Founder Chemistry: The Real Due Diligence

Angel investors should be comfortable with the team before writing that first check. At the earliest stages you’re not buying a perfect financial model, you’re betting on the people sitting across the table (or Zoom). The product will pivot; the market will change the plan will burn. But the founding team will, hopefully, remain the same. Or at least they need to for the short term.

Before writing that first check, angel investors must get comfortable with the team. This is because, at the seed stage, the initial financial model is secondary. The product is likely to pivot, the market will inevitably shift, and the original plan will be discarded. You are essentially betting on the people, as the founding team is the enduring asset that will navigate all the necessary short-term changes.

Venture investing is a high-touch game. You get to choose this, and you need to choose wisely. Startups don’t fail just because the idea or the product is bad. 23 percent of startups fail because of internal team problems, such as misaligned visions, ego wars, burnout, and communication silos. Competition doesn’t need to run these companies off the market; they just need the founders to fight between themselves.

At OSEIN we strongly recommend that each investor’s due diligence has a formidable aspect of founder-team chemistry testing, including character evaluation, cohesion, chemistry and coachability. Rather than relying solely on financial projections, firms like Sequoia and a16z know that the real investment is in character—specifically, the founders' resilience, adaptability, and self-awareness.

·       Resilience: Founders who can bounce back from setbacks with renewed focus.

·       Adaptability: Willingness to forego a cash-cow to invest in the next transformation.

·       Self-awareness: A team that takes ownership instead of blaming each other.

Grit needs to pair up with uncompromising self-awareness. If a team is clinging onto their idea too hard, despite what the market is indicating towards, please consider that a red flag. Resilience is not just sticking to the initial plan or idea; it’s about perseverance.

Having been on the receiving end of pitches from exceptional startups, I can tell you that the way we start conversations might be with the product or the problem, but every debate ends with the people. Can this team take the product to market? Can the founder find the right people to build the product? Can the founders execute their vision? Are they envisioning where the company will be in ten years? Do the founders get along? Are the founders open to feedback? Do they brainstorm with creativity? Do they trust and respect each other? People, people, and people.

You’re probably wondering: if founder fighting leads to failure, is the solo founder better? No. Sure, solo founders don’t have team friction, but the tradeoffs are too great. Solo founders face heightened risks, including isolation, counterproductive tunnel vision, and burnout. Startups are emotional roller coasters, so, as an investor, you want someone to hold their hand when the product fails, and the deal goes bust.

This is why balance beats brilliance:

Solo founders burn out. Too many co-founders implode. The data shows the sweet spot is two or three co-founders, which is enough diversity for creative friction, but small enough for quick decisions.

You want to look for a combination of these four archetypes:

• Hacker – the builder, technical core.

• Hustler – the storyteller, seller, fund-raiser.

• Hipster – the empathy engine; owns product feel and user trust.

• Handler – Ops guru who keeps the day to day in line.

Shared values keep this kind of team glued together when the market melts down. Complementary skills allow them to solve problems faster than competitors.

Domain expertise is, naturally, a prerequisite, but we shouldn't disqualify a team simply for lacking extensive experience in that field. I’ll write a more elaborate piece on that in my next release, but if the team members have the right skillset, I want you to interview the founders like you would a new hire.

• “Tell me about a time you failed spectacularly, and what did you learn?”

• “Describe a disagreement with your co-founder, and how did you resolve it?”

• “When everything breaks, who does what first?”

You’re listening for emotional stability, ownership, and empathy. You can even ask them about their reaction to adverse market challenges and how their company would navigate the situation. Does the founder get defensive when you say their product isn’t all that great? Do they avoid your line of questioning when you raise concerns? You want them to listen carefully, acknowledge, and respond with curiosity and clarification.

The ultimate predictor? Coachability: founders who can unlearn fast enough to pivot when data shifts. Think Slack, born from a failed video game, or Airbnb, whose founders literally shot better photos themselves to fix user growth.

I know you want to see conviction in your portfolio founders, but conviction without humility will burn cash. In a world where the market changes weekly, the adaptive, coachable, and chemistry bonded team is your real hedge.

“One cannot expect founders to win every round, only that they learn fast enough when they start losing.”