Identifying the Right Entrepreneurs (for Us)

A glimpse into our thought process when meeting future-founders

One of the most critical roles of any venture capital fund is assessing the entrepreneurs who come to us for a pitch or consultation. To founders, this process often feels like a “black box” with little understanding of what the VC is evaluating. What complicates matters is that the decision not to move forward with an investment is often less related to the market, product, or tech, but rather to the assessment of the team’s capabilities and fit — a reason most VCs rarely share, because it’s so difficult to communicate.

While we can’t speak for the industry but only for ourselves, here are some principles we follow at Symbol that might be useful.

First Things First: We approach this process knowing that people are complex, and as humans judging other humans, we make every effort to avoid biases or preconceptions. Also, this is a huge topic that is almost impossible to cover in one piece — but we felt that we had to start somewhere. So below are a few of our guiding principles. We’ll share more in the near future.

When to Start Engaging with a Fund

Entrepreneurs often struggle with the question of when to start talking to VCs. Should you approach them while still figuring things out to build a relationship, or will they see you as “half-baked” and write you off forever?

On the one hand, VCs have a lot of macro-level industry knowledge and can help you accelerate processes, provide market insights, and even help find co-founders. On the other hand, at these early stages, they may see you as unfocused, confused, or unconfident, not having all the answers or throwing out half-truths. So, should you approach them early or not?

While the concern is understandable — VCs do begin forming opinions about you the moment they meet you, just as you start forming opinions about them — our approach as a first-check fund is that it’s never too early. For real though — in 8 of our portfolio companies, we knew at least one of the founders for over 6 months before the investment. When we meet a founder early in their journey (as long as they’re genuinely at the beginning and not showing up with an investment deck while calling it “ideation-validation phase”), we don’t usually assess how much they know. Instead, we look at how they think, how they learn, and how they view the market.

We’ve made several investments in companies where, well before the decision to invest, we saw the founders pivot between ideas and even industries. By the time they landed on the idea they wanted to pursue, we already had a strong conviction that we wanted to be part of their journey. At the same time, they got to know us better and understand whether they’d want us as a partner.

Ideation and Validation

We love meeting founders during the actual ideation phase, but even if we only meet them later on, we always ask about it. We are interested in how founders came up with their idea and explored it. We try to understand their mindset and thought process — how they conducted validation, who they reached out to (potential customers and personas), and how their learning evolved.

Much of reaching product-market fit (PMF) is about running quick experiments and learning from them. Ideation is also a process of experimentation, and even after raising money, most founders will continue this iterative process. The ability to do this effectively and thoughtfully is something we deeply value.

The validation is particularly interesting to us — which potential customers and industry nodes you managed to reach and how you got to them. We want to see that you’ve engaged with potential customers, design partners, etc, mainly outside of Israel. This demonstrates your ability to reach and engage diverse customers and shows that you understand how cultural differences impact consumption habits, preferences, and needs.

Market Knowledge and Vision

We want to see that you can dive into details while also looking at the market broadly to identify future trends. You should know the personas within your target space, their pain points, needs, and political influence within their organizations.

We value an expansive vision (as it aligns with the VC economic model), but we also appreciate the ability to combine that with practical planning — thinking carefully about where to start: in which vertical, with which types of customers, and what your entry point or “hook” will be.

An important emphasis in this context is that we don’t necessarily look for industry insiders. Yuval has a whole thesis about Outsiders’ Advantage, which he will soon share in a separate post. He also wrote this piece about how he gained enough conviction to make some truly pre-consensus investments.

Team Cohesion

The relationship between the founders, what each brings to the table, their worldview, and their knowledge of product development (we call this Founder-Market fit) are critical factors for any fund.

It’s challenging to address this topic without clichés, but here are some more specific points that might help:

The Crucial Element: We always ask ourselves what will make this product successful. Is it a technological breakthrough? A masterpiece of product design? A standout GTM strategy? The answer guides us on what must be present in the founding team.

Team Dynamics: We evaluate this throughout the process. How well does the team think and communicate together versus individually? How do they challenge each other and resolve disagreements? How flexible and resilient are they in adapting their thinking?

Personality

While this may sound like another cliché, we look for people who are self-aware — those who know what they’re not good at and don’t try to hide it. Founders should understand their limitations and know how to address gaps, whether through early hires or partnerships.

We also want to see that founders are aware of the risks in their venture and are thoughtful about how to mitigate them.

At the same time, we are looking for people with unique abilities. This X-factor is very much defined by our own specific criteria, which might differ from those of other funds. It doesn’t have to be an extroverted, shining talent, so you need to help us uncover these areas. Share the stories that show us who you are — whether it’s a project you launched, a hobby you pursued with passion, or moments when doors were closed on you, and you found a way in through the window.

This is a complex and sensitive subject... and I’d love to hear your thoughts on it