Last year 2023The tech world will remember it for the massive losses, as 3,200 startups and more than $27 billion in venture funding evaporated, not to mention the largest US bank collapse since 2008.
At the same time, venture capital investment in early-stage companies has declined dramatically, with VC firms doing more due diligence and showing reticence toward founders unable to articulate a clear path to profitability.
While investors appear confident that 2024 will see an increase in deal flows after a cautious 12 months and the accumulation of a lot of dry powder, the onus remains on startup teams to convince VCs that they can pull the plug.
In fact, many entrepreneurs — especially first-time founders — will likely end the year disappointed. They continue to operate under a double misunderstanding that ideas are sacred and that technical superiority is the key to startup success.
Great ideas are common, but great teams are not
As Bill Gates famously said: “The shelf life of intellectual property is equivalent to the shelf life of a banana!” First, founders must understand that entrepreneurial success is not about the idea. There is no shortage of exciting business ideas; In fact, its multiple founders often experience the same lightbulb moments and go on to develop near-identical business propositions.
What makes startups more likely to succeed is the quality of the team, their ability to execute, and their sense of timing – the most elusive element in building a company.
What makes startups more likely to succeed is the quality of the team, their ability to execute, and their sense of timing.
Like many seasoned investors, I have been preaching the virtues of “team, timing, and execution” for many years. However, I still meet group after group of founders who are strong in technology but need more of the basic company leadership and interpersonal skills required.
Don’t get me wrong – there’s no doubt that technical prowess is essential, especially when building enterprise SaaS solutions where “good enough” isn’t actually good enough. However, it is just a small piece of the puzzle.
According to the Carnegie Institute of Technology, 85% of financial success stems from an individual’s interpersonal skills and ability to communicate, negotiate, and lead effectively. These founders can deliver a clear message, demonstrate passion, demonstrate empathy, and build a relationship with customers, which helps them determine product-market fit and master the sales process.
Likewise, they are more likely to assemble winning teams and take everyone with them on the challenging growth journey ahead because they understand what it takes to run a company and what it means to be a CEO – to hire, fire and execute the business. A clearly laser-focused plan.