Why backing technical founders is the way forward

It’s worth me laying my cards on the table; I invest in technical founders exclusively. This is something that often gets some degree of push back from other investors - where’s the business guy? Who’s going to do sales?

At EF, we believe that technical founders can be excellent commercial and sales people. Not only do we believe this, but this is how some of the world’s most successful tech companies were built - Bill Gates and Larry and Sergey need no introduction. Having done a little more digging into this, if you look at the top 20 ‘unicorn’ startups by valuation, 75 percent of them have founders with technical backgrounds (usually they had studied a Computer Science degree at university). These are companies that are quickly becoming household names; Drew Houston from Dropbox, the Collinson brothers from Stripe, Jack Dorsey from Square, the Bansals from FlipKart for example.

So there is some strong proof that technical founders are not only able to build amazing tech, but they’re able to build scalable, high growth companies around the products they create.

At EF, we invest in individuals, usually before they have a team or an idea. We originally started taking 70 percent technical individuals and 30 percent non-tech/commercial individuals. After a couple of cycles we were beginning to see some clear patterns. First, during the ideation phase, when you have one technical founder and one non-tech founder, we found that the team is much less likely to come up with an idea that makes the most of the technical founder’s skills. In these teams we would see more consumer facing marketplaces and e-commerce ideas. This type of startup can be hugely successful, but it can be hard to create a defensible product.

In a team where you had two technical founders, we found that that they built on and challenged each other’s technical ideas and produced far more valuable and defensible products. In these teams we would see more B2B and enterprise facing startups, anything from applying advanced computer vision to visual inspection tasks, to applying machine learning to video compression.

Another quirk was that we found that non-tech founders were far more likely to drop out of EF. Unlike their technical peers, they were unable to quickly test and iterate on ideas. Without the means of production, when they hit a barrier they were more likely to stop than to change direction.

Yes, many of the technical founders we have worked with have had a very steep learning curve, but the best ones quickly learn how to sell and how to think commercially. Later on in a startup’s life individuals with commercial experience can be invaluable - look at the Sheryl Sandbergs of this world. But, in the first 100 days of a very early stage tech startup, I know who I’d back.

This story, "Why backing technical founders is the way forward" was originally published by Techworld.com.


Copyright © 2015 IDG Communications, Inc.

Shop Tech Products at Amazon