- Mayfield’s Navin Chaddha shares the importance of securing the right founders and seed investors in a startup.
- The founding team should complement each other’s strengths, fill gaps, and shape company culture.
- He says the first round founding investor should be able to actively help the founders build the startup.
- See more stories on Insider’s business page.
Building a startup is a challenging and uncertain journey, and it takes passionate and determined individuals to take on the mantle of entrepreneurship.
As both a serial founder and a venture investor who has partnered with over 50 startups leading to 17 IPOs and 24 acquisitions, I’ve observed that critical decisions can help minimize missteps and accelerate a founder’s journey to success.
For fledgling founders, these decisions occur during founding to raising their first and second rounds — typically the first 2-3 years of the company. I’m writing a three-part article series that will touch on key phases for early startup building, laying out elements of the playbook with examples.
In this first article I talk about company founding and first round funding.
Pick the right opportunity
The most successful founders begin their journeys with a careful and iterative process of discovery to pick the right opportunity for their startup.
This includes establishing founder-market fit (including related work experience or hobbies, industry contacts, or a deep technical innovation that can disrupt the space), assessing whether there is a large existing market or an opportunity to create and expand the category, and interviewing potential customers to validate the importance of the pain point.
When Ankur Singla founded Volterra, he was dreaming big by planning to build an edge cloud which could deliver security, networking and even run applications. He iterated through exploring different markets for edge such as autonomous cars until he found the demand in distributed applications for enterprises who were modernizing and cloudifying their business.
Identify strengths and gaps in the founding team
Every founder has skills and traits that will deeply contribute towards the startup’s success.
One of the things I look for in founders is the self-awareness to understand their strengths and gaps, and thus who could be brought on early in the company lifecycle to round out the team.
This could be additional co-founders, key hires, or advisors that provide the right skill set — including technical knowledge, go-to-market capability, domain expertise, and company-building experience.
When Manish Chandra was working on founding Poshmark as a social fashion marketplace a decade ago, he had his engineering co-founders on board, as they had worked at his prior startup together. However, he knew he needed a business leader who understood the fashion industry and who was preferably a woman, as that was the demographic of sellers and buyers he was targeting.
We introduced him to Tracy Sun who had all the relevant experience, they established great chemistry, and she joined as co-founder, where she still leads a big part of the business today.
Define company vision and values
Culture matters. The history of entrepreneurship is filled with startups that scaled quickly and then collapsed due to broken processes, a toxic environment, or lack of strategic alignment.
Successful founders can mitigate these issues early on in the company lifecycle by brainstorming on strategic vision, defining the long-term company mission, and establishing the values by which team members will be held accountable. Doing this upfront will ensure that vision and values are ingrained in the company DNA and thus set up for future success.
When Logan Green and John Zimmer co-founded Zimride, which grew into Lyft later, they were motivated to improve people’s lives by providing the world’s best transportation. Logan had seen the success of a carpooling network in Zimbabwe and John had studied urban planning in college, and they both realized that there was a need for reinventing transportation with a social experience.
They built zeal and authenticity into their founding culture, and codified their values from day one of being yourself, uplifting others, and making things happen which has served them well through the various ups and downs.
Pick the right first round founding investor(s)
Wherever founders are in the company building process, it’s critical they take the time to pick the right founding investor(s) for the first major round of fundraising (whether that is called seed or mango seed or series A).
Many investors claim to be “founder friendly,” but it’s important to go a level deeper and find a partner who gives honest and thoughtful feedback, as well as supports the team through both the ups and downs.
Having an investor with deep domain expertise can make a huge difference in pointing out potential land mines along the path of company building.
Finally, the founding investor should lean in and help founders as needed; this can be anything from brainstorming on the right company ideas, providing contacts for potential customers and team hires, to opening doors for future fundraising rounds.
There is no silver bullet for entrepreneurship; that said, taking the time to build out the right opportunity, team, and values during company founding can accelerate a founder’s journey. Likewise, the right founding investor can help figure out some of these initial challenges and be a long-term partner for success.
Navin Chaddha is the managing director at Mayfield Fund. He has ranked on the Forbes Midas List of Top 100 Tech Investors 12 times, including in the top five in 2020.
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