In the last newsletter, I put forth the “Venture Investing Expression” below:

✅ Depth of market problem ∝ solution fit ∝ non-obvious insight ∝ traction ∝ business model ∝ market size ∝ go-to-market strategy ∝ team execution potential ∝ status of fundraise ∝ valuation ∝ stage of business ✅

Team execution potential. A lot could be said about how I evaluate a team’s ability to execute in a startup environment.  

 ✅ Here is the ultimate question that I am asking - “Can this team execute under the current context, sell its product to customers, and fundraise at a higher valuation for the next round?” ✅

Among other things, these FOUR variables are some of my first pass decision factors in figuring out if this team is worth pursuing. 

“This Team”

There are two broad categories of startup teams: 

1. Founding teams who have done “it” before (“it = being a venture-backed startup founder or CEO, COO, or CTO)

2. First time founder(s) who is/are running a technology startup for the first time

Founders who have done “it”

Most founders have not done “it.” Founders often say they have “startup experience” in order to position themselves to investors in a de-risked way. Beware as I and other investors see right through that. 

Back in 2018 as a startup founder, I had the exclusive opportunity to be one of several startups that pitched a room full of angel investors. I still remember one particular startup founder’s pitch. During his pitch, he got to the Team slide, where he said, “I’ve had an exit.” It sounded impressive. 

But what occurred several minutes later was not impressive. During the Q&A, one of the investors asked, “What was your role in the company you exited?” The founder replied, “I was in business development.” 

The room was quiet. Everyone knew that the founder had completely exaggerated his startup experience. “I’ve had an exit” is not the same thing as “the company I worked for got acquired.” 

My other pet peeve is “I’ve been doing startups for 15 years.” Investors will put you under the microscope as to what you mean by that - what was your role, how close you were to the founders and the C-suite, etc. How large were the “startups” that you worked for, and were they even tech startups? 

Here is my rule - if you have worked in a “startup” don’t overstate your startup experience. To a VC investor, a “startup” is a product-based high growth tech startup. Being casual about your experience you had vs. the experience you have in a high growth tech startup is the quickest way to bury your chances at getting VC funding. 

But for the ones that have done “it” - from idea to building product to raising venture capital, even if it didn’t result in an exit (as in my startup journey), talk like it, they execute like it, and they think like it. Investors also know that the founder they are speaking to have received battle scars using someone else’s money. Investors see that as an opportunity. If they have experienced an exit as a founder of their company, then bonus points, let’s have a conversation. 

First time founders 

I love first time founders. I have a special place in my heart and mind for tech startup founders. Yet, there are layers of complexity in a tech startup that don’t exist in other types of business. In fact, most people cannot do it. 

When I am speaking with a first time founder, one of the most helpful things I pay attention to is what former Y Combinator CEO and OpenAI CEO Sam Altman calls, “the slope, not the Y-intercept.”

In other words, if it's a first time founder, don’t necessarily hire, or in my words, invest in someone who is already proven. Invest in someone that has a defining upward trajectory in their talent, acumen, and execution.

In my observation, it typically comes down to the founder’s mindset - they have an inclination toward risk mitigation. Note that I do not mean lack of risk taking. They are very good at taking risks. I am speaking about taking calculated risks. Looking at the variables and being able to optimize upside potential by mitigating the downside risk. 

For example, at one point one of our portfolio companies had closed its funding round. In spectacular fashion. An excellent investor FOMO, well-executed raise. At the 11th hour, the startup had a fund offer to invest several hundred thousand dollars more within three days of initial conversation with the team. This amount would oversubscribe the round quite significantly. The founding team had internal discussions and decided that it would opt to take the additional capital to provide extra capital that would help it de-risk itself even further, even though the founders were the ones taking the hit on equity dilution. They opted to increase the chances of upside potential by mitigating the downside risk on not having enough capital. 

The founders that Tundra Angels and other investors look to fund are masters at taking calculated risks. 

“The Current Context”

The context that I am referring to is the raging sea of working in a tech startup environment. 

A tech startup is not upper management in a large corporation. A tech startup is not working a mid-level marketing role in a 500+ employee organization. A tech startup is not an entrepreneur running a successful services-consultancy. 

I speak with many startup founders who are successful in other professional endeavors and try to apply the same principles they learned in industry to a tech startup. It doesn’t work like that. 

Some tech startup founders are used to ample capital, ample resources from a larger organization and they apply this mindset. But in a tech startup with no boundaries, the founder needs to create the scope of work. They need to create the constraints and boundary lines across building product, marketing, sales, and fundraising. Many find it excruciatingly difficult. 

I find it extremely enjoyable. I love creating value with just a few data points and going from zero to one. I love the ability to set the constraints of the market and the product and coming up with a value proposition, messaging, and GTM strategy that is novel to the market.  

But I’ll be honest - my former co-founder, who was my late father in our FinTech startup, was the opposite. He spent 20 years in B2B SaaS as an early employee to VP of Sales. He liked the idea of being an entrepreneur, but he couldn’t re-calibrate his mind from an organization of having ample capital and resources to know what needed to be done in a two-person startup. I felt the excruciating friction daily. However, he never acknowledged it. It’s only when I look back five years later than I can see what transpired and why I felt so much friction between us. 

