More than 102Crunchbase reports that 000 workers in US tech companies will be laid off en masse by 2023. For early-stage startups, the outlook isn’t as bleak as the headlines make it out to be—on the contrary, there’s a huge opportunity for promiscuous founders. A lower market offers investors a better entry price, more time for due diligence, and bigger returns over the long term. By 2023, early-stage capital should be more than enough to bet against great entrepreneurs.
Early stage venture funding is unique. Unlike a Series B or C round, there isn’t a lot of data and metrics to evaluate. Because of this, investors must rely on the founders to convince them that there is a market for their product and to make it happen. As we enter a market downturn, finding and developing investment-worthy founders is more important than ever. Whether or not to invest is at the intersection of the founder or management team’s mindset, skills and motivation.
Early stage investors should choose entrepreneurs with a growth mindset. It’s as simple as that.
Find founders with a true entrepreneurial mindset
Early stage investors should choose entrepreneurs with a growth mindset. It’s as simple as that. Entrepreneurs who are eager to learn, embrace challenges and don’t give up easily, persevere through failure, learn from criticism, surround and learn from those who are experts in their field (and whom they trust). Be inspired by the successes of others.
As a fund, we seek excess returns. To deliver those excess returns, we need to pursue and address a market where a significant total solution can be achieved. For an investment that supports the outcome of a venture, we must invest in a founder who can stay the course through the inevitable challenges. You should also be sure that the founder you are investing in is looking for the same things and will not guarantee the first exit offer.
In early-stage companies, the focus or thesis is often changing market conditions and demand for the solution. That is why, although chance is important, it is not decisive. Early stage investors must rely on the entrepreneurial mindset to deliver results; Numbers on a spreadsheet can’t do that.
When a founder’s education and work experience come into play, what matters is an entrepreneurial mindset. To take a risk or take an unconventional path and ultimately learn from it are important traits. Endurance and cruelty as well. Many of the founders we work with have previous startup and founding experience, including some failures. A good entrepreneur is an outlier; They see what others don’t and are willing to go to the wall to support those beliefs.
Questions to ask when questioning a founder’s mindset include:
- How have you led your team through a crisis in the past?
- Take us through a smooth/tough day at your company. What went right/wrong and why?
- How do you motivate your team to reach the next milestone?