Over the years, I’ve been fortunate to be a mentor, judge, and guest lecturer for dozens of deep tech startup courses and competitions. I’ve worked with pre-seed student teams to post-A companies out of universities💬Particularly my alma mater. Go Wildcats!, national laboratories, and venture firms.
Through my experience, I’ve noticed patterns. These have become my personal “gut checks” for judging deep tech startups, which I always use as a first-pass filter before digging into their tech literature.
I cannot stress this enough: the founding team must be rock solid. A first-time deep tech startup is nothing more than branding around a founding team and maybe a couple of publications. This means that your founding team is your company’s value!💬I spoke through seed-stage startup valuation with a well-known venture investor. He told me that first-time seed-stage deep tech companies are always worth $3-6m, with that slider based entirely on the “feel” of the founding team. Larger seed-stage valuations are reserved for serial entrepreneurs and celebrities. In other words, the quality of your founding team is your company’s valuation.
So, what makes a solid founding team? If I were to boil it down to one rule, it’s this:
The first thing I look for in a new startup is a balance of technical and business expertise within the founding team. These must be equal voices at the company.💬I want to be clear about balance. Balance doesn’t mean that you need to have the same number of technical and business founders, or that all technical founders have PhDs and all business founders have MBAs. This instead means that each side is given fair representation and founders are not overriding each other.
A team of all business founders will sell you teleportation. They’ll spend their entire pitch talking about how great teleportation would be and how many trillions of dollars of value will be unlocked. They’ll leave implementation as a foregone conclusion if you invest.💬They’ll likely string along investors at a decent valuation, be unable to attract technical talent, and then fold once they run out of money. They’ll write an investor letter blaming “technology readiness”. Steer clear.
A team of all technical founders will sell you a sparger. They’ll talk excitedly about how their sparger is, like, really good, and how they have a friend in the R&D division of a big company who wants to give it a go. Their business plan is basically “my friend wants one so I’m sure we can sell enough”.💬They’ll struggle to raise investor funding and are more likely to end up bootstrapping through government grants. If they overcome their lack of managerial experience, they might sell at a modest valuation to an industrial partner 5-10yr down the road.
In the real world, you’ll often see hybrids of this dynamic.
There’s the team of M7 business founders dragging along a disinterested technical founder who will not leave their current job.
There’s the technical PhD CEO who will pad the founding team with low-tier MBA students in an attempt to game the system.
There’s the professor who’s taken a C-level title and won’t let go of organizational control, even though they have no plans to leave academia.
In all of these scenarios, there’s an underlying trend.
Our egos tend to make us over-value our own skills and under-value the skills of others.
Are you a PhD starting a company off a recently accepted Nature manuscript? Do you think that most of the “hard” work is done now that you’ve shown a proof of concept? Are you convinced you just need a team of lower-skilled technicians to bring your tech to market?
Never underestimate the skills you don’t have. How are you going to segment and sell your technology to a supply chain bent on giving you as little money as possible? How are you going to develop an organizational culture that attracts top talent? How are you going to build a quality-driven manufacturing organization that reproduces your innovation every day without failure? How do you know your safety, intellectual property, information security, and accounting systems are rock solid? Who’s keeping your investors happy?
Are you an MBA student dead-set on being founder and CEO of a deep tech company? Did you find a couple of technical grad students who are willing to give you full control and work for pennies?
Never underestimate the skills you don’t have. Technology is the engine of all deep tech companies. You may have the skills to steer the company in the right direction, but your abilities are worthless if nothing happens when you press the accelerator. Do not figure out your engine “along the way” and do not hire inferiors to minimize dilution. If you don’t have a technical co-founder who you deeply trust as a peer, you’re not ready to start a company.
Keep your ego in check and you’ll be able to build the rock star founding team needed to turn your vision into reality.