Background

Early-stage ventures offer little evidence to outside investors about their potential for success. There is no business model to base performance projections on other than the one conjectured by the founders. So, in many cases, investments in early-stage ventures are based solely on the character of the founders. Early investigations into the founder criteria used by venture capitalists leveraged extant theories of entrepreneurial personality or human capital. However, lingering dissatisfaction with investment selection among both researchers and investors has underscored the need for additional research integrating a more contemporary view of leaders and their role in driving venture performance.

Method

Employing a grounded theory model for qualitative data collection and analysis, 16 professional investors focused on early-stage ventures were asked to describe what they look for in a founder when selecting a venture for investment.

Results

Participants suggested several criteria are important when assessing a startup founder, categorized broadly as soft skills, personality, character, hard skills, and mindset or mental attitude. The soft skills participants primarily cited were interpersonal and leadership skills. Regarding personality, persistence and persuasion were extremely important. Virtuous character and passion were suggested to also heavily influence decisions to invest in early-stage ventures. Hard skills such as a founder's previous startup experience and domain expertise, which are long-standing founder criteria were confirmed to be still important. Lastly, founder mindsets like coachability, self-awareness, and inquisitiveness were valued by some investors. 

Conclusion

In the wake of advancing ideas about leadership, including character, purpose, and passion, it is reasonable to assume that venture investors are assessing founders based on a broader set of criteria than the traditional range of human capital, its consequences, and its outcomes. The study presented here confirms that professional investors are considering far more than traditional resume criteria and are interested in many of the characteristics that IPPA researchers are investigating.