Unveil outlier founders and drive smarter VC investments with LEONVC's Founder Potential Diagnostic.
It serves to identify, measure, and mitigate risks tied to prospective investments. This process can be broadly dissected into four primary phases: preliminary screening, business model evaluation, due diligence, and deal terms negotiation.
The Preliminary Screening stage finds VCs wading through a sea of investment proposals, pinpointing businesses that resonate with their focus areas and investment thesis. This stage typically involves assessing the novelty of the idea, the potential market size, and the founding team's first impressions.
During Business Model Evaluation, VCs dig deeper into understanding the startup's business model. This often includes competitive analysis, financial modeling, market validation, and traction assessment.
The third phase is Due Diligence. Here VCs conduct a deep dive into the startup’s team, technology, legal matters, financials, and market positioning. Every claim made by the founders is scrutinized, intellectual property assessed, financial records examined, and team capabilities evaluated.
Finally, the Deal Terms Negotiation phase kicks in post a successful due diligence process. Here, the specifics of the investment, including valuation, equity stake, and voting rights, among others, are negotiated.
The answer lies snugly within the Due Diligence stage. While evaluating a startup's team, the potential of the founding team often weighs as heavily as the financials or the product. The FPD allows VC firms to derive a data-driven, quantifiable, and relative assessment of the founders' potential, making the evaluation process more objective, clear, and fair.
FPD delivers an in-depth understanding of the founding team's strengths, weaknesses, and areas poised for growth. By identifying potential risk factors that could stall the startup's scalability and growth trajectory, it provides VCs with the tools to spot exceptional founders based not on intuition but objective, data-driven evidence.
But the FPD isn't just designed to assist VCs in finding outlier companies—it’s also a powerful tool for identifying outlier founders who may not fit the stereotypical mold of a unicorn founder.
In a traditional VC setting, there exists an unconscious bias towards founders with established pedigree—those with previous successful ventures or Ivy League education, or those connected within the Silicon Valley ecosystem. This approach, while historically effective, runs the risk of overlooking founders who may not fit the mold but still possess exceptional potential.
The FPD takes a data-driven approach, focusing on the underlying qualities and potential of a founder, regardless of their background or pedigree. It empowers VCs to recognize high potential outliers, the mavericks who might have been otherwise overlooked.
The use of FPD contributes to a more diverse and inclusive VC landscape. It assesses founders on the merit of their potential, rather than their resume, enabling VCs to tap into a larger, more diverse pool of founder talent.
Outlier founders can bring disruptive ideas, fresh perspectives, and unique problem-solving abilities—qualities that often translate into innovative, successful ventures. The FPD helps VCs identify these unique individuals.
By adopting the FPD in the due diligence process, VCs can level the playing field, giving every founder a fair shot based on their potential, not their pedigree. The result is not just a more diverse portfolio but also the chance to find those hidden gems that could become the next big success story.
Incorporating FPD into the due diligence process can establish a new norm for founder evaluation—one that aligns with today's data-driven landscape. LEONVC's FPD equips VCs to compare founders across their portfolio using a uniform score, further aiding in portfolio management and risk mitigation.
At the end of the day, the FPD lends VC firms a more comprehensive, data-driven, and consistent lens to assess founder potential. In a landscape where success and failure often pivot on the capabilities and potential of a startup's founding team, the FPD offers a significant advantage. Because, remember, at the core of every successful venture, there's a driven, passionate, and talented group of founders. The better we understand them, the better our investment decisions will be.