While industry and market analysis is critical to understanding the opportunity and Verda relies heavily on data and financials to support investment decisions, it’s ultimately teams that execute on the opportunity at every stage. Assessing a team is not an exact science and requires a qualitative assessment, but there are three areas Verda uses to systematically review team’s fitness for the business: (1) Mission, aspirations, propensity for risk; (2) Ability to execute on critical success factors; (3) Network across the value chain.*
Entrepreneurship is a very personal game and requires a clear vision about what you want out of the efforts. Three elements largely drive an entrepreneur’s dream and they should fit together cohesively: mission, aspirations, and risk propensity. An entrepreneur’s mission drives what kind of business to build and what markets to serve (“founder-product fit”). Without a clear mission, entrepreneurial efforts will lack direction and purpose. We’ve found that strong entrepreneurs are often guided by personal experiences that give them unique perspectives on untapped market potential and an obsessive drive to find frontier solutions. An entrepreneur’s mission should also be congruent with the investor’s for an effective relationship. Aspirations guide the level of achievement being sought. Without which, you won’t be able to articulate what help you need. Level of risk propensity indicates the level of risk and sacrifice an entrepreneur can endure. Investors want to know that you are willing to share in the risks before investing.
Every business is different as are the critical factors for succeeding. The best teams consistently can and do achieve the critical success factors for their business as evidenced by a strong history of execution. It’s important to ask which decisions will result in negative effects versus deliver disproportionate success? Examples of critical success factors include Gmail becoming a dominant email provider due to it having more storage than competitors and chrome winning browsers due to it being lightweight and fast. After identifying the key success factors for a business, Verda is looking at whether teams can execute in their particular industry. In many cases, technology isn’t the hard part, it’s applying technology (e.g. blockchain) to effectively solve real customer problems.
Entrepreneurs with a strong network relevant to their industry across the value chain are instrumental to responding to market changes and establishing strategic relationships. A robust network can also deliver new perspectives. Relationships can deliver critical information about storms on the horizon, including regulatory and competitive challenges. Information is critical to making the best decisions and success or failure is largely the cumulative result of each decision.
There are, of course, many other important factors in assessing teams, but these three areas are part of the core framework Verda uses to assess teams.
*Source: The New Business Road Test (John Mullins), New Business Ventures and the Entrepreneur (Stevenson), The Four Steps to the Epiphany, Contemporary Strategy Analysis (R.M. Grant), Getting to Plan B: Breaking Through to a Better Business Model