Tech startup founders tend to be incredibly scrappy, masters of the art of doing a lot with very little. The point is - know the context that you do your best work within. 

Can they execute on what they need to in the current context? 

Investors need to be aware of the skills sets that are needed at this moment in time. For example, Tundra Angels invests in the pre-seed to Series A stage. At the pre-seed and seed stage, there are skill set needs for the startup that may become less relevant once that startup becomes a Series B, Series C, or beyond. 

Thus, it is important to note that I am evaluating the team’s ability to execute in the current moment, whatever context is ahead of the startup. It could be identifying customer pain points, building focus around the customer market, building product/market fit, making critical hires, etc. 

Consider two scenarios. A founding team came to me seeking capital. The startup’s stage was that they had a collection of users in a free beta in their B2C product, a value prop that I saw as potentially viable.I asked about the monthly active users and the founding team did not know. I asked about the core transactions of the product and how many times a user completed one of those core transactions and the founding team did not know that either. After discussion, it was evident that the founding team didn’t have anybody tech-oriented on the team who knew the questions to ask, the metrics that mattered, and the know-how to move the product forward. A clear talent gap on the startup’s team that would prevent them from executing on what they need to do. 

Contrast this with a startup that comes to me for capital. The startup founding team has certain skill sets, one business-minded founder and one technical founder. But differently from the first, they have a slew of independent contractors waiting in the wings who cover domains such as marketing and finance that they do not have a keen skill set in. The independent contractors each have worked in 2-4 high growth startups previously and the founding team has them as independent contractors in order to lower the burn rate. When I ask similar questions to this startup team about user engagement, I get an immediate answer. When I press on the plan for how they will acquire more users, they have an overall strategy that I think needs some work but they have clearly defined tactics to execute that strategy. It’s a clearly different level of confidence in the ability of the team to execute on what they need to do. 

✅ In short, the evaluation of the Team Execution Potential is all about what the founder’s skill set is relative to the skills needed to make incredible progress. The startups that catch investor attention have realized the skills sets they need and have brought them onto the team, either full time, part time, or as an independent contractor. ✅

If you don't know the skill sets you need, then talk to someone who has done "it" before. Otherwise, shoot me a note and I can try to guide. 

“Sell its Product to Customers:”

Can the CEO sell? Does the founding team possess the charisma to get out there and talk to a complete stranger and sell them a brick wall? 

One of my advisors runs a nationally known angel investor network. This person says the CEO needs to have “sparkle.” 

✅ But “sparkle” is not a personality trait or something. In fact, some of our portfolio company CEOs are PhD’s who successfully transitioned from academics to CEOs and scored many millions in customer contracts and raised many millions more of VC funding. ✅ "Sparkle" doesn't exclusively mean someone who has the most interesting conversation at a party. 

Typically, whether or not the CEO can sell is in the results that the startup is achieving. 

Three questions I ask: 

• Is the startup CEO or founding team actively prospecting? Or is the pipeline stale? 

• Is the startup closing its sales pipeline? 

• What are the deals that you won last month? Deals you lost? Why? 

The idea of Mark Zuckerberg being a complete technology nerd and building a world class company is worshiped in Silicon Valley lore. But in every great startup story, there are salespeople who frantically get the word out. Mark was not that person. He had others around him who saw the opportunity and evangelized it out in front. 

To increase the likelihood of winning in the market, every startup needs someone who is an evangelist for the company. Hands down. Even if it’s not selling customers, such as in product-led growth, it’s selling employees on the vision to join the company and selling investors. Speaking of investors… 

“Fundraise:”

Venture fundraising is a rare skill. Raising venture capital is not something like product marketing, social media market, accounting, that unless you were a venture-backed startup CEO previously, 100% of people have never done before. 

✅ Specifically, to fundraise, the founding team needs to build a brand-new network and learn a brand-new skill set. ✅ 

That’s why second time founders are so prized by investors - because previously raising venture capital is a notable accomplishment. It’s like a checkmark that this team has done “it.” It doesn’t mean that they will be successful with this startup. But it means that they have crossed the gauntlet of raising VC money of which it is highly unlikely to do in the first place. 

But for first time founders, fundraising is typically a completely new skill set AND a completely new network.

✅ For founders, fundraising often feels "harder than it should be.” It's because building a new network and learning a new skill set mid-career is not easy for anyone. ✅

I’m not going to unpack fundraising strategy here as that is not my intention and is for a later time. But I want to underscore the importance of the investor having confidence that this fundraise can happen, and happen successfully. 

Two things that I tend to look for: 

• When the startup pitches to me, do they have a crystal clear articulation of what the startup is doing in common language? 

  • Investors are not like customers. They do not understand the market like your customers do. Speaking to investors requires a re-wiring of language. 

• Is this a founder and startup that I would feel excited about calling up a fellow investor and pitching? In other words, has the energy of the founder been transferred to me in our 30 minute call? 

90% of the Tundra Angels’ portfolio consists of first time founders who had never done “it” before. With natural talent, coaching, advising, and scraping their knees in the wild, they are successfully raising follow-on rounds from later stage VCs. 

 ✅ Here is the ultimate question that I am asking - “Can this team execute under the current context, sell its product to customers, and fundraise at a higher valuation for the next round?” ✅

If you are a first time founder, it won’t be easy, but it certainly is possible with the right circumstances. Be encouraged and get objective.