Picking the winners: What makes an entrepreneur great?

By Jennifer Smith

By the time we leave business school, we will have read a hundred case examples of start-up successes and failures, met half as many case protagonists, and heard countless first-hand stories from entrepreneur/investor classmates, professors, and campus visitors.  Now that we are about to graduate and make decisions on founding, joining, or investing in early-stage start-ups, it’s time to take a step back and reflect: what do we believe separates successful entrepreneurs from the rest? What criteria will we personally use to evaluate a venture’s likelihood of success?

My own answer is simple and not at all original: I would bet on a great team going after a large, addressable market.  The latter part is easily defined (by number of potential customers, willingness to pay, size/frequency of purchase, etc.)  I might be convinced to add a clause about how the team goes after the market (e.g., using lean principles where appropriate), but that’s not the point.  In my mind, the key differentiator between success and failure lies with having a “great” founder/team.  “Great,” however, is hard to measure, and reasonable people would disagree on its definition. 

Successful entrepreneurs I’ve met have been “great” in their own unique and individual ways.  However, I’ve observed that they have almost always shared a set of core characteristics that I believe were critical to the success of their ventures.  In assessing whether to join or invest in a founder/founding team (or found myself, if I were launching my own venture), I’d immediately search for evidence of the following:

+ Passion:  There is something incredible about talking to a founder who lives and breathes her company; from the excitement in her voice to the slightly crazed (mostly sleep-deprived) glint in her eye, you get the sense that she almost couldn’t help herself but to start this company and couldn’t imagine doing anything else.   (HBS alum Vicky Tsai, founder of Tatcha, is a great example).  This is important because passion is infectious (see: salesmanship below), but more importantly, because founding a company is really, really hard.  Marc Andreessen and many others have written extensively about the emotional rollercoaster that is a start-up.  It’s important to have someone at the helm who is committed enough (and just crazy enough) to ride this rollercoaster through to the end.

+ Vision…grounded in reality:  “Vision” has two parts, and you need both.  The first part relates to your customers: you need to deeply understand them and their pain points and have a vision for how you are going to address them.  (I particularly get excited by entrepreneurs who are responding to a problem they had in their own lives – like Jessica Kim did with BabbaCo).  The “reality” part comes into play with the entrepreneur’s ability to solicit, respond to, and (where appropriate) ignore customer feedback.   The second part of the vision articulates where you are going and how you will get there. A great entrepreneur can paint a vivid and compelling picture of where his company will be five years from now.  The vision should be exciting and grand, but realistic and specific.  You don’t need to build a complex revenue and margin projection model, but you do want clarity and detail on who the customers are, what the product looks like, how large the company is, and what capabilities and resources will be required to get there. 

+ Salesmanship: I was at a lunch with Ray Rothrock earlier this week, and he posited that the founder/CEO’s most important job is as salesman  – selling investors,  customers, and talent/employees.  I fully agree.  It is a rare person who can sell to all three groups incredibly well (here is where hires can help round out gaps), but strong passion and a compelling vision – combined with the salesmanship to convince others to join the cause – is a winning combination.

+ Coachability:  I don’t care if the founder/team has no prior start-up experience; I do care that they have passion, vision, salesmanship, and – critically – the ability to learn and adapt based on failure and feedback.  Start-up teams will always suffer from skill gaps; investors, board members, and informal mentors can help fill these gaps, but only if the entrepreneur lets them.    

As with any gross over-generalization, there certainly exist numerous counter-examples of entrepreneurs that had these characteristics and failed or lacked them and succeeded.  Nevertheless, as a rough rule of thumb, I would hesitate to join or invest in a startup where the founder/team did not have the above in spades.

What have you observed to be the common attributes of successful entrepreneurs? For those of you joining or investing in early-stage startups: what criteria are you using in evaluating where you will invest your time and/or money?



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