Why 7percent Ventures invested in Clim8: “Founder-market-fit”
We believe at 7percent that one of the best signals that a startup Founder could be successful and change the world is “founder-market fit”. What does this mean?
We’ve learned that investing at an early stage is all about the Founder, not about the product or market per se. In fact, as a team we’re all ex-Founder ourselves, so we have to be careful not to “get drunk” on our own vision for the product or service being pitched.
Instead we must look at the temperament of the Founder and how their life experience relates to what they’re building.
Here are 7 things we think matter:
- An authentic origin story
Customers have to identify with the startups story — the why. And that story is often rooted in the Founder themselves, a personal experience or challenge in life. Particularly with consumer startups, customers must believe the brand messaging is real and that is often most successful when the story is personal to the Founder(s) and hopefully the wider team.
With B2B startups this is still important because it is often the fuel which keeps a team inspired and a Founder obsessed. As humans we empathise most with stories.
James Currier of NFX (who has written a great post on this topic) put it best:
“Don’t start a startup … [unless] there’s nothing you’d rather be doing. It’s something you need to see out there in the world, and you’re going to will it into existence. World-class, iconic companies are almost always founded by Founders with that level of obsession because it equips them to endure for the long haul that it takes to build a company without burning out or losing faith.”
Great solutions to big problems are built by Founders with an obsession to create a fantastic product for customers to solve their problem — think Daniel Ek at Spotify and Steve Jobs at Apple.
The Founder needs to have bags of positive energy to be able to go the distance, to raise the money, to overcome the inevitable multitude of challenges. Resilience is hard without energy.
Passion is different to “energy”. Passion is the infectious enthusiasm which enables a Founder to pull together a world class team and build an ecosystem around the company to scale fast. It gives investors confidence that your determination today will be there tomorrow.
Every day a CEO is presented with a slew of problems. Sign up problems, operational problems, people problems, delegation problems: curiosity drives a person to find solutions. Curiosity means a person is usually coachable when they may need support, they’re keen to be better leaders and improve themselves.
6. Experience, or no experience?
A great Founder will often have experience in the sector that he/she wants to change, in order to have valuable insights into how things can be better.
Conversely, someone who has no industry experience may have a new, better take on a sector, perhaps their only experience being as a customer, which all those who are institutionalized into their thinking within that industry can’t see. Paul Graham wrote:
“It’s hard enough already not to become the prisoner of your own expertise, but it will only get harder, because change is accelerating … [a] trick I’ve found to protect myself against obsolete beliefs is to focus initially on people rather than ideas. Though the nature of future discoveries is hard to predict, I’ve found I can predict quite well what sort of people will make them. Good new ideas come from earnest, energetic, independent-minded people.”
Deep-tech innovation requires specialist expertise to realise. Elon Musk spent the first 20 years of his career outside the space industry before founding SpaceX — but had spent a lot of time becoming a rocket expert after asking himself the question why do rockets have to be so expensive?
Products or services transforming an industry may require access to a network of partnerships or suppliers which might otherwise be challenging to work with as a startup.
At the very least, you need a key insight and then a solution which can form the basis of your secret sauce.
If the Founder(s) don’t have the ambition to grow their business into an organisation that has impact at scale, even if you have the other traits listed a startup can end up down a rabbit hole, limiting eventual scale.
We’ve learned there are two types of founder: those who love running a company and those who love growing a company. There’s overlap of course, but each type is representative of a bias toward a set of behaviours and reward seeking which provide the entrepreneur fulfilment.
It’s better early stage if a CEO gets their kicks from growth, not from operational excellence by itself.
The moment Duncan starts talking about why he Founded Clim8, you can feel his obsession to build a product which will have a real impact on climate change. He wants to empower millions of people to invest into clean energy and truly green companies.
He’s spent almost 20 years building cleantech companies and investing in others, from biofuels and recycling to solar batteries and clean energy. It is an authentic frustration built out of his experience, alongside his network in sustainability and renewable energy, which makes him uniquely placed to build Clim8.
We invested early because from the start Duncan’s passion has attracted a world class team, and when we met them it was clear they share a common mission to help fix our planet.
We are excited to investing again into Clim8’s their latest round, at time of writing raising on Crowdcube.