Startups & Investments
Episode 3: How to Select the Best Team

In this series, we are discussing the role of investors, technology developers (startups as well as established companies), accelerator programmes, end-users (e.g., water and wastewater utilities) and industry-experts in the battle against climate change with targeted reduction and mitigation technologies in the water industry. In the previous posts, I have explained why the early-stage diagnostics of climate or water technologies needs to be improved, and why Tech Talk is essential early on in the discussions between investors and technology developers. In this third episode, we will explore the role of accelerator programmes in the selection of promising startup teams with the right characteristics to become successful entrepreneurs.

Sharks and dragons

According to Sifted, investments in repeat founders do not perform significantly better than investments in first-timers. This suggests that seasoned entrepreneurs are not necessarily better equipped to pick the most promising ideas out of a line-up of startup pitches than anyone else. Yet, this is often the format accelerator programmes choose to select startups for their incubators, bootcamps or consecutive stages of support: a group of seasoned entrepreneurs forms an assessment panel, and startups present a three-to-five-minute pitch to explain their idea. It looks a lot like the BBC’s Dragon’s Den or ABC’s Shark Tank. Except that in these televised versions, you do not get to see the preparational work that is done behind the scenes well in advance of the broadcasting of the show, so it looks as if the investor draws their check book spontaneously, based only on a short pitch. Of course, this isn’t true, but it makes for entertaining television. However, in the pitch sessions that I have either observed up close or been involved in myself, these preparations were minimal if not completely absent.

The first time I had to present a pitch about my own business idea, I was asked by one of the panel members whether I thought I would be able to do the job, which required in-depth knowledge on sensor technology for the water industry. “Are you sure you have the necessary technical knowledge to do this?“ he asked. Given that I had been active in the water industry for 25 years by that time, dedicating my career to water quality monitoring and sensoring, including a PhD on the subject, as well as the fact that the panel members had all been given my CV in advance and were thus assumed to know my background, this question made no sense to me whatsoever. All the more so because the previous pitch had been by four university students with no work experience to speak of, in which they asked for a € 15m investment to set up a production facility for their product. Nobody asked them if they possessed the necessary knowledge and skills to do that.

The thing is… the more you know about what you are doing, the more you can see potential weaknesses and pitfalls. Unfortunately, pointing out the parts of your product that may still need further development can also make you seem less confident, and these pitches are first and foremost about confidence. I am deliberately using the word ‘seem’ here, because personally, I do not think that addressing possible points for improvement are indicative of a lack of confidence. But more about that later.

Why confidence is a bad indicator of real leadership ability

In itself, confidence is an important ingredient of leadership, albeit the least important of the list, which also includes expertise, intelligence, hard work, connections and luck, according to Dr Tomas Chamorro-Premuzic. In his book Why Do So Many Incompetent Men Become Leaders, he clearly describes the difference between confidence (how good you think you are) and competence (how good you really are). And although this book was not written with technology startups in mind, it also explains what is wrong with the pitch culture at accelerator programmes, and why this approach does not lead to the selection of the best startup teams. In order to unpick this further, we need to take a closer look at Chamorro-Premuzic’s research as an organisational psychologist. I warmly recommend his book to anyone interested in improving team selection procedures at tech accelerator programmes, but for the short version, you can also watch his TED talk.

In my previous post, I mentioned the example of Jacob Tompkins advising startups to focus on selling a compelling story and vision to show enthusiasm and self-belief. He is by far not the only one giving this kind of advice to startups. However, according to Chamorro-Premuzic, confidence has two sides: internal (how you feel) and external (how you seem). Internally, you can feel confident enough to admit there are things you do not know or cannot control about your business idea, but to the outside world, this can make you seem less confident. The startup pitch is all about external confidence, and largely ignores – as I experienced myself – or even punishes internal confidence. Additionally, when competent people lack confidence, they tend to prepare more and act with caution, as they are aware of the risks. But when confident people lack competence, their best bet is to try and hide it from others, which is a recipe for disaster. So, in order to improve early-stage diagnostics of potentially successful teams, the selection procedure within a tech accelerator programme should be focused on identifying real competence rather than confidence, or worse: charisma.

What’s wrong with charisma?

Over the years, I have attended several water technology conferences during which a number of technology developers pitch their business ideas to an audience of water professionals. All members of the audience are then asked to identify their favourite pitch, and the team with the most votes wins a prize, such as a marketing and communication package to attract further attention to the technology under development. The idea behind this approach is simple: if you ask several hundreds of people (professionals even) for their opinion, and one presentation receives a majority of the votes, it must be a good idea because that many people can’t all be wrong. The problem is that they can be and they will be, since everyone will pick the most charismatic presenter as a winner, regardless of the technological merits of the idea presented. Charisma clouds people’s judgements of actual performance and has a universal attraction that is difficult to resist.

