What is Founder Sense? and how it could make you a better venture capitalist and angel investor?

Founder Sense is the ability of a Venture Capitalist to identify a great startup founder. Founder Sense is a sense that you develop – a sixth sense. It is not something you are born with or a talent that only a few people have. However, it is a skill that venture capitalists and angel investors develop along the years, working closely with great and not so great entrepreneurs. Some investors underrate the weight and importance of investing in great founders and focus only on market analysis and financial due diligence, especially in the growth stages. They usually learn with the years that the founder quality will make or break the success of their portfolio companies.??

Why do we need Founder Sense??

Founder Sense is a term that I invented to help Venture Capitalists to keep focus on evaluating great startup founders at all investment due diligence processes, no matter if it’s a seed-investment or an investment that is pre IPO. It helps emerging fund managers that do not come with experience of working with founders, but from corporate backgrounds, or financial banking backgrounds to develop the skill of evaluating founders or asking advice from people who has that experience.?

Having a Founder Sense will allow you to develop the instinct of identifying founders that you will enjoy working with. Leaders who listen to feedback and know how to execute against it. It will help you Founders that could transform as their company scales and grow from developing a product, to develop a scalable business, with a vision to disrupt its market.

Coming from building products, in many industries from cloud computing to climate tech, I got the inspiration from the term "Product Sense" that is a much-needed skill for Product Managers. Great Product Managers develop a great product sense, which means that they develop an instinct to create products that people need and love. They know how to read users' needs and develop features and solutions that answer those needs.?

How much time does it take to develop a good Founder Sense??

I have been working with startup founders in different capacity since 2006. First as a member of a founding team, later as a founder of 4 startups, and then as an Entrepreneur in Residence in a big corporation and today investing in many. I have mentored over 80 founders in different programs. I am still developing my Founder Sense constantly. If you have an expectation that you’ll develop a perfect Founder Sense in a few months or a few years, you have the wrong mindset. Even if you do already have a great Founder Sense, practicing and maintaining it requires constant daily work with founders and other ecosystem stakeholders that support founders.

It is a marathon, not a sprint.?

How can Venture Capitalists develop Founder Sense??

There is no one-way to develop Founder Sense, other than working with founders themselves. Reading about founders, writing about them, and even watching “Silicon Valley” won’t bring you far – it could help but only as a complementary thing. Only daily work with startup founders, listening to their challenges and problems, observing their decisions and trying to help and support them will help you develop that skill.?

Here are 4 ways that I recommend you pursue if you want to develop your Founder Sense. Like everything in life, you have to be persistent in pursuing these:??

Mentoring Startup CEOs and Founders

There are many entrepreneurship programs that offer mentoring for its founders and startups. Startup Mentors usually volunteer and give their support pro-bono to founders. They will commit to spend between 30 min – 4 hours per week, supporting founders during those programs. To become a mentor, you will have to bring some needed expertise or perspectives to startup founders. For example, if you have experience in scaling cloud systems, or have experience in raising capital, or building ESG strategies for large corporates, all could be relevant for startups out there. If you have built and managed teams, or dealt with hiring, those are critical skills founders seek for mentors to guide them.?

Startup mentors, have the opportunity to work closely to founder, ask tough questions and give advice. They are able along the years when they mentor founders, to develop their Founder Sense and see which founders are coachable and who is not, who comes back after the program ends and who take their advice and come back after a week with insights and results.?

Different programs have different processes to get accepted o become a mentor. Techstars for example, will ask you to submit an application form and then you’ll have 1-2 interviews, and other programs might base your application on referrals from other mentors.?

Read more about mentoring and tips for becoming a great mentor: https://sifted.eu/articles/mentoring-startups-corporate/

Angel investing or joining a Venture Capital Fund ?

Investing is a great way to develop your Product Sense. As an angel investor, you can invest between 1000 USD to 500K USD, and become a shareholder in an early-stage startup. If you wish to develop the skill, you have an opportunity to offer the founder your help, open your network and understand his or her challenges as they build the company. If you are working in a Venture Capital Fund or in a Corporate Venturing team, you’ll be exposed to founders that work with some of your business units or that are in your VC portfolio. You will engage with them and can see the ups and downs of their journey and offer support.?

Build your own startup

There is nothing more powerful to get Founder Sense than building a startup yourself. Building a startup is a life-changing experience. You will get your hands dirty and get to experience the roller coaster of building a new venture. No matter if your startups will be a great success, if you raise a couple of rounds or if you shut it down because you could not raise capital, it will help you build empathy for other founders and develop your skillset for Founder Sense.?

Do not go and start a company just for the sake of developing your Founder Sense for other jobs later. Building a startup as a founder is hard and should only be pursued if you have a really big problem, you are passionate about and wish to solve and if you are ready for a 7-10 year journey full of ups and downs.?

Get an operating role in a startup

I would highly recommend that if you want to develop your founder sense, you either work in an early-stage startup where you could get to work in a small team and close to the founders, or if you are a corporate executive, working in a growth startup in a position that will be reporting to the founders could help you get exposed to their world. I know many Venture Capitalists, who took a break and worked for one of their portfolio companies. If you are excited enough to leave your job in the fund and join that founder, it means that they inspire you and you will learn a lot from them.?

Those investors, who went to pursue an operating role, go back to their funds, or build a new fund, with a better Founder sense which makes them better venture investors.?

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