful artists that have not had some training in the arts - but it certainly doesn’t constrain their creativity.
Ryan -
Sherwin said:
Question for Mr. Floyd -
Why are VC’s so inaccessible? You won’t find fresh ideas by constantly meeting with people inside your extended network (as in, you need connections to get meetings). There are a lot of ideas from people far from Silicon Valley, but we aren’t going to get heard…
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Ryan Floyd said:
It is hard to find a balance. At Storm, our first priority is to our existing portfolio companies. This is the majority of our time. Second, we meet with new companies (and existing ones) talking about ideas and direction. I try to respond to every email and voicemail. I don’t only take meetings with people that come from someone within my network - because you are right ideas come from lots of different areas. However, ideas are not as valuable in my opinion as most people think. Its much more about the team, their ability to execute, the market etc.
We do think hard about investing in companies outside of Silicon Valley. There are other places in the US we are excited about but we would prefer to invest in Tel Aviv or Seoul or Shanghai before many other cities in the US.
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Ranj said:
Hi, This might be an odd question to post here but I really want to know your opinion. It is no doubt very nobel to believe that failure is not an option & Never Quit logic. But what happens when ones gut feeling starts telling that the venture is no longer economically feasible. Is there some time when one has to stop pumping in more money in the venture (as founder) especially virtually bankrupting oneself.
Ranj
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Ryan Floyd said:
Ranj
I think if you are unable to attract venture investment it is worth really understanding why this is the case. Venture investors sometimes don’t give direct feedback, but many try to like Storm. If your instinct as founder is that the venture no longer makes sense I would ask yourself what has changed since you started - maybe you have learned more about the market, technology etc. Maybe the team didn’t come together as you had planned. If you are on the edge of bankruptcy, I would think hard about all of your options including shutting the business down. When you are operating under this sort of financial pressure (which is different from not taking a salary, working from coffee shops, working 100+ hr weeks etc.)it makes it more difficult to make the right decisions. The great news about start ups is that you can always try again. You will be that much wiser next time around the track.Ryan
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Nick Panchev said:
No comments. No re-invented wheel.
Wasted time reading blogs. -
Ranj said:
Ryan thanks for the reply.
Acutally the company I had founded with two other partners was a IT services company. It might not even fit the description as a “venture” as it was plain vanila programming outsourcing firm. We worked in a difficult market like Japan and kept at it for almost 10 years but the results were just not there. On other hand the debts were mounting to maintain ever costly development center. So personally I felt some different direction is necessary rather than keep on doing same thing. As an investor how would you have evaluated the situation and when would you have made the decision to pull the plug.
Thanks
Ranj -
Ryan Floyd said:
I think in general for services firms you want to try and run them profitably almost from the beginning. It forces you to focus on the accounts or types of jobs that make the business stronger rather than what a long white board session might suggest. I would have to know a lot more detail to give you a more insightful answer but clearly you needed to change things and it may well have been that the market niche you were serving was not very big or willing to pay you enough. If markets are not there you have two choices - either focus on another one or shut the business down. Sounds like you made the right decision.
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Sherwin said:
Mr. Floyd,
Thanks for your response. I hope you didn’t take it as harsh in tone — when I said “you aren’t…” and other uses of “you”… I wasn’t referring to you, of course, but investors in general.
I understand your opinion that it’s the team rather than the idea. However, I don’t think somewhere like Tel Aviv is somehow going to have better teams than what you could find in some major city in the US. If it’s about the traits you mentioned in your post, I don’t see how those traits won’t just as easily be found in Dallas, Phoenix, etc. etc. Unless you prefer those places outside of the US because they have ripe markets? Sorry, just trying to pick your brain here.
Sherwin
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Ranj said:
Ryan
I would really like to get a more insightful answer but this post might not be right place to put out the details. If you do not mind I would like to write to you directly.
Kindly consider
Thank you -
Ryan Floyd said:
you are welcome to get in touch… email is probably easiest to start… ryan@stormventures.com
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Chris Howard said:
As an entrepreneur for 20 years, my motto has always been “I can’t be stopped.” It’s a phrase you really have to believe in order to succeed. Thanks for an interesting article.
– Chris
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Joanne Graham said:
What a valid post. I enjoy reading the posts on this site and will be sure to return on a regular basis.
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Erick said:
Great post.
cant tell you how true this is.
Drive and Dedication and adreline gets me through.
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Abysmal Creature said:
Thanks for the great detailed article. I also tried to compile such a list from the stories of top 25 entrepreneurs. Here are the 10 entrepreneurial traits
