Mike Hirshland has been a Boston-based investor for 17 years, first with the venture firm Polaris Partners and, for the last five years, at the firm he co-founded, Resolute Ventures, which has offices in both Boston and San Francisco.
Hirshland doesn’t say so outright, but presumably he has a certain degree of “pattern recognition” at this point, so over coffee in San Francisco earlier this week, we asked him what he looks for in startups. We wanted his take on nascent startups specifically, as — unlike a growing number of VCs, who wait for companies to better establish themselves — Resolute tends to write checks when there’s a founder, an idea, and not much more.
For example, Resolute has funded storage startup Clutter, whose subsequent Series A and Series B rounds were both led by Sequoia Capital; Greats, a footwear brand that makes classically-inspired sneakers (Resolute has led two seed rounds in the company); and the applicant tracking software company Greenhouse, which has now raised $60 million altogether, including from Benchmark and Thrive Capital.
In short, Hirschland’s strongest ideas are about so-called pre-seed deals and how to hopefully find the most promising among them.
So what’s there to know? For starters, he says, early traction is “very uncorrelated to success. There are many things that few people like. There are few things that many people like.”
As cheesy as it may sound (even coming from the earnest Hirshland), investors in hyper young deals also need to “be inclined to fall for founders’ dreams,” particularly if the founders fall in to a number of buckets that Hirshland has found to hold the most success.
He thinks that people who work for big companies tend not to become the best founders. That includes MBAs, unless they also happen to be great coders. The reason: “The ability to build [your own product] is core to success.”
A “messianic attitude” is also key, says Hirshland. “I’ve seen the most outsize outcomes from people who know from the start what they want to do, versus people who want to start a company and begin by winnowing down a number business ideas.”
The former are “qualitatively different people” and they are “very easy to recognize,” he insists, pointing to an (unnamed) founder who worked briefly at Google but left after finding himself unable to get a certain business idea out of his head. “He’s waking up at 5 a.m. seven days a week, he’s so consumed with [his new startup],” says Hirshland. This person may be chasing a product that goes nowhere — the odds are always stacked again founders — but Hirshland is willing to gamble otherwise; he just wrote him a check.
Hirshland says there are plenty of red flags he watches for, too. Among them: people who want to release a “perfect” product (he says this is usually toxic); and founders who fall so in love with their own technology that they’re blind to the imperatives of building a business (in other words, they confuse validation from a small, early group of users as success and don’t pay enough attention when user growth turns sluggish).
Startups that are focused on growth from day one are often doomed, too, in Hirshland’s experience. “It’s the kiss of death. You see so many companies focus on growth to attract funding and they raise the capital, but investors are then really investing in an [unhealthy operation] that can’t sustain itself.”
(Pressed on what is a sustainable rate of growth, Hirshland says it varies from company to company. He notes that “20 percent user growth per month is bandied about,” but adds that “that’s much easier to do when you are teensy” and very difficult otherwise.)
One last indicator that Hirshland admits is anything but sure-fire but that gives him the feels about a startup: a relentless compulsion to soak up all the information a founder can about the market in which they are operating. “I get most excited about people who are highly experimental, not afraid of rejection, and who are super data driven. I’d rather see someone who is willing to disappoint their earliest users in order to get something right.”
Those first 100 people may not become customers, he says. But with the right approach and a little luck, the next million will be.