Picking Startups and Leadership Teams

As someone who has helped grow a number of startup companies and who has invested in a few dozen more, I’m often asked how I go about picking companies that I think show the promise of success. It’s an important question, and not just for entrepreneurs or early investors. It’s also one that everyone who works in our industry thinks hard about when it comes to making a yes-or-no decision about a job offer from a new, unfamiliar startup. While there is a fair bit of intuition involved, when I’m evaluating a new company, I mainly look for two things in the founders and the leadership team: motivation and conviction.

Motivation is important for many reasons, not the least of which is that too many entrepreneurs, particularly in recent years, are motivated by the wrong things. And sometimes at the very top of that list is the thinking that there are quick financial gains to be had.

It takes just a few minutes to identify those entrepreneurs for whom a quick pay-off is the only or the primary motivation. Frankly, these conversations don’t last very long. In my many years spent following entrepreneurs and having grown a number of startups myself, I’ve become convinced that it’s impossible to build a great company if your primary motivation is a quick pay-off. If you come across entrepreneurs who only think short-term, you can bet they won’t be building a great company; one with a great, market-changing product that they’re proud of and that many loyal customers rely on.

With so many startup opportunities to choose from in Silicon Valley, I’m only interested in those that have a chance to become great companies. My advice for those looking to join a startup is to look for founders and a leadership team that exude a passion and intense desire to build something long-lasting; in other words, a company that matters.

There is another aspect of motivation worth discussing. It’s become clear to me that the best companies are those whose founders are trying to solve a problem that they themselves have experienced first-hand. When you talk to these founders, it is quickly evident that their idea is grounded in the reality of some everyday pain they themselves struggled with or witnessed directly around them. Meet these entrepreneurs and you immediately pick up the vibe that they have a genuine belief they are solving a real problem, and are willing to take big risks to do so.

A good example is Instart Logic of Mountain View, which is now three years old and has already raised $26 million from some of the Valley’s most respected investors. The founders are gamers, and like many gamers, were starting to use more apps on their mobile phones. But the slow speeds of mobile and wireless networks made some of their favorite games painfully slow to download. In addition, the graphics-heavy websites they frequented, took so long to access over a wireless network that they found themselves not using them. So they decided to do something about it, and came up with an idea for a new content acceleration technology that would speed up accessing web apps and websites over wireless networks. Now with nearly 50 employees and a growing list of customers, Instart is a logical candidate for greatness.

ServiceNow has a similar story. The San Diego company offers cloud-based products for enterprise IT automation. The founder of ServiceNow, Fred Luddy, was previously CTO of Peregrine Systems and Remedy, the latter of which was one of the first entrants in the computer help desk software market. While help desk software solved many problems, it also created new ones, as it was expensive and cumbersome to run such IT management software on-premise. That made it a ripe candidate for a SaaS model, which is the insight and personal experience that led Luddy and team to create ServiceNow. ServiceNow is now a public company with a market cap exceeding $6 billion.

One of my favorite examples of companies solving real problems faced by their entrepreneurs involves the new breed of transportation companies, like Uber and Lyft. Both were founded with different visions for transportation, but each share a similar tale of urban founders who had a vision of getting around town quickly and easily. Not only are these startups on their way to becoming great companies disrupting a major market, but they are also playing an important role in a worldwide trend called “collaborative consumption,” a trend which is disrupting a lot more than just urban driving.

The other quality I look for in a startup and the founding team is deep conviction. I think of conviction as a kind of reality-based stubbornness. Entrepreneurs with conviction are stubborn about their vision — while never forgetting to be flexible on the details. This is an important balance to look for in entrepreneurs. Circumstances will change around them that may well necessitate adjustments in tactical details even while holding true to their original vision and conviction. That conviction involves the intense belief in what they are building, and a burning desire to prove to the world that their entrepreneurial idea is valuable and practical. So look for a founder and team with great conviction and remarkable technology that builds on their conviction about the idea.

All this, of course, applies to us here at ClearStory, just like at any other startup. We’re solving a problem that my co-founders and I encountered all the time in our previous companies: quickly finding and using data at the right time to make quick business decisions is much harder than it should be. We saw a need to simplify and speed up the otherwise tedious, difficult and slow process of disparate data access and analysis, so that people of all skill levels could work with diverse data to reach quick insights. Our experiences through our last 2 companies motivated ClearStory’s vision and product. Simply put, we want to make accessing and working with diverse data, from multiple sources, much simpler, so more people across companies can make fast, data-driven decisions.

So how do I score ClearStory on motivation and conviction? The motivation and the conviction of the team here at ClearStory is evident every day in the energy and excitement we feel as we move closer to our product launch and look ahead to how we can change how businesses across the world work with data. Will ClearStory become one of the “great” companies I alluded to earlier? Only time will tell, but I strongly believe we’ve got two of the most important founding ingredients to do it right.