Founder Playbook: What Investors Really Look For | Luke Smith, Molten Ventures

0:00Alex Chisnall:What do the best founders look like at the very beginning of the journey? One thing I consistently see is like a real proactivity drive to get things done. What separates someone who has a great idea from someone who actually does something with the idea? I think people build these castles in the sky and just not having that guption to go out and make contact with the real world, iterate, get that learning and get the doing.

0:29Alex Chisnall:what stops founders from building something meaningful isn't a lack of ideas it's the fear of getting started i'm alex chisnell and this is screw it just do it the podcast for people who are ready to stop waiting take action and make things happen what do the best founders look like at the very beginning of the journey do you think are there any traits that you can kind of put your finger on yeah like ultimately a successful founder that different founders are successful for different reasons but i think one thing i consistently see is like a real proactivity drive to get things done and then i suppose the other thing is often like a deep understanding of the space they're in and the problem they're solving and when you combine those two i think it's very powerful.

1:18Alex Chisnall:Do you think you can spot founder potential early on? I think good founders shine through from very early stages. I think it's not just about the founder. I think, you know, there's also, it's really important the space they're in and the idea. But again, that ability to get things done, that understanding, the ability to kind of make complex things simple. I think even from very early on, founders do show that. What separates someone who has a great idea from someone who actually does something with the idea? I think that ultimately, yeah, lots of founders have ideas. I think the thing that makes the difference is just, again, that proactivity, going and doing something about it.

1:59The challenge is when people have almost like a desk view of what the world is and they just want to go away and think things through and build these castles in the sky in their plans and just not having that that guption to go out and make contact with the real world iterate learn from things and change to what's actually needed i think that's the big one it's so many

2:24Alex Chisnall:people think that they need to get it perfect right rather than um how important it is to break something break it again to fail to fail again and keep going right yeah because ultimately the market will know more about their pain point than you do. And you sitting in your office, in a cafe, whatever, your ability to understand the customer better than they do is limited. So you just need to get that learning and get the doing. Do you think people underestimate how much entrepreneurship changes the person, not just changes the business? Yeah, I'd say probably. You really do see the difference.

3:04Someone who's scrabbling, managing a team of maybe 10 people, really having to hustle, get things done versus someone leading a team of 100 plus, built a team of leaders around them and a kind of recognized leader in their space. and they often carry themselves like that. And frankly, they've just done a lot of pitching. They've had to become good storytellers. And that kind of comes across in the way they present themselves, in the way they talk.

3:37Alex Chisnall:And from all the founders that you've backed or you've seen backed as well in your spaces, they're usually a moment when something changes for that founder. I'd say it's probably at that stage where they go from being the main doer in the company to building a team of leaders that their job base becomes build that team, keep that team working, keep culture through the business. That is a big shift. Is there such a thing as the perfect time to start? I think yes, but you will never know whether that answer is yes, probably until like five years later. This episode of Screw It, Just Do It is sponsored by Maltadventures.

4:17Alex Chisnall:one thing I've learned from speaking to hundreds of founders on this podcast is that the right partner brings more than just capital that's exactly how Malton thinks about backing founders they work with some of Europe's most ambitious technology companies from series a and beyond bringing experience energy and partnership to help bold ideas scale faster go further and become global businesses so if you're building something with real ambition Malton's mission is simple to help make more possible. Go to maltonventures.com. We often see, you know, the headlines and the press and the podcast around the exits and the big funding rounds, those moments where you can't make payroll when the funding round that you think you're going to get, the term sheet doesn't come through.

5:05Alex Chisnall:You know, what's your experience or what other hurdles kind of come up along the way? Yeah, so I typically get involved at Series A and as you're building our go-to-market, typically a lot of that is around that go-to-market sales. Are we going to hit our numbers? Are we building enough pipe for next quarter? Is the path we're on a path that's going to get us to a next funding round that's one we're going to like? Do we have the right sales leader in the business? Do we have the right structure? All that. Things like that where you just have to draw the date you can and make a decision and commit and do something.

5:40Alex Chisnall:What like nearly breaks founders or what breaks founders? I think probably the thing that founders find hardest is the things they can't control. And to be fair, there's a lot of things they can't control, but some things they feel at least they've got some level of control. So sales, product, things like that. So it's often things like interactions with VCs where the normal levers they could pull, they don't have. So funding rounds are a classic where you just don't feel in control. Often I sit on the same side as founders where we're going for a full on round and everyone wants it to happen.

6:14But you're dealing with VCs who are giving you some insight, but they're not an open book. They're not just giving you all their thinking. And so that uncertainty and having things fall over when you've got a lot riding on it and things feel like they're going well. And then suddenly it's a no. I think that is a very hard thing for founders. That's the, yeah. And especially the earlier the stage it is,

6:39Alex Chisnall:the harder it's going to be, right? Yeah, there's a lot of no's. Particularly as you build success, you kind of pull more power to you because if you're a really successful business, the VCs, you're choosing them. What mistakes do you see entrepreneurs make, like even the brilliant ones that maybe people are kind of unaware of? I think one we see quite often is at that stage when you're having to build the leaders around the entrepreneur. There's kind of a view of you need the grownups in the room. And so they'll go, we need someone who's been in a really successful business. That's going to give us the gravitas.

