By Pekka Mäki, Managing Partner at 3TS Capital Partners
Over the years, I have had the pleasure to meet with hundreds, if not thousands, of entrepreneurs and get to know them both as captains of their businesses and as individuals. It is a well-known fact that a team is one of the key aspects of a prosperous business. At 3TS, we have been fortunate enough to partner up with and back many of the very successful entrepreneurs and below I am highlighting some of the key characteristics we search for before investing.
Passion for the Purpose
Some entrepreneurs are unfortunately too focused on the money. They have a preset idea of how much they are raising in the round and at what pre-money valuation. They can also tell you how much money they need to earn themselves and how much they need to make at exit to make this business worth their time. They often also talk about their own opportunity costs. Such approach is never ideal.
We rather focus on entrepreneurs who will passionately and in detail tell us how they have spotted an opportunity to change the way how server remote monitoring is done or how they will improve the efficiency of solar panels or how they will decrease the time wasted on retooling manufacturing robots. Their businesses are built on a purpose to fundamentally change things, either big or small, either globally or in their own country. These types of entrepreneurs are driven by their passion to change things for the better, and these are the types of entrepreneurs we want to support.
Learning from Tops & Flops
There is a common belief that our industry likes backing serial entrepreneurs. It is easier to invest in them, as they know how to interact with investors and even speak in their own jargon about “participating prefs” and “cloud multiples”. Also, backing the second business of a successful entrepreneur soon after their first exit is a relatively safe bet and you probably won’t get blamed for the failure even if things go terribly wrong. There is however no reliable data to show that serial entrepreneurs deliver better returns than first-time founders.
Rather than focusing on the number of businesses they have previously started, we focus on their personality. During our first meetings, we ask about their biggest achievements and missteps and their learnings from these. The tops and flops normally form the character plenty. People who have experienced both hard times and the good life are normally more balanced in their views and do not pretend knowing it all. Working with such entrepreneurs in the long term is more pleasant and they actually understand that you support them with much more than money. The fastest way to end a pitch meeting with us is to say something like “I know how to build this business and all I need now is five million euros”.
Focus on Execution
In the early stages, many founders believe that their business idea is unique and there is none or very little direct competition. Some are even secretive about their great idea. The reality is that for most good business ideas there are globally many direct competitors or very good alternative options. What we all already know is that the original business idea accounts for some 10% of the success and 90% is up to the continuous, relentless execution.
We look for entrepreneurs and managers who work hard every day on improving executional details and put in the hours needed to perfect even the tiniest details. Small daily steps lead into visible advancements by the end of the week, which can turn into major positive advancements within a month. Small streams are needed to build big rivers.
The most successful teams we have seen at 3TS are those comprising passionate and grounded entrepreneurs who focus on solid execution. Those are the people whose journey we want to join and with whom we want to work on achieving the set goals and ambitions.