This session deals with how to evaluate founders. It was led by Alok Goyal, Stellaris Venture Partners.

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9th May 2020
Founder Evaluation – Pi Fellows Program

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Case Study CEO Evaluation
Good vision
High hustle
Learning Agility
Intellectual Honesty/ Integrity
Network/ Pedigree
Humility
Intellectual smarts
Has done sales in US, can hire teams
Persistent/ driven/ tenacious
Personable
Good salesman
Committed (paid for others from his salary)
Growth mindset
Experience of starting something from scratch at Company #2
Followership - team from Company #2 wanted to join him
Customer centric
👍 👎
GTM Capability is not optimum
CTO background not stellar - what does it say about CEO?
Tendency to be defocused e.g. in product development
Is the CEO bringing people like him into the team
Remote working with his teams
Will the CEO have a control issue given hardships
Poor business judgment as per company #2 founder
Ability to hire top talent
Lack of clarity of thought
Sales skills - pilots as opposed to annual contracts
Lack of vision - very reactive to the market
Does he have good product thinking
Rushes to get the product in
People management skills
Did not demonstrate remote GTM in Company #2
Delegation skills

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CTO Evaluation
Hardworking and can do attitude
Humble
Learning ability
Has worked on both backend and frontend
👍 👎
Poor pedigree
No history of building teams
Low on vision
Questions on tech/ ML capability, may need to hire another CTO
Can he be an engineering leader?
Spark is missing
Has not built large complex systems in the past
Limited experience in running a large company

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Both Together
Have trust
Both with tech background, can build product
Do not need a CTO with a solid business judgment given CEO
Good complement for each other
👍 👎
Would the CEO get a better CTO for higher equity?
CTO has very low equity
Were TDF and CTO actually founders, or just early employees?
CTO not a peer to the CEO

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Some Other Comments
You can have an external CEO as a VC
Is the VC too attached to the deal or space - important to
remove that bias
Referred by good SaaS founders
CEO will be the primary driver of success
Will we need a product leader soon?
One man show
Progress in 3 years less than what it should have been

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So, What Does That Tell Us?
There are no right or wrong answers
Everyone will have a different take with the same set of facts
You will never know whether it was the right call barring extreme cases

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Key Questions?
Do you judge the whole team or part of the team?
Do you give equal weightage to each of the references?
How do you weigh external feedback against your own judgment?
What qualities do you look for in a founder? Do you give each of these equal weightage?
How do you assess each of the qualities?
What you look for – does that change based on stage or the type of business?
How do we make sure our own biases do not seep into the evaluation?

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Team or CEO – Our View
A great CEO is worth his/ her weight in gold
- Many other skills can eb hired for, CEOs are difficult to hire for
- Most founding teams thin out over a period of time, but very few change CEOs
Some teams, however, are different, and you need to evaluate the team
- In deep tech businesses, CTO/ VP Engg can be as critical if not more as the CEO
- Same is true for the product co-founder where building a product is hard

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Core Beliefs
Great people define new patterns. Successful entrepreneurs, by definition, are outliers
that defy any attempts to put them in a box. Our job is to find the spark that defines
every great entrepreneur, recognize its potential and help harness and nurture it
There is no such thing as a perfect team
Every strength is a weakness as well
CEO matters a lot more than any other person in the team

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A startup CEO
Intellectual smarts
Ethics, Integrity
Strategic
Thinking
Leader
Iterative &
Agile
Learner
Growth
orientation
& Hustle
Customer
Focus
Hygiene
Factor
Need spike
in at least
one of
these
Product & tech orientation
Sales
Capability/
Fund Raising

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Next level details
Area What to look for? What are the downsides?
Iterative and
Agile
Learner
• Curious to learn
• Iterates/ runs multiple experiments
• Ability to develop insights and learn from these
experiments
• Self aware of own strength and weaknesses
• Thinks objectively/ argues rationally
• Solutions are not perfect,
processes are not in place
• Things will break down
• May appear that CEO does not
know enough or it too humble
Leader • Independent doer (doesn’t need others help to decide
or act)
• Strong emotional quotient
• Can rally the team around
• Hires for future and retains talent
• Will not take your advice
• While hiring, will look for
passion as much as skills
• Will not fire people objectively
• Hires expensive resources
Strategic
thinking
• Strategic thinker (gets the big picture, can envision
where co fits as future changes)
• Business judgment
• Ability to see the high level picture but also the Monday
morning view
• Can come across as arrogant
sometimes

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Next level details
Area What to look for? What are the downsides?
Sales Capability • Inherently a great sales guy
• Good story teller/ articulate in communication
• Exudes confidence
• Will not have a details on finger
tip
• Appears arrogant, conflicting
with agile learner ability
Growth
orientation &
Hustle
• Ambitious
• Strives to be market leader/ growth is metric CEO
chases
• Good growth hacking skills
• Executes at fast pace
• Figures out ways to get things done
• Will be capital in-efficient
• Will sacrifice other metrics over
growth
Customer Focus • Long term focus
• Clarity on who the customer is and their needs
• Can build right product for the customer
• Doing what leads to customer success
• May appear too idealistic
• Difficult to judge at an early
stage

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Founder Market Fit – What do we need in a deep tech business
Different businesses need different things - look for “founder market fit” – In a SaaS apps business,
engineering is not the hardest skill; In a logistics business, operations is a core skill
What do we need in a deep tech business?
Need “off the charts” tech skills – need to benchmark against the best (mostly globally)
You still need strong CEO skills unless one is investing behind a tuck in acquisition – leadership, sales,
strategic thinking/ business judgment, customer focus – they are all as important in a deep tech
business as they are in others
Do not just go by pedigree, look at the evidence of what they have done
Do not make the mistake of evaluating tech skills yourselves unless you are yourselves a deep tech
person, find relevant people who can evaluate this

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Learnings in Founder Evaluation
Do copious references – many traits of the founder(s) cannot be assessed with just a few
meetings, you need to speak to people who know the person well e.g. leadership, ethics
Dig deep in these conversations…and read between the lines. Ask them “will you put your money
as an angel” – the answer will tell you a lot
On areas like strategic thinking, trust your own gut based on conversations
Be cognizant of the stage of the business – all answers cannot be perfect given the number of
unknowns at an early stage
Avoid the temptation of evaluating a business as if you are the CEO – You are not!!
Listen to the founder(s) and evaluate them, not “what you will do in the same situation”

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In the end…
…Back your gut