7:14They've done it before. They know what they're doing. And that can often be very dangerous, particularly if you're hiring someone fairly senior, because the skill set you need is still kind of hustle and adaptability and learning. And someone senior, late career, who's been there, done that, often by that point they're far more used to leading teams than actually doing things what's

7:36Alex Chisnall:the hardest transition do you think actually starting the thing or scaling the thing fewer people get right is is the scaling the thing yeah it's going from being like i get things done i see a problem i fix it to i need to scale i bring the right people around me and enable them to fix the problems and what changes do you see when when a company goes from startup to scale up and what What kind of breaks first? Most obvious is going from the point where the founder is the main salesperson. And founders are just good founders of really, really good salespeople. Because they understand the customer.

8:14They understand the product. And they have the kind of people skills to iterate in that space and find a solution for the customer. But that's like a ridiculous set of skills to expect from someone who's not a founder. and so what works for founder-led sales doesn't work when you need to start formalizing the sales structure and bringing in other people and for most businesses you have to start doing that fairly early because the founder doesn't scale so you you can't have them just driving all the sales so i think that is a is a very tough stage what do you think the best founders learn to let go of I think a lot of founders get very caught up on product.

8:58And to be fair, I think they always need to have some level of control of product. But what the risk of the founder doing product is it becomes a bottleneck and it just doesn't iterate. And everyone needs to go and get their say so before they do anything and you get slow. And really, your only big advantage as a startup is that you're fast.

9:18Alex Chisnall:Exactly. The agility, isn't it? For you, what does like a world class founder look like? What kind of attributes? But I think real conviction, absolutely certainly, but willing to listen. And when the data shifts, they will shift with it. And then just an ability to build a really, really good team around them. And I think that conviction helps with that because good people want to feel like they're doing something important and they're going to make a difference and have the independence and the ability to reach their limit. And so I think it's those things that mark out really world-class founders.

9:56Alex Chisnall:Is there a founder that you've met, that you've seen, that you've worked with, that's changed your view of what's possible, what's possible to achieve in their space? I think, yeah, actually, I'll name him Steve Roost, the PocDoc founder in our portfolio. He's in healthcare. Yeah, yeah. And healthcare is notorious for being hard to sell, impenetrable. And I think what he's done partially through sheer force of will, I think, in terms of building that momentum and the buy-in from health systems, from the ecosystem, I think pitching, if he pitched that at the stage we got involved, I don't think I would have believed it because I've been around the healthcare space.

10:46And I would just say, no, that's not how it works.

10:48Alex Chisnall:I want to kind of dive into a bit of what Moulton looks for. Is the founder or the idea more important? We're Series A and B. I'm kind of more focused on Series A. I think at that point, it's gone beyond the point where just a founder can carry everything. Obviously, we're looking for founders who could build really big businesses, who are world class, and who can continue to grow. But I think at that point, there has to be something that's working. Typically where I get involved is that point where you're starting to see that you could scale. So by then the idea is fleshed out, right? It's in the market.

11:30People are showing that this matters to them by their behavior they're buying. And at that point of starting to scale up, so I think it's kind of a combination of the founder, the idea and the proof points around things starting to work.

11:47Alex Chisnall:And what are you looking for from a molten perspective when somebody's coming for investment or help with investment? I'd say often it's that, you know, are they at that point where the go-to-market is starting to work? We're not saying it has to be a machine that is, you know, humming and you add X pounds of investment, it turns into Y pounds of revenue. I don't think it's fair to expect that, but there has to be evidence that it could be scaled. You know, customers starting to care, pipeline building, deals closing. That's the kind of stage where I think I like to get involved. What are some of the biggest misconceptions about raising investment, do you think?

12:30Yeah, I think one thing is, and I think most founders who've done it for any length of time have realized this themselves, but there's so much focus on the successful fundraisers and the successful founders. There's like a real survivorship bias, right? Like it makes it look like you could get something started and raise a huge seed round immediately. And then within 12 months, it's a massive A and going from there. There are companies doing that, but the vast majority of startups are not living that journey. It is hard. there are a lot of no's and it's particularly in the early stages often a bit of a grind finding the investors that work with you their view of the world aligns with

13:19Alex Chisnall:your view of the world and what you're doing should every founder raise money then? oh no so I'm very vocal in saying VC when it works for a founder and a business can be incredibly powerful I think the ability of, and it's not really VC, right? It's the availability of this kind of capital can massively enable the right kind of founder to build some. The worst cases are where you somehow raise VC money, but it's not really a business that can get to the scale that VCs need. Because then you have a fundamental disconnect between what the VCs are pushing for and what really is right for the business.

14:02Alex Chisnall:and that can kill good businesses. What advice would you give a founder preparing to raise? I'd say really understand the investor market, who the right investors are for you and build your plan around that. So don't start with the best ones. Start with some investors who maybe aren't the obvious fit to learn and it right in practice and then go to the investors you think based on what they've done in the past, what they say they're looking for are the best fit. and go that way. What's the difference between an average pitch and a great pitch? I think what makes a great pitch is tying together all the elements into a real narrative like, here's why this will work and here's why when this works, it will be enormous.

14:52And particularly putting in the context of the investor. So an investor has prior experience, companies they've backed, tying into that, and kind of pulling them along the journey, I think is particularly strong.

15:07Alex Chisnall:If this conversation resonated with you, don't just sit there, act on it. Make sure you follow or subscribe for more game-changing conversations. And remember, the only thing standing between you and your business breakthrough is the decision to screw it and just do it.