In doing some outside research recently, I came across many references to startup CEO “superpowers,” the characteristics that separate the big winners from the also-rans in the race for value and exits.
Now, I’m skeptical of the notion of entrepreneurial superpowers. For one thing, they imply invulnerability. No entrepreneur, no startup, is invulnerable. In fact, no organization is invulnerable. The Dow and the S&P 500 turn over completely every few decades. Another reason I raise an eyebrow at startup Superpowers is that it is what I call a New Yorker generalization. That is, speaking absolutely and oracularly about complex situations. “Do this and you will be happy” (Marie Kendo). “Do that and you will be a successful entrepreneur” (startup superpowers).
Having said that, our research does find a set of characteristics much more prominently present in startups that generate great success than in those that crash and burn or linger in the mob year after year.
Great investment market. First, we believe success doesn’t just come from the CEO. Success comes most fundamentally to the right markets. Today, if you are leading an alternative protein company, your chances of success are far greater than a CEO in, say, the remaking of an already established SAAS category. We spend a lot of time researching and qualifying markets. The best entrepreneurs in the best markets deliver the best, most consistent returns. Great entrepreneurs in weak markets may do better than median by the lights of that area, but they will need to work harder, probably take longer, and face greater risks. We want to sail with the new tide.
Right time. Almost every idea you can conjure could succeed (one day) or has succeeded (at some point in history). What matters with startups is the word “now.” Is this area/industry ready for bold new ideas that will have great huge value….now? Almost always, the answer is no. The science isn’t ready for prime time. The operations of the market can’t yet absorb radical new approaches. The current market dominators are hidebound, but can still retard innovation. For nearly every idea, every breakthrough today is not the right time. This is the single biggest factor in startup success. The same idea presented at the wrong time will fail, while its twin arriving a few years later conquers the world.
The right CEO personality. In our view, only after qualifying the market and timing does the background and psychology of the CEO come into play. Some funds, I think, believe that ultra-great CEOs can reorder the universe to their will. We agree, but only in a limited band. Within the parameters of the market a CEO serves, greatness can shift reality, but not beyond that. Within those boundaries, though, the personality of the CEO is the single biggest factor in startup success. Our most successful CEOs share these traits in various configurations: detailed, strong, truth-telling operator; humble but confident; listen as effectively as they speak; artistic, musical or otherwise seeking mind-rich experiences apart from work, great storytellers; head in the clouds, in the sense of having a grand vision, but boots on the ground in the sense of having and sticking to a current plan. What doesn’t correlate to success is whether a CEO has been active in a particular market before (except in the case of deep science companies, where previous successful implementation means everything), where the CEO went to school, or what accelerator, if any, the company joined. Startups succeed by adapting themselves to the complexities of the world around them and the market they serve. No initial deck can capture that complexity, so startups always begin on false presumptions and have to grope their way to the truths that propel their success. That is the process the CEO must lead. It is about nuanced change, not bold charges.
The right team dynamic. Finally, we recognize that CEOs can’t succeed on their own. The dynamic of the team is a critical factor in startup success. That is why two-founder companies do statistically better than one-founder companies. It isn’t that those sole founders are worse, it is that the two-founder pair has shown they can find and bind to at least one other strong team member. The core concept here is: A small group of humans who love one another and love what they are doing together can achieve…anything. Navy Seals. Great soccer teams. Prime orchestras. And startups. Building a company is rough and most startups will fail. It takes camaraderie and trust to run this gauntlet. If you win by generating billions in value, how wonderful. But if you don’t do that, a cohesive team will have spent every day working alongside people they love toward a goal they all believe in. That, in itself, is a win. So, when love is present across a team, there is no losing outcome. And that leads to greater calm and stronger performance. Which, of course, increases the chances of winning in the financial sense as well.
By Managing Partner Mike Edelhart