There is a lovely little, self-validating myth in venture capital that startup failure is usually about the market, timing, capital, product, regulation, distribution, act of God or some other tidy external reason that can be modelled neatly after the event.
Sometimes that is true – Mostly, in my experience, it is only half the story.
I believe that the more awkward truth is that a lot of startup failure starts much earlier. It starts in the first few meetings, when investors decide whether the person sitting opposite them is someone they want to back.
Not the spreadsheet, Not the TAM slide. Not the beautifully tortured hockey-stick forecast that says year five revenue will be $100m because someone dragged a cell across Excel and squinted, with supreme confidence, at the result.
Nope, I’m talking about The Founder.
Everyone in VC and PE land says, “they back founders”. It’s now compulsory. “We invest in people, not business plans.” Fine. I absolutely agree with the sentiment. But that statement is only useful if investors are actually good, have the skill, to spot the right people.
And I am utterly convinced they aren’t!
In fact, I think one of the great systematic failures of venture capital is that it repeatedly mistakes the appearance of a great founder for the reality of one. It backs the person who performs well in the room, rather than the person who will survive contact with the market, when the rubber hits the road.
That is not a small distinction. It is the whole bloody game!
Startup failure is not some niche problem. New business mortality is brutal. Roughly one in five new businesses does not survive its first year. Around half do not make it to year five. Venture-backed startups are even harsher, because the model is not built around gentle survival. It is built around the West-Coast myth of scale fast or die trying.
So, if most startups fail, and if the founder is the most important early variable, then founder selection is not a soft judgement call.
It is the main bloody job.
Yet the industry still behaves as if the founder question can be answered through a familiar bit of theatre: the pitch deck, the warm intro, the polished narrative, the McKinsey / Goldman / Stanford logo, the big market map, the crisp origin story, and the ability to say
“platform”, “network effects” and “category creation” without a trace of irony or self loathing.
The problem is that none of this proves someone can build a company. It proves they can pitch one, tell a good story and do it with a bit of passion. Those are not remotely the same thing.
I’ve sat with a lot of founders over the years – more than I’d care to admit. Some in boardrooms, some in cafés, some over a drink once the armour starts slipping. After enough time around startups, turnarounds, fragile egos, brilliant operators and polished bullshit merchants, you start to recognise patterns.
And, unfashionable as it sounds, I think you can often tell pretty quickly whether a founder has the wiring to succeed or whether they’re heading towards becoming another casualty.
Not always. Obviously. This isn’t palm reading. – But often enough to matter.
There is now a very recognisable VC-friendly founder type. Confident. Articulate. Ambitious. Fluent in venture-capital theatre. Usually carrying a huge market, a giant vision and a personal story polished to within an inch of its life.
Some of these people are brilliant – Most are absolute walking disasters. The problem is that early-stage investing rewards the same behaviours in both.
Confidence gets mistaken for competence. Charisma gets mistaken for resilience. Fluency gets mistaken for insight. A good pitch gets mistaken for a good business.
And that’s where the wheels start to come off.
The traits that help someone raise money are not always the traits that help someone build a company. Raising money is episodic. Building a company is relentless.
Raising money rewards certainty. Building a company requires adaptation. Raising money rewards charisma. Building a company requires follow-through. Raising money rewards narrative. Building a company is mostly dealing with awkward customers, slipping timelines, cash pressure and the fact the market doesn’t care how good your deck looked.
I also don’t think success comes from deciding where you’ll be in three years, drawing a neat straight line back to today, and calling it “execution”.
That’s fantasy with a Gantt chart.
The real work is dealing with ambiguity. Playing in the grey. That’s where the insight lives, and usually where the business changes shape.
Most founders hate the grey. They try to stamp it out with passion, certainty and a few heroic slogans. The good ones are different. They can sit in ambiguity without panicking. In fact, they often thrive there.
That’s why “back hungry founders” is right, but nowhere near enough.
Hunger matters. Hugely. I’d back a hungry founder over a comfortable strategist with a lovely deck every day of the week.
But plenty of hungry founders still fail.
Some are chaotic.
Some cannot listen.
Some confuse activity with progress.
Some are so obsessed with winning they cannot see when the plan is broken.
The founder’s worth backing are usually some combination of hungry, coachable, commercially aware and brutally honest about reality.
That last bit matters more than people realise.
The best founders don’t hide from bad news. They don’t need every setback to be someone else’s fault. They absorb evidence, adjust course and keep moving. And you can’t steer without moving!!!
Some are difficult. Fine. Plenty of excellent founders are a right royal, pain in the arse. But there’s a huge difference between difficult and destructive.
Difficult founders challenge assumptions and raise standards.
Destructive founders create drag, politics and fantasy.
And in my experience, the signs are normally there early.
Ask a founder what isn’t working. The good ones answer quickly. The bad ones perform optimism and talk about things outside their control.
Ask what they’ve changed their mind about. The good ones have plenty ofexamples. The bad ones have slogans.
Ask what happens if the next raise slips six months. The good ones know the number. The bad ones start talking about “runway optimisation”.
You learn a lot from those moments. Because startups rarely die from one dramatic wound. They die from accumulated founder misjudgements:
Hiring too slowly.
Expanding too early.
Mistaking investor interest for market demand.
Raising money instead of proving the model.
Chasing partnerships that make everyone feel important and nobody richer. At the centre of most of it sits a founder judgement problem.
That’s why I think venture capital needs to get much more serious and better about founder selection — not more psychometric theatre or founder horoscopes, but actual behavioural judgement.
Can this person learn?
Can they listen?
Can they sell without bullshitting?
Can they hold conviction and doubt in the same head?
Do strong people want to work for them?
Do they understand cash?
Do they understand the customer?
Are they learning faster than the business is burning money?
That last question may be the whole game.
A startup is really just a race between learning and burn.
The company is spending money to discover the truth. The founder’s job is to learn fast enough before the money disappears. If they can’t learn, the capital is just funding denial.
That’s why the best founder conversations often feel oddly practical. The real operators usually want to talk about pricing, churn, hiring, margins, conversion, procurement and customer behaviour — all the boring things that determine whether a business actually lives.
I’m naturally suspicious of founders who only want to talk about vision or about tomorrow. Vision matters. Of course it does. But vision is cheap. Execution is expensive. And the bridge between the two is founder quality.
The irony is that VCs love to describe themselves as contrarian, but founder selection is often deeply conventional. The ecosystem repeatedly backs the person who looks like a founder, talks like a founder and has already been socially pre-approved by the room.
And if they are getting it wrong most of the time, I can only conclude that they’re not very good at it
Based on my experience, I like to spend as much time as I can with them, outside the boardroom, the theatre of dreams, bullshit and hockey sticks. Socialise with them, sometime in places outside their comfort zones, actually get to know them, what makes them tick, etc. And I’ll get second opinions from people outside the VC community. Because ultimately, startups are not built in pitch rooms. They are built in the long, messy stretch that comes afterwards, when the money gets tight, the plan stops behaving, customers disappoint you and reality starts punching holes through the story.
That is when founder quality actually reveals itself.
Not in the performance. In the response.
The founder’s worth backing are rarely the ones trying hardest to look like founders. They are usually the ones obsessed with the problem, capable of learning, able to absorb pressure without becoming delusional, and honest enough to confront bad news before it kills them.
VCs say they back founders. I believe them.
I’m just not convinced enough of them really know what they’re looking at.