At nvp capital, we aim to lead seed rounds, and across our funds, we’ve done that 40+ times. When we lead, we stay deeply involved—so we’ve had a front-row seat to how founding teams operate and what makes some succeed while others fall short.
Let’s face it: many seed-stage companies don’t make it. Some fail outright, while others don’t create the kind of value the founding team and investors believed was possible. Building a software business that generates tens of millions in revenue annually isn’t a default outcome—it’s exceptional.
Of all the factors that influence success or failure, team is at the top of the list. At the seed stage, founders and their team dynamics are everything. You might have a product and even early customers, but without a strong, well-aligned team, those pieces don’t add up to much.
From our experience, here are a few dynamics to consider when building a founding team:
Key Questions for Founding Teams
- Who are the founders and why? What are the strengths of the team relative to what needs to be accomplished – it is perhaps an over-shared observation but most of the best functioning teams in our portfolio balance commercial and technical experience.
- And the corollary to that question is who is on the founding team—and why? How do you differentiate between founders, founding employees and early employees you’ll add later?
- What’s the team’s history together? Have you worked together? Shared high-pressure situations? Can you tackle tough questions about money, failure, and success as a group?
- What are your personal situations? Founding a startup is a long haul and situations change, but it’s an unforced error to go in without being prepared to make a long-term commitment.
Structure Matters Too
Once you have the right team, structure becomes critical:
- Ownership: Is equity split equally among founders? Why or why not? There’s no “one-size-fits-all,” but equity decisions should be intentional.
- Disagreements: How will you handle disputes? Many start-ups are 50/50 equity splits, which can work, but it’s important to discuss how a stalemate can be avoided.
- First Investors: Your lead investor is essentially a co-founder when it comes to ownership. Is the relationship structured to help you succeed?
There’s no perfect formula, but we’ve seen mission-driven, well-aligned teams overcome incredible challenges. Taking the time to align on roles, goals, and structure early on can make all the difference when the going gets tough.
If you’re starting a company and wrestling with these questions, we’d love to talk.