Do You Have What it Takes?

Jun 23, 2023 | Product-Market Fit

At Outbound, we have carefully developed our diligence process to screen for various indicators and characteristics. One of the most crucial components that can make or break a company is the founding team. Before we even consider investing in a startup, we make sure that the founding team is set up to win. A strong and well-rounded team is a prerequisite for greatness. In this blog post, we will delve into three fundamental elements that Outbound looks for when engaging with startup founding teams:

  • Strong Founder-Problem Fit
  • Co-founders with Complementary Skills
  • A learning Mindset

Strong Founder-Problem Fit

At the heart of most successful startups are founders who possess a deep understanding and passion for the problem they are trying to solve. Often, we see strong founder-problem fit when the founder has had firsthand experience with the problem, has unique insights, and is genuinely committed to finding a solution. Another key component of founder-problem fit is the potential market size and the severity level of the problem. We’re looking for founders who solve big, painful problems. 

We screen for founder-problem fit during our startup evaluation process. Based on our experiences, the following indicators help us gauge founder-problem fit:

  • Personal Experience and Passion: Founders who have personally encountered the problem and experienced its impact firsthand are more likely to have strong founder-problem fit. Their personal connection to the problem often translates into a genuine passion and intrinsic motivation to find a solution.
  • Deep Understanding of the Problem Space: Founders we work with typically possess an in-depth understanding of the problem that they are trying to solve. They have conducted thorough research, gained insights into the pain points and challenges associated with the problem, and can articulate the problem’s nuances and complexities. This level of understanding often results from many years of experiencing and thinking about solutions to the problem.
  • Unique Insights and Perspectives: Great founders will bring unique insights and perspectives to the table. They have identified gaps or inefficiencies with existing solutions and have come up with a clear vision for how their startup can address these gaps effectively. The bottom line? They’ve done their homework, and can speak to the problem, the market, and the solution.
  • Value Alignment: Strong founder-problem fit often involves alignment between the founder’s personal values and the mission of the startup. When the founder’s values are closely tied to the problem they are trying to solve, they are more likely to demonstrate a long-term commitment to the cause and make ethical decisions that align with the startup’s goals.

Additionally, the following factors bolster founder-problem fit, and contribute to the team’s likelihood of success: 

  • Unwavering Commitment: Building a successful startup requires dedication and perseverance. Founders must be committed to solving the problem, even in the face of challenges and setbacks. Determination and resilience are required to navigate the ups and downs of the entrepreneurial journey. For example, one of our founders completed two product pivots before raising a seed round of capital, because he was committed solving the problem in a scalable way.
  • Relevant Expertise and Skills: While founder-problem fit does not necessarily require expertise, having relevant skills and knowledge can greatly enhance the founder’s ability to understand and tackle the problem effectively. Domain expertise, industry experience, and technical skills related to the problem can significantly contribute to the founder’s understanding and potential success in addressing the problem.
  • Market Opportunity: Assessing the market opportunity associated with the problem is also crucial. Strong founder-problem fit is reinforced when there is a sizable market, strong potential for growth, and a genuine need for the solution being offered. Conducting market research and validating the problem’s relevance can provide valuable insights when deciding to commit to solving a particular problem.

Co-Founders with Complementary Skills

Building a successful startup is a complex endeavor that requires a diverse set of skills and expertise. The founding team should be carefully assembled to ensure that all critical areas of the business are covered. As early-stage investors in B2B software startups, we highly recommend that startups have a dedicated Chief Technology Officer (CTO) who can quickly and efficiently make product decisions and updates as required. This role is crucial to ensuring that the startup can pivot based on customer insights and feedback, and market factors. Here are some other key roles and skills we think should be present within the founding team:

  • Visionary Leadership: A startup needs a visionary leader who can articulate a compelling vision, recruit and inspire the team, and guide the company’s growth. This person should possess excellent communication skills, strategic thinking abilities, and the capacity to adapt to a rapidly evolving landscape.
  • Technical Prowess: As previously mentioned, in the software space, technical expertise is crucial. The founding team must be able to drive product development, ensure technological innovation, and navigate complex technical challenges.
  • Business and Marketing Acumen: Building a sustainable business requires a solid understanding of finance, marketing, sales, and operations. Founding teams should be comprised of team members with a working knowledge of these areas so there is an ability to formulate effective business strategies, secure funding, and scale the startup.
  • Design and User Experience: In today’s customer-centric world, delivering an exceptional user experience and reducing time-to-value is paramount. Having individuals with a keen eye for design and user experience can differentiate a startup from its competitors, attract customers, and foster loyalty.

A Learning Mindset

A learning mindset is an often overlooked but critical factor that separates successful startups from the rest. A learning mindset encompasses several key traits that enable founders and their teams to overcome challenges, embrace change, and persist in the face of adversity. Here are some essential elements we’ve seen in great founding teams:

  • Openness to Learning and Feedback: Successful founding teams understand the importance of continuous learning through experimentation. They actively seek feedback, iterate on their ideas, and foster a culture of improvement. They do this through thoughtful experimentation and incorporating insights back into their startup’s key business activities.
  • Resilience and Perseverance: Startups face numerous obstacles and setbacks along the way. The ability to bounce back from failures, learn from mistakes, and maintain unwavering determination is crucial for long-term success.
  • Adaptability and Agility: In the fast-paced startup environment, the ability to quickly see and adapt to new market trends, customer demands, and emerging technologies is vital. An agile mindset enables founding teams to pivot when necessary and seize new opportunities.
  • Openness to Advice: Founders with a learning mindset understand that external stakeholders, including investors, can offer fresh insights, identify blind spots, and challenge their assumptions. Open-minded founding teams remain agile, adaptable, and open to new ideas as they build resilient and innovative startups.

So you’ve got what it takes. What’s Next?

After a founding team has demonstrated that it has a strong foundation for future success, and we make an initial investment, we work with our founding teams to help them find product-market fit (PMF) faster. While founders are often good at identifying the important problems to solve, conceptualizing solutions to those problems, and building the first versions of the product, they often stumble when it comes to finding PMF before they run out of capital. 

Our sweet spot is helping founders find PMF. We help our founders find PMF by encouraging a focus on the value they create for their customers and on how they can measure that value. We then help our founders define the experiments that they should run in order to: 

1) Find their early adopter customers, 

2) Determine new product features, 

3) Align on their initial go-to-market (GTM) motion, and 

4) Price their products based on the value they create for their customers. 

If you are the founder of a B2B technology startup with a learning and discovery mindset, solving a truly painful business problem, you might have what it takes. Please get in touch to explore if we can serve as a capital provider and partner to help you create customer value and find PMF faster.

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