"That many people can’t all be wrong. The problem is that they can be and they will be..."

Picking a good idea out of a line-up of pitches becomes even more difficult in an international setting, with presenters from different backgrounds and nationalities. The language of choice at events that I attend is usually English, and native speakers tend to perform better at such pitch-events than non-native speakers. Many people are more comfortable speaking in their mother tongue, and even people who are charismatic in their own language may struggle to get their message across with the same amount of flair when having to present in another language.

Charisma, as stated by Chamorro-Premuzic, can be a helpful tool for leaders. However, it rarely combines well with efficiency, execution and organisation. Additionally, it can become a substitute for leadership, masking genuine objective indicators of leadership skills. If confidence is not backed by competence, charisma is an excellent smoke screen to hide behind.

Charismatic leaders are often remembered for their ability to draw attention to themselves, which may create the impression that all effective leaders possess this quality. However, exceptional leadership is characterised by an unusually high degree of self-evaluation to counterbalance the flattery that leaders receive, as well as a healthy dose of determination and humility, which is vital to cultivate talent within their teams. Exceptional leaders promote the success of others and facilitate effective collaboration among team members. When a leader exhibits humility, team members are more likely to follow suit by displaying greater modesty, acknowledging errors, sharing credit, and being receptive to feedback and ideas from others. These attributes are essential for a startup team to build a successful business.

Therefore, charisma is something to be wary of, especially in startup teams. The pitch culture at accelerator programmes is in this case particularly unhelpful, as it favours charismatic speakers. In a situation where actual competence is already difficult to judge, overconfidence becomes very hard to spot, and charisma muddies the waters even further.

Regarding leadership, Chamorro-Premuzic concludes that character traits which are helpful in obtaining a leadership position at a company, i.e. (moderate over-)confidence and charisma, can often hamper performance when executing this role. Similarly, these traits are also likely to increase the startup team’s chances of successfully attracting an investment, but do not necessarily match with those needed to spend the money wisely and build a successful company in the long run.

Ditch the pitch

Confidence is a positive attribute only when it is backed by competence. Therefore, it is crucial to identify concrete signs of competency within startup teams. Chamorro-Premuzic describes this as intellectual capital, a combination of domain-specific expertise and sound judgement. This combination of traits enables individuals to filter out irrelevant information and rapidly address core issues. This in turn results in creative problem solving, pro-social behaviour and less counterproductive work behaviour. But first-time startups have no past performance that can be judged, so – especially for young startup teams – the focus should be on potential rather than competence, as this helps to identify future leaders as early as possible. Chamorro-Premuzic identifies four indicators of potential: curiosity, a growth mindset, grit and learning agility. Selection procedures should focus on the identification of these traits in young startup teams rather than focusing on confidence. It is counterproductive to have startups present themselves as confident business leaders when there is still so much to be explored and learnt and very little to be confident about. Therefore, the only logical conclusion we can draw here is that the pitch needs to go. So, let’s stop trying to squeeze a wide variety of entrepreneurs into the stray jacket of the stereotypical, charismatic male business leader. I realise that this also means that the accelerator’s selection procedure needs to be more tailor-made to each startup and may possibly take a bit more time than getting each startup to do a five-minute pitch, but I think the result is well worth it, both for the startup and the accelerator. And there are two added bonuses:

  1. Accelerator coaches of startup teams have known for a long time that the most coachable people are the ones who do not think of themselves as better than they actually are. In a selection process focused on identifying potential rather than (over‑)confidence, the more coachable participants will automatically prevail, leading to better coaching results and a much more rewarding job.
  2. Many accelerator programmes recognise the benefits of diverse startup teams, but are struggling to meet their diversity and inclusivity targets. Forget about specific search parties for female or minority-led startups in order to achieve that goal. A selection process tailored to the identification of real potential instead of confidence as a substitute for competence, and with room for expressing internal confidence by sharing possible weak spots of the business approach, will automatically yield more underrepresented participants who, like me, are put off by the boastful male-favouring pitch-format.

In summary

If we can improve the startup selection process and move away from the stereotypical charismatic business leader with a healthy dose (or even an overdose) of self-confidence, we can focus on the teams with the best business idea and chances of success. And by creating an environment in which unresolved issues and potential weaknesses can openly be discussed, creative solutions can be found within the accelerator’s network. This is essential to give promising sustainable technologies the best possible chance of becoming successful, without wasting time and other precious resources on compelling stories with no substance.

Corina Carpentier, PhD

Corina Carpentier, PhD

Corina (PhD in aquatic ecotoxicology) has more than 25 years’ experience in (online) water quality monitoring as a researcher and consultant. She is responsible for the technical content and quality of Sensileau’s products and services.

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