I recently sat down with Chris Redlitz from Transmedia Capital to talk about how he evaluates entrepreneur qualities and founding teams from his perspective as an entrepreneur (AdAuction, Get Relevant, Aptimus, and On Village), executive (Skyrider, Feedster, Reebok), and now venture capitalist. We discussed what makes a founding team work, potential conflicts of interest between investors and entrepreneurs, and what KickLabs looks for in a company.
T: In your experience, is there a distinct advantage to having a founding team as opposed to being a sole entrepreneur?
C: Yeah, I think so. Especially in technology it’s good to have breadth so to speak. You can obviously take an idea and have it outsourced but from a development point of view, it’s good to be able to collaborate. Collaboration is really the most important thing when you’re doing something. I have an idea but I need to actually have some sort of way to vet that idea as it morphs along the way. Having someone that has a little bit more of a technology capability with someone that is more of a business or marketing person… it’s kind of the ideal situation if you can make that work.
T: So what do you think doesn’t make that work?
C: I don’t think it’s a showstopper if you don’t because there are resources to develop. I think it’s more just, the ability to vet, collaborate, you know, brainstorm. It’s tough to do by yourself. In the short time we’ve been doing this and looking at companies over the last six months, we’re not seeing too many single people come in. Or if we do, they definitely had the desire to find a team to round out what they’re doing. It’s rare to find somebody that’s doing it by themselves.
T: What are, generally, the types of things they’re looking for?
C: It depends on what their core competency is. So it’s to be able to sort of leverage what they’re doing with a very complimentary core competency.
T: When you say “core competency”, are you talking primarily in terms of skills/entrepreneur qualities or roles or do you find that they’re very much the same thing in this context?
C: Yeah, as a founder, it’s less about title or role. It’s more about what my skills/entrepreneur qualities are to bring that idea to more of a real tangible product. If someone is a little more business-oriented and methodical about their approach and someone is a little more of an idea person that’s probably a good match, right? If you get too many people that are idea people, nothing ever gets done. So I think you really need to have that sort of very complimentary skill set.
T: So would you say that the primary entrepreneur qualities you look for in terms of finding people both for KickLabs and teams to invest in is complementary skill sets or are there other entrepreneur qualities such personality types or shared vision that you think are also critical?
C: If you’re looking to accept a company or do an investment, what are we looking for? Is that your question, yes?
C: Ok. It’s a little bit different here, because we’ve got an open environment. As opposed to looking at strictly a company to invest in from a business model point of view and an entrepreneur and stopping there, we have to take that a step further. Because now we want a personality/entrepreneur qualities that would fit in, not to sound trite, but people either they want to work in an open collaborative environment or they don’t, and they either add value or they don’t. It’s kind of binary in that sense.
It goes beyond the normal evaluation of doing investment because you have to “live” with the people, You made the chicken reference: [note: Chris and I discussed his interest in chicken farming before I turned on the recorder] every time you enter a new hen into the coop or to the flock, they have to all get along, and they go through this pecking order process until they figure out.
T: Who’s the alpha hen?
C: Who’s the alpha hen. It may not always be the same one as you enter new ones into the flock. So that’s kind of the same thing here. When I look at a company here, I look at the business opportunity, but it’s almost as important to look at the people or person. I’m very much into investing in the founders or founder primarily.
T: Do you think that’s more important than the idea?
C: No, not necessarily, but we’ve seen this over and over and over. Twitter is a great example, Evan Williams had a great success with Blogger right? Odeo was going nowhere and Twitter was a new idea that the same investors ponied up again for because they believed in him [Evan] and his team. Because frankly, Twitter, if I looked at it in a vacuum, it probably wouldn’t have made a lot of sense. But it came from those guys who had success and they believed in him so they invested in him and the rest is history
T: I’m curious as to why you differentiated. You said in a team that you’re looking solely to invest in you look more at the business case and less at the personality…
C: Uh, no, no, no. I look at the personality as how they would potentially fit into an environment, so I want to qualify that. If we look at just an investment, we’re certainly looking at the people and…
T: People within their own environment as opposed to…
C: Within their own environment, yeah. I don’t have to worry about them getting along with someone next to them and that whole sort of ecosystem. We’re building an ecosystem here at Kicklabs that, just as a standalone investment, we wouldn’t really consider.
T: But you still have to worry about the co-founders getting along with each other?
C: Yes and that doesn’t always work. I’ve been in a few that haven’t worked for me.
T: What are some of the warning signs of that?
C: Sometimes there aren’t any. I don’t want to get too personal, but I’ve been in situations where I never saw it coming and all of a sudden… 180º on how this person acted. Never saw it coming, and I think part of it is that as things change, whether it’s stress, success, failure… in this particular case, there was a tremendous amount of success early on and this person wasn’t able to handle it. It’s almost like you shouldn’t read your own press clippings, and if you do, then it creates issues.
So I don’t think you’d ever see it coming. It is a marriage and you kind of have to treat it like that. I mean, I actually lived with this person for a while. When you start a company, it is truly living with someone, spending more time with that person than you would with your family and no matter how well you know that person, when they say a lot of times “don’t take money and do business with your friends” there’s a lot of truth to that too, so.
T: So, speaking of marriages, one of the things I’ve talked about with a lot of people is “how you date your co-founders?” So, what would be your ideal first date when vetting somebody to join a company? How would you sort of determine if they have the right qualities, the right skill to fit in with what you were doing?
C: I was going to say go play golf with them, but that’s not necessarily the right answer.
T: It might be.
C: I like to get out of a business environment, understand that person more. So, I was half joking about the golf. I do a lot of networking on the bike… I just did a bike ride with a bunch of guys that are in and around social media on Friday. We went up in the mountains of Mt. Tam. So I think it really is like dating. I think that you have to know someone beyond business because you spend so much time with them.
I think it’s really important to understand peoples’ expectations because you’ve got to stay really aligned and you may not always agree with how the business is going or you may have to… the favorite term today is pivoting, changing business models or “morphing things”.
You have to be aligned in sort of macro vision of what you want to do, but also when you take money the founders have to stay aligned. It’s really important because if not, that can really fracture a business really quickly.