Team building is one of the big success factors for any startup and when you add deep tech into the mix there are some extra things you should think of. In this blog, Voima Ventures Partner Pontus Stråhlman shares his insights into what are the things you should pay extra attention to when building your early-stage deep tech startup team and sheds light to what investors are looking at when evaluating your deep tech startup team.
My working hypothesis for science-based startups is that quite often they tend to be solutions, looking for a problem. A team of researchers have come up with a new invention, be it a new material, a new tech or some novel food, and now they are thinking what the heck to do with it. Conventional wisdom tells us that this isn’t necessarily an optimal starting point for a new business, quite the contrary. At the same time, conventional wisdom tells us that startup investing is all about the team, and here I tend to believe the same.
As a deep tech investor, however, I place a bet on the innovation first. In a perfect world, of course, you would have a world class team commercializing the innovation from the very beginning, but this isn’t always reality. What’s important in those cases is that the teams have an open mind and feel the urgency of building the best team around the innovation. It will take a world class team to build a successful business, regardless of the depth of an innovation.
How do I then judge science-based research teams compared to other startup teams? There are some differences, and they are mainly derived from the fact that – as solutions looking for a problem – they often have a longer path to a product/market fit than other startups do.
Essential Team Qualities
The critical qualities that make any team tick are that the team members enjoy working together and trust each other. Equally important is that the team has all the critical skills in place. Furthermore, they should be able to understand the broader market and their customer need.
For the team to know that they enjoy working with each other, and for the key members to trust each other, they quite often have known each other for some time, and they have similar interests. The core team quite often comes from the same geographical location, often even the same university. This, in turn, quite often leads to a fairly homogenous team that can work well in the beginning, but one that should be eagerly looking to diversify the team with people from different backgrounds.
A great startup team has global ambitions. Understanding the broader market and the customer specific needs is easier with a more diversified team. This highlights the importance of growing diversity in deep tech startups, with a longer road to a product/market -fit, and where the potential customer base often is quite international from the very beginning.
A great team can complete on their own an entire product development cycle, so that these cycles can be completed at maximum speed. A startup cannot wait for external consultants to finish tasks, nor are there many investors willing to finance consultancy fees for product development in early-stage startups. Therefore, the best teams can build the product without external resources. They can measure how users or customers react with the product, and they have the ability to digest this information and learn how to improve upon it, thus completing a complete build-measure-learn cycle.
Having a team that can complete a full product development cycle is particularly important in deep tech, where your starting point can be that you are a solution, looking for a problem. This means that there are probably more development cycles needed to reach a product/market -fit than in other startups. On the other hand, I strongly believe that the impact you can make on the market can be much stronger if you have a unique innovation as the foundation of your business. The trick is to have the patience to work towards that product/market -fit, until it’s strong enough to be scalable.
What I Assess in a Team
At Voima Ventures, our team assessment includes assessing the team’s relevant skills in the following: entrepreneurial experience, business development experience, product development experience, and leadership. Furthermore, we value the team’s scientific achievements highly. But equally important remains the team’s ability to excite us about their innovation.
As deep tech investors, the innovation we invest in really needs to be world class to succeed. But the team that we invest in needs a thorough understanding of the industry and the global business landscape that the startup will operate in. My observation is that university spin offs have larger scientific or technical work experience and less commercially relevant work experience compared to other startups. Growing the team with someone with an industry background is often a good choice, as long as the person hasn’t succumbed to the old ways of doing things. A longer road to a product/market -fit can be significantly reduced by someone with great business development skills.
In the very beginning, when the company is merely working towards a product/market -fit, the most important business development skill is to be able to reach out to potential strategic partners and be able to agree on joint product development projects. In this very early stage, a university researcher with a renowned academic track record can be quite successful in reaching out to other industrial players. Therefore, if the academic team has enough credibility to open the right doors within the industry, I believe that a researcher background can work well in the business development role that’s usually the responsibility of the CEO. Corporations and investors want to be convinced of the technological advances that a deep tech startup has achieved, which is quite difficult for someone with a pure business development background to achieve.
Being a startup CEO is, however, something completely different than being the CEO of a growth company. If a researcher wants to become the CEO of a startup, I believe that this works well. But if a researcher wants to stay on as the CEO of a growth company, then they need to be ready to grow new skills in business development and leadership. For many this will work fine, but equally for many, their personal skills are better served if they step down from the CEO role. I believe that the best startup teams are able to have enough self-reflection that they understand their strengths and look for a position within the company that best serves the company’s needs.
Dealing With Extreme Uncertainty
Growing a business is hard. Working in a company that is burning cash is even harder. You have a runway, and at the end of that runway lay the possibility of a bankruptcy. Dealing with this extreme uncertainty is a vital characteristic of a good founder. As a founder, you cannot merely cope in this environment, you must be able to thrive and inspire others to do so as well.
Sometimes, a university setting isn’t perhaps the best place to gain experiences of this kind of uncertainty. Strengthening the team with entrepreneurial experience can therefore prove to be extremely valuable.
At the end of the day, it’s about attitude. The eagerness to learn new skills can overcome many shortfalls, and a university setting can work well in nurturing this willingness to learn. The ability to cope with stressful situations is often a matter of having the right attitude. The innovation that a deep tech startup has needs to be world class, but the ability to communicate it in a way that excites all stakeholders is often up to having the right attitude. Being able to grow from a team of researchers to a team dedicated to solving real customer problems and serving the customer in the best possible way, is therefore a vital skill for a deep tech startup.
What is the right attitude then? That is often a personal treat that I cannot, and do not want to, define in advance. It’s about being genuine and sincere. True to yourself. Honest and hard working. But first and foremost, passionate about your cause.
Written by Pontus Stråhlman.