When thinking about investing in a very early stage startup where the technology or the market has not been proven yet, the focus shifts to the team. Naturally there needs to be a big enough theoretical market, the technology needs to work and product needs to make sense even if only to those few individuals, namely the team and the investors (think Twitter). But when the idea is only a very rough proto or just a concept, the team will make all the difference. Team is always important, but in early stage startups it’s hugely important.
I talked to a prominent VC over a dinner this week and he told me that despite all the attempts it is very hard to determine what are the key success factors for a startup ie. which startups make it and which won’t. But one thing where there was a correlation (not necessarily causation, but correlation) was whether the entrepreneur had previsous successful starups under her belt. So not just startups, but successful ones that he followed through with regardless of whether the idea evolved as they went forward. This might sound obvious, but it is interesting still that this is the only factor that can be shown to correlate with the success of a venture. What this comes to prove is that early stage venture capital is people business. Having said that, it does not mean that you need to be a succesful serial entrepreneur to be pull it off. If the entrepreneur doesn’t have a historical track record, and most people don’t, there are other indicators to look at.
Last week I attended the Aalto Entrepreneurship Society (an independent student run society associated to upcoming Aalto University here in Helsinki) pitch competition (a Facebook group) that was put up for students to pitch their ideas and get support to take the ideas forward. A great initiative in itself. I was personally surprised of the high quality of the pitches and went on to explore the ideas a bit more afterwards. One of the students had an interesting idea of how to tap in to the personalities that each and every city has, but that are often very poorly communicated by the travel agencies or cities tourist offices. The initiative is called Cityard – A network of cities for discover and exchange.
After a little exploring I found the weblog of Shanfan Huang of Cityard, where she wrote that just for this one occasion, she practiced the pitch 40+ times. She practiced over and over again until the very minute that she needed to jump to the bus so she could make it to the venue in time.
Last night I went to Aalto Entrepreneurship Society pitch event… 40+ webcam videos were recorded before the actual speech, in order to fit all the words into 2 minutes and get over the stage fright… This is the last rehearsal before I jump on the bus to go to Design Factory…
Cityard is an interesting idea for a startup, but like I outlined above in this stage of venture the team matters the most. The idea can evolve and live on (again, think Twitter), but the key team members will most likely stay the same. What is paramount to the team is showing leadership in their space and dedication to their project beyond any rational measure. With Cityard and Shanfan I don’t think any of us can accuse her of not being dedicated (see the pitch below). I have seen same dedication and irrational optimism more and more lately. Many people whose initial idea is struggling, accept the fact that sometimes you don’t hit a home run with the first one, but that sometimes it’s good to let the idea evolve. But one thing they don’t stop is trying. I have heard grown up people tell me how they might need to move back to live with their parents to be able to keep going, but in a same sentence tell me about the new ideas they have to push their project forward.
It is great to see more and more people just like Shanfan who start to come to the fore with their ideas everywhere we travel in the Nordic and Baltic countires and are willing to hang onto their passion regardless of the circumstances. Ideas evolve and they should evolve. This is something smart investors understand: To invest in people, not just big ideas. Happy easter easter everybody! …and if you’re interested in Shanfan and Cityard as an investor or if you want to work with her team to take the idea forward, drop me an email and I will forward it to her.