As an entrepreneur turned venture capitalist, Jeff Bussgang sits in a unique position that allows him to provide advice that is both relevant and helpful to young companies. Such was the case this morning on his aptly named “Seeing Both Sides” blog where Bussgang discussed what he and investors like him look for in startup teams. As we’ve mentioned before, a VC invests just as much (if not more) in the entrepreneurs themselves as they do in the idea being pitched – and Bussgang has an interesting perspective on why this may be true.
As he sees it, its not just the experience or skills of a given team that make them viable candidates for investment. Team chemistry, he says, plays a large role in the ultimate success or failure of a startup.
“Joining a winning team, and bonding with that team in a manner that transcends the particular start-up you are operating in, is far more important than your specific role in the start-up.”
– Jeff Bussgang
“Creating companies from scratch is very, very hard. Too often than not, there are soap operas at start-ups and self-inflicted wounds that cause failure,” writes Bussgang. “And so it would make sense that a team that has performed well together as a unit and (again, importantly) made money would have a leg up when embarking on a new company again, putting aside their domain knowledge, capabilities or execution skill.”
At first that sounds a bit obvious – a team that built and launched a profitable company is more likely to have repeat success – but Bussgang isn’t connecting these dots for the obvious reasons. A previously successful team will have existing connections and contacts with which to secure funding, not to mention personal capital to invest into a new company. They will also have the knowledge and startup know-how that can only come from prior experience, but this still isn’t why Bussgang thinks they continue to succeed.
A successful startup team that regroups to give it another go with a new idea is a lot like a professional sports team gearing up to defend its title. Winning a championship gives a team the confidence to make that push again, and instills mutual trust throughout the team. They know that when the going gets tough, they can count on their teammates to come through in the clutch.
The same is true of startups. Confidence and trust are two large factors in the success of startups, and an inexperienced team will tend to lack these qualities early on. So how does a young entrepreneur overcome this hurdle?
“When evaluating a new start-up opportunity, look to join a team of folks that you would be excited to perform a second act with – and has the characteristics of being winners,” says Bussgang. “I would argue joining a winning team, and bonding with that team in a manner that transcends the particular start-up you are operating in, is far more important than your specific role in the start-up.”
But is that enough? Is it enough for a team to have great chemistry in order to repeat their success? Do we overlook the importance of great ideas, or do great ideas come from experience and chemistry? Team chemistry may not trump experience, but it might actually be born of that experience. Let us know your thoughts on these questions in the comments below!