What does work? The human factor and its importance to a Startup’s success

11.03.2018
Noa Matz, Founder of TeamDiligent
The most common and interesting question for entrepreneurs today (after 'how to get an investment') is ‘why Startups fail’ and how do they avoid falling to the painful and cruel statistics of startups graveyard. In 2014, a fascinating analysis was conducted at CBinsights, a tech market intelligence platform that analyzes data for venture capital usage, during which 204 former startup founders were asked to describe the reasons for their failure. The participants attributed an average of 45% of the reasons for their startup failure to the team element ("Not the right team", "disharmony in the team", "lack of passion"). This statistic is indeed surprising, but this is not a mistake; The common reason for any startup failure is not necessarily lack of validation or being ahead of the market, as we like to call it, but neglecting of the human capital - the feverish minds with whom we work every day, for long hours and with great intensity to make our dream possible. As part of the bloody pursuit towards product development, marketing, capital funding, dealing with bureaucracies and competitors - most venture teams simply forget about their most important asset.

It is pretty ironic that if you ask the most influential investors in Israel how they choose their investments, they will claim religiously that the team element is the most important factor and has a dominant element in the decision making process. Gigi Levy-Weiss, the most active and connected Israeli angel, admitted in his lecture a few years ago that a good idea is not hardly enough to make him open his pocket and invest in a venture. According to him, 70% of his decision whether or not to invest in a team is influenced by the team's identity: “An excellent idea with a mediocre team would interest me far less than a good team with a mediocre idea”. About two years ago I was fortunate enough to meet Ruthi Simha, General partner and Founder of the Viola Credit Fund, as part of a female entrepreneurs empowerment program. Besides being an inspiring woman, Simha has more than 20 years of experience in technological investments and is responsible for raising 4 different funds and over 20 exits. Each and every entrepreneur reaching Simha’s door step has huge technological and financial potential, so how does she choose? What unique qualities do the chosen ventures possess? Simha's answer was conclusive: the decision is broadly based on her impression of the human capital - the founders team. Simha gave me, and the rest of the women sitting in the room, important insights regarding the extent to which she place emphasis on teamwork and the individuals forming the startup team, for Viola’s potential investments. She will make sure to identify complementary skills and professional abilities, mutual respect, strong leadership, synchronization and communication of team members with one another, both on the professional and the interpersonal levels. According to her, only a team in which we can find all of these elements, will succeed in maintaining the success and leverage that comes following the investment.

The core concept that emerges from Ruthi Simha and Gigi Levy-Weiss’ statements, is the existence of a human space, which is an integral and essential part of the venture’s success. But yet, we do not devote the needed time and attention to empower and nurture it. This exact space is the one that will establish the ability to offer our customers and investors not only a good product, but an excellent team that will boost the venture forward phenomenally. We tend to ask 'What does not work'. I suggest we start asking ‘what does work’ - what did those who succeeded do and how will our venture fall on the right side of the statistics.

This article was written by Noa Matz, Social Psychology, Founder of TeamDiligent  and an expert in startup teams empowerment and diagnosis.