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Early Stage Recruiting: What do We Look for in a Startup?

We're experiencing arguably the greatest startup bull market of our times, which certainly gives the founders an edge over the investors while negotiating deal terms. Per a recent Crunchbase report, seed-stage funding is up year-over-year by 47% and is down a little quarter-over-quarter. Mature investors dipping their feet into seed-stage funding may be affecting this trend.

Typewriter with Startup Investments on paper. Photo by Markus Winkler on Unsplash

I consider myself extremely lucky to meet with hundreds of founders worldwide every year. We exchange ideas about their vision for the future of the industries they seek to transform. In this article, I have pulled together the lessons learned from my own experiences, emphasizing the key items we as Sente look for when evaluating startups and making an investment decision.

Resourceful Founders Have Skin in the Game

Getting excited about a business idea is common; having the audacity and tenaciousness to get in the market and do the work is not. Drawbacks, shortcomings, and other failures typically teach people to do more with less. Presumably, that's why second-time founders are statistically more successful than first-timers. They consistently identify and work on high-priority issues, regularly reflect on their strategy, implement new learnings, and develop a sharper sense to avoid problems before they happen.

Founders must invest their own resources, time, and capital to demonstrate belief in the product - enough to take the high hit if things go south. This also motivates founders to get the business off the ground on their own.

Paper ball to paper airplane. Image by Matt Ridley on Unsplash

Nassim Nicholas Taleb's book, Skin in the Game, is an excellent read for founders looking to learn more about the importance of taking risks to benefit the business.

What is Your Differentiation and Competitive Advantage?

Apart from the typical "What makes your product/service unique?" question, I ask founders why their company exists in the first place? Why do they matter?

  • Most founders start their businesses to solve a problem. But, that problem likely existed before, and solutions will likely get better every day, and customers may have already found workarounds and substitutes.

  • Have you identified a market niche where you can capture a major market share and get loyal customers? We'd rather see an early-stage startup get traction in a small market than struggle against many competitors in a larger market).

  • What other benefits, other than pricing and technical features is your business bringing to the table?

These are the questions the founders should be asking themselves and their teams every day -and be radically candid to avoid pitfalls.

Traction – Will Your Business Survive and Thrive?

The question when it comes to pre-seed and seed investments is the company's survival prospects.

At Sente, our sweet spot is when startups have an MVP, or they recently launched in the market — we call it pre-revenue. Typically, being the first on the cap table, we bear the greatest risk compared to a Series A+ investor. We want to nurture startups through commercial collaborations with our corporate partner network.

We want to see measurable progress toward the validation of product/market fit, a path toward strong unit economics, and visibility to something that can scale.

The signals that customers are willing to pay and that the fundamental business mechanics can work at scale are important, and the earlier a startup can show those signals, the better. Winning startup competitions, hackathons, being accepted into accelerators - these are good ways to get press coverage but not reliable signals of traction.

Now is the Time to Be a Startup Founder

There has never been a better time to be a startup founder. The burgeoning capital availability, combined with high economic activity and corporates' need for innovation, provide founders with unprecedented opportunities to launch new companies and scale globally.

At Sente, we have worked with more than 500 startups and 20 global corporations. We manage a year-round CVC-as-a-Service process for corporations to explore, engage, and invest in international startups in-line with their strategic priorities.

Startup team with woman at white board. Photo by Jason Goodman on Unsplash

Our relationships with corporates and family offices unlock countless possibilities for startups as we foster commercial partnerships between the startups and stakeholders in our ecosystem.

Are you a startup founder looking to get to the next level? We'd love to talk with you and see if Sente can help you do that.


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