Learnings from Looking Inside Thousands of Businesses

As a venture capital investor at Collaborative Fund and Kindred Ventures, Kanyi Maqubela has invested in dozens of companies—including Lyft, Kickstarter, Beyond Meat, and Blue Bottle Coffee—and evaluated hundreds more. He seeks out founders and businesses that are not only addressing a market need, but have the potential to reinvent our future. In this episode of our Creative Confidence Podcast, he shares the elements he looks for to signal a strong business idea, an impactful leader, and a collaborative team. 

When Lyft first arrived on the scene, some people were a little freaked out about hopping into a car with a stranger. Venture investor Kanyi Maqubela remembers telling his wife about the concept when his firm decided to invest early on—and her response: “That’s a terrible idea.” Now, of course, Lyft and Uber are mainstream businesses that are changing how we see transportation.

Often investors are the first ones to see the potential in a business idea. It takes a practiced eye and a clear set of principles to evaluate a fledgling business and decide if you’ll invest thousands or millions of dollars in the hopes it takes off.

We sat down with Kanyi, managing partner at investment firm Kindred Ventures and co-founder of Heartbeat Health, to learn how he separates the good ideas from the bad ones. We pulled out lessons you can apply to your business, your leadership practice, and your team today to set the path for success.

Finding and communicating your business market

Kanyi has evaluated thousands of businesses and invested in hundreds, including Lyft, Quora, Kickstarter, Reddit, Beyond Meat, Impossible Foods, Creative Mornings, and Thumbtack. Previously at Collaborative Fund and now at Kindred Ventures, his investments support emerging founders and world-changing startups at the earliest stages. To make decisions about which of these early business ideas he’ll bet on, he looks at three areas: the market, leadership, and team.

The first and most critical factor for success is the market. “The most important thing in startups and business more generally is about making something people want,” Kanyi says.

Three questions that get to the market potential are:

  • How big is the market the business is addressing?
  • How big could the market be in the future?
  • How badly do people want the solution?

Kanyi likes to look farther ahead as well, examining the benefits and challenges of solving for the user’s need in the way the founder is suggesting. “Don't ask what could go wrong, because the answer is everything,” Kanyi says. “Ask what could go right.” If this exploration brings up bigger, more interesting questions, the business might have potential.

If you’re building up an idea for a new business, the lesson here is to stay human-centered and focus on the needs of your users. Zeroing in on the market and being able to articulate it clearly is critical to getting investors on board.

Leadership traits of successful founders

If there seems to be a good market for a business, Kanyi next looks for evidence that the founder will be able to grow and guide the business to success. A few of the things he looks for include founders who:

  • Are comfortable with uncertainty
  • Have a strong vision—and can communicate it clearly
  • Create and conduct experiments to learn
  • Expertly mitigate risk
  • Switch altitudes easily to see the big picture and also dive into details

Kanyi looks at it this way: “The job to be done for an entrepreneur is to create a plan in the midst of extreme uncertainty.” That plan must be inspiring to both convince people to get on board with your vision of the future and to articulate urgency in the market so the user will decide that they want the thing you're offering. “Being able to tell a story about what the world could look like and what the world should look like is a really important personality trait for a founder,” he says.

Founders who can create experiments to learn and test the market are what Kanyi likes to call “business scientists.” Instead of throwing spaghetti at the wall and running with whatever sticks first, business scientists use a design thinking approach. They develop a hypothesis, design an experiment to learn, and gather insights to reshape their thinking. Then they repeat the process, creating a closed feedback loop that allows them and their team to get smarter about their market.

A common misconception of founders is that they are people who love risk or get excited about it. But Kanyi sees it differently. To him, risk tolerance means you're okay with it now, because you know that very, very soon you're not going to have that risk anymore because you're really good at mitigating risk. “If I had to choose between somebody who loved risk and hated risk to fund, I’d choose the person who hated risk,” he says.

Lastly, leaders at the startup stage should be able to switch altitudes easily. That means looking at the broader landscape from 10,000 feet up at one moment—framing and articulating their vision—then diving down to sea level in the next moment for code reviews, bug fixing, and performance marketing.

These qualities are critical for an early-stage business leader to be able to act on their vision and the market opportunity.

 


“The job to be done for an entrepreneur is to create a plan in the midst of extreme uncertainty.”
Kanyi Maqubela


 

Business growth hinges on a collaborative team

If the market and the leader have strong potential, the last element Kanyi evaluates is the founding team. This small group of initial employees has a huge impact on the way the business unfolds. “An early team is oftentimes not a founder and their employees,” Kanyi says. “It's a team of founders.”

Kanyi looks for these qualities to spot strong teams:

  • A high rate of learning
  • The ability to collaborate and execute quickly
  • Diversity of perspectives
  • Builders who get hands-on

A high rate of learning is more important than a team’s pedigree in Kanyi’s eyes. He’s looking for an adaptable, experimental group that seeks out new information and can move quickly to execute on ideas. In order to execute quickly, he says collaboration ability is critical. The team should be able to minimize bureaucracy to allow the best ideas to go forward quickly.

“Diversity of thought, diversity of perspectives, and diversity of interests, typically tends to yield the highest quality results,” Kanyi has observed. How? Because diversity of ideas often leads to friction and tension, which slows things down. This creates a needed balance between speed and quality. The best teams are good at shifting back and forth between speed and quality modes.

Since all hands are on deck at the very early stages of a new business, Kanyi also looks for a team of builders—people who can be both a leader and an individual contributor. Progress will stall if the team is too heavily weighted towards visionary leaders or tactical executors.

If you’re building a team to get your business off the ground, take Kanyi’s advice. In addition to an impressive resume, look for these power skills and consider the group’s ability to work well with each other.

Learning from success and failure

While Kanyi’s invested in many winning ideas, he’s also experienced plenty of failures—an expected part of working in the venture capital world. Perspective and a learning mindset are critical to get the most out of the profitable investments and also the ones that didn’t work out.

“The disappointing investments teach me about people and frankly, they teach me most about myself,” he says.

A failed investment is a moment for Kanyi to reflect on how he handled the situation as the investor. Could he have given the founder different counsel, or did he miss something when initially evaluating the idea? While there’s no surefire way to pick out which early ideas will turn into world-changing businesses, the gamble is worth the chance to help dedicated founders solve important problems and improve people’s lives around the world.

“With venture investing, we're trying to find the unlikely,” Kanyi says. “We're trying to turn the world over a little bit.”


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