Concept Ventures was an early investor in billion-dollar AI company Eleven Labs.
Reese Chowdhury
One venture capitalist says one of the biggest reasons startups fail is the relationship between co-founders.
Reece Chowdhry, a founding partner at Concept Ventures, said early teams often split within two years because co-founders clashed or lacked a common vision. His venture capital firm, founded in 2018, says it is Europe’s largest pre-seed fund focused on idea-stage startups. The company recently announced that it has raised $88 million for its latest fund.
Chaudhry told CNBC Make It that he invests based on the founder’s personality and characteristics even before the product is created. Chaudhry explained that there are four to five key characteristics he looks for in a startup before going all-in.
“I think 80% of our decisions rest with the founders. Typically, we are the first investors in every company we invest in,” Chaudhry said in an interview.
“Typically, the number one reason why companies fail in the first 18 to 24 months is that founders don’t get along or are at odds and don’t have the same vision or purpose, so we think that’s really important,” he said.
In his first meeting with the founders, Chaudhry emphasized that compatibility in his co-founders was one of the key characteristics he was looking for.
“One of the things we’re very particular about is, ‘How well do you know each other? Have you experienced anything meaningful in your life? If we interviewed both of you separately, would the answers match? What are that person’s strengths? What are that person’s weaknesses? And do you know each other well?
“If I asked the New York Times dating questions, would the questions match up to a level that would really give me an intimate insight into the nature of people?”
Other core traits Chaudhry looks for in founders include obsession with a particular field or industry, tenacity and grit, a growth mindset, and evidence of exceptionalism in something outside of work, such as sports or chess.
Concept Ventures was an early backer of Celebrity, a $3 billion voice AI company co-founded in 2022 by Mati Staniszewski and Piotr Dąbkowski. Chaudhry said two key features stood out during his meetings with Eleven Labs’ co-founders that convinced him to invest.
“The two things that stood out were the obsession with the domain, literally thinking about the problem for a long time, and the team dynamic. They were like childhood friends. They knew each other very well. They complemented each other really well,” he added.
“The whole package”
Y-Combinator co-founder and startup guru Paul Graham shares similar wisdom on his blog. He noted that most successful startups have at least two or three founders, and warned that individual founders face an uphill climb.
In one post, Graham wrote that it was a “vote of no confidence” to suggest that startups with only one founder were unable to convince any of their friends to join. However, failure is possible even when there are multiple founders.
“The relationships between founders have to be strong. They have to genuinely like each other and work well together. Startups do to relationships between founders what dogs do to socks. If they can be pulled apart, they will be,” Graham said.
Concept Venture’s Chowdhry added that the decision to invest in early-stage startups involves considering the “whole package” rather than just one founder.
“It has to be a package. I think what a lot of venture capitalists optimize for is to usually meet with the CEO, and 50% of the business is two or three people, but a lot of eyes on the CEO,” he explained.
He noted that many companies being founded in Europe have very technical founders, but are looking for founding teams with complementary skill sets.
“It’s not just about technical and non-technical things. Are some people very fast thinkers and others balance those things? Slow thinkers slow others down. Do people have a magnetism that allows them to attract world-class talent?” he added.
