Behind the Grind: Lessons from a Product Leader, Episode 3 – What Makes an Amazing Startup Team
March 31, 2022
Riveting, right? Even if you’ve seen this a thousand times, it never fails to excite. An excitement the brand can still elicit from millions to this day. Largely because the company was designed that way. But I digress.
Welcome back to my series for leaders looking to build 0 -> 1 products the right way. If you’re joining us for the first time, here’s a quick recap of what you’ve missed.
In Episode 1, I covered how to think about typically abstract concepts like Product Market Fit, Startup, and Founder. In Episode 2, I proposed a simple framework for how the best Startups operate. Now, as I welcome you to Episode 3, it’s time to focus on the most essential ingredient for any Startup – the Team.
As an angel investor, it’s no exaggeration to say I’ve been pitched hundreds of times. Yet, of those, only a tiny fraction resulted in investment from me. That’s because, over the years, I’ve honed a formula for not only building Startup Teams but qualifying them, a formula I’ll share with you.
Bet heavily on the Team because there’s not much else to objectively measure at the seed stage of a Startup is the approach of most early investors (called seed-stage investors or angel investors). In some cases, there may be a Minimally Viable Product in-market, but likely no clear indication of Product-Market Fit and almost certainly no meaningfully scaling revenue.
So what do you do? Ascribe value to what you can and make judgments on the capabilities of the Team!
The likelihood of success for the Team is largely defined by the People on it, most notably the Founders, who are both the vision and culture gate-keepers well into the company’s lifecycle and how well the Team works together. Thus, before investing, I always ask myself these two critical Why questions:
- Why these People/Founders?
- Why this Team?
Can this team change their industry/the world, and if so, how likely is it to happen? This is the ultimate answer we seek, and the above are questions to help us do it.
Why these People/Founders?
After all, on paper, this is simply a collection of individuals who have chosen to spend their time working on this problem. Unfortunately, that’s all I really know about them at the onset of our relationship, and it tells me almost nothing about their prospects for success.
So how do you get to know the Founders, and more importantly, what do you want to know?
Start with their intrinsic motivations for building this product. Do you notice any historical indicators they are the right visionaries to build this product at this time? What about them makes them better suited to build this product than any other team in the world right now?
“Of all the things you could be building right now, why are you building this now?” is a question I always pose to founders and let me tell you if it’s not obvious, that’s not an easy question to answer. But, a nonetheless critical one that you need to be able to answer if you’re a Founder.
In one recent example, after three attempts, one Founder’s answer essentially boiled down to, “Cause we can sell this product to a big company to make a ton of money.” That’s an automatic pass for me – if your primary motivation is to exit and not to build/impact, the odds that you’ll succeed are just super low. You literally have a foot out the door and you haven’t even started. I can’t take a swing at that opportunity with you.
If I can’t see and am not excited by the answer to this question almost immediately, I heavily discount the probability of massive success (or, more accurately, my ability to see a path to massive success). I have placed this check up-front in my due diligence because if I can’t get past this point, there’s no reason to think about the other aspects of the business like capital requirements, product, market, competition, tech, etc deeply.
Another lens that I’ve begun to really focus on when meeting Startup Teams is Founder Proximity. During my time on Meta’s New Product Experimentation team, I saw firsthand their focus on proximity at the center of their strategy to construct teams to build huge new products for Meta. I strongly believe in Founder Proximity as one of the biggest competitive advantages you can actually measure in a team trying to find Product-Market Fit. The fact remains that People who have logged their 10,000 industry hours will be much more likely to develop truly innovative ideas for how to disrupt it than those who haven’t. Seems obvious, but when you actually apply the above criteria to teams who are fundraising, many simply don’t make the cut.
Why this Team?
Any Team that I’m looking to bet on has to pass underwriting across three proof points
Can this Team run an efficient, high-velocity shipping/learning process like the one we outlined in Episode 2?
Here are some red flags I’ve seen: teams that say “we need to do more research in that area before we build anything,” teams that can’t say, “we don’t know – let’s just put something out there next week and figure out a way to drive 15 users to it,” and teams that don’t know that these are even the types of things they need to worry about.
Does this Team contain, or have the capacity to quickly learn, all of the things that the Startup will need to reach Product-Market Fit?
Every Startup has a different risk profile at the unproven seed stage – some are riskier because the tech is unproven, some have risk embedded in their GTM strategy, some are just risky execution bets (scaling is hard!), and some are riskier because of the Team they’ve chosen to construct (or not construct, in many cases). I can generally get comfortable with some level of risk across any of these pillars (because the alternative would be to close zero investments), but the one I have the least tolerance for in my formula is the team quotient. The Team truly is almost everything at this stage, and if I can’t see enough proof that they have the approach/grit/ability to make the right decisions in the face of insane pressure, I simply cannot bet on them.
Does the Team make each other better? Do we have a “1+1 > 2” situation (hopefully, much greater than just 2!)?
Teams can have extreme Founder Proximity, can execute a fantastic ship-to-learn process, and may still not be a good bet if they can’t work together over time in the pressure cooker that they’ve created. I usually try to understand how long everyone has been working together, what trials and tribulations they have gone through, and how they’ve handled difficult situations/decisions so far. Since there usually isn’t a lot of history in these Startups, this is one where I just try to get a feel for how the core aspects of respect, accountability, culture, etc., are displayed during our time together. Sometimes, red flags are obvious. Other times, it’s difficult to get primary data, so I try to source secondary data in my “get to know the team” process.
With limited time and resources, it’s really important to build a framework that enables you to analyze a disruptive product opportunity and decide whether to join and support it – either as an investor, team member, manager, and even customer. This framework should be specific to the stage of the product life cycle (i.e. more data and less risk exist as a product evolves from a seedling to one with a strong Market Fit). This is my framework for the earliest products/companies that I invest in, and I think it naturally applies to increasing your chances of finding product success as a Builder.
So, let’s recap: we now know how to think about the work of a Startup, how the best ones operate, and how to build a fantastic team. So what’s left?
How do we know that we’re working on something meaningful or have the right vision/product strategy? How do we know what matters and what doesn’t matter about the specific product in 0->1 work? We’ll cover that in Episode 4!
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