The importance of talent spotting
David Peterson

I just finished Tyler Cowen and Daniel Gross’ latest book Talent: How to Identify Energizers, Creatives, and Winners Around the World and would highly recommend it. (If you’re short on time, you can listen to their excellent conversation on Cowen’s podcast here). In the book, Cowen and Gross claim that the world is currently failing at “identifying talent,” and they argue that getting better at talent spotting would have enormous benefits for individuals, organizations and the world at large.

I’d like to make a more specific and somewhat stronger version of that claim. Namely, that talent spotting and “talent-routeing” (putting the right people in the right job) are by far the most important factors in startup success. In fact, in comparison, technical innovation barely registers.

That may sound strange coming from an early stage technology investor, but I’m nonetheless convinced. Technical breakthroughs can be important (if they enable some sort of business model innovation or pricing advantage, for example), but they are neither necessary nor sufficient for startup success.

In the podcast, Gross shares an example of this phenomenon: SpaceX. SpaceX has completely changed the space industry, but the company isn’t doing anything new from a physics standpoint. They’re using yesterday’s technology. They’ve been able to succeed, Gross argues, by hiring the right people and putting them in the right roles.

Once you notice this, you see it everywhere. Category winners are rarely those companies that are the most technically innovative. They’re the companies that hire and use their people well.

You can see this within companies too. Think about your own company. Is there a group that is executing on another level entirely? A manager that always seems to get the best out of their team? There was a manager at Airtable that seemed able to handle any problem, no matter how thorny, and irrespective of whether or not she had relevant experience. How? She knew how to recruit the right people, and point them in the right direction. That skill was far more important than any domain expertise she had. (I won’t embarrass her by naming her here, but suffice it to say, you should probably hire her.)

Okay, so, let’s say you agree with my claim. How do you go about spotting these special talents?

I don’t have a silver bullet for you, but here are some questions to ask inspired by Gross, Cowen, and my own experience:

Do they have durable, unbounded energy? For founders and early employees in particular I find this to be an incredibly valuable signal. For any startup to succeed, founders will need multiple shots on goal. The first path won’t be the right one. But they will need to bounce back, identify a new angle in, and try again. To keep going in the face of countless rejections, founders and early employees need a deep well of energy to draw on.

A stronger version of this: raw intellect is overvalued. Energy is undervalued. And I’d bet on energy every time.

Can they identify, recruit and “route” great talent themselves? Good recruiters are somewhat easy to identify. Some things to look for: are they a magnet for talent? If you ask them who they’d hire, do they have a list of top performers on the tip of their tongue? Even better, do they have people waiting in the wings who will jump at the chance to join them once the opportunity arises?

The best routers, however, are a special breed. They are empathic. Intuitive. They are often able to identify hidden talents of individuals on their teams. To spot a router, I like to ask about teams they’ve built in the past. How did they find each person? Why did they put that person in that particular role? I’m looking for stories of unlikely candidates doing extraordinary things.

This isn’t a complete list, of course. Some variables that may be important, but I didn’t include above:

• Systems thinking. This was something we looked for obsessively at Airtable. Especially when you’re building something new, it’s important to find people who are excellent at execution, but understand the broader context of the business — the system, the inputs and outputs — well enough to prioritize for themselves.

• Competitiveness. Startups are undeniably competitive. How important is competitiveness as an attribute on the team?

• Curiosity. Are they more excited by what they might find out than what they know for sure?

That’s where I’d start, at least. Now identifying the right talent, and putting them in the right roles, is hard. But attracting that talent in the first place….well that’s another challenge entirely. Perhaps for next time!

David

EVENTS

Jun 22 / The Importance of Culture and Values As You Scale a Business
Oren Kaniel, Co-Founder & CEO, AppsFlyer

Sep 7 / The Evolution of Collibra’s Product Positioning & How They Created a Category
Stan Christiaens, Co-Founder & Chief Data Citizen, Collibra

Sep 21 / A Talk with Jason Green
Jason Green, Founder & General Partner, Emergence Capital

FROM THE BLOG

The Right Stuff
How to build a commercial team.

Mapping the New World of Business Collaboration
Why we invested in Reco.

What do a 2003 BMW and Microsoft Excel have in Common?
Leaving users feeling empowered and energized, rather than managed and disconnected.

Fewer, but Better Than Ever
The Israeli tech eco-system ponders a slowdown in startup creation.

EUROPE & ISRAEL FUNDING NEWS

Germany/Education. Coachhub raised $200M for its digital coaching platform for companies.
Israel/Health. AIDoc closed $110M for its AI-driven solution that analyses medical images directly after the patient is scanned to empower physicians and expedite patient treatment.
Netherlands/Employment. TestGorilla raised $70M for its online skills assessment platform and applicant tracking solution.
Germany/Financial. Upvest raised $42M for its API that offers its end customers capital market investment products including everything from ETFs and stocks to crypto assets.
Israel/Security. Jit raised $38.5M to make the field of product security accessible to application developers on the cloud.
Germany/Travel. Distrubusion raised $31.5M for its B2B ground transportation marketplace offers an array of operators instant access to a network of online travel agents, meta-search websites, and other mobility platforms.
Germany/Financial. Airbank raised $20M for its all-in-one finance management platform for businesses.
Germany/Operations Automation. Next Matter raised $16M for its no-code automation platform that helps operations teams.
Israel/SW Development. Tabnine raised $15.5M for its code auto-completion tools.
Israel/Industrial Systems. Indoor Robotics raised $15M for its autonomous indoor security drone robot fleets.
Israel/Financial. Finout raised $28M for its self-service cloud cost management tool that provides unmatched business context into their cloud environment.
Switzerland/Health. Molecule.one raised $13M for its open platform that connects life science research to funding.
UK/Industrial Materials. Epoch Biodesign raised $11M to target plastics that are currently unrecyclable — things like multi-laminate packaging, flexible films and plastics used in agriculture and manufacturing.

WORTH READING

ENTERPRISE/TECH NEWS

European downturn. Gil wrote an informative tweet thread about why the European and Israeli startup ecosystem will likely not be spared during this downturn.

Unicorn tracker. Pitchbook has created a global unicorn tracker, tracking all the new unicorns minted since the start of 2016. What is particularly fascinating is that, while it may feel like the unicorn birth rate has plummeted as of late, Q2 2022, still has had more new billion dollar companies than in any quarter prior Q4 2020.

HOW TO STARTUP

Adapting to endure. Sequoia recently shared four presentations for founders to help them navigate the current market conditions and emerge as strong, enduring companies. All the decks are worth checking out, but the Extending your Runway and Forecasting & Scenario Planning presentations in particular are must-reads for founders.

The Israeli layoffs project. The Israeli Layoffs Project launched last week to share Israeli layoff announcements, laid off employees looking for new roles and companies still actively hiring. This project’s goal is to help people who were impacted by recent layoffs find new roles at companies that are still actively hiring. For startups still hiring, there is now a terrific opportunity for hiring great talent impacted by these layoffs.

Maintaining investor confidence. Jason Lemkin wrote a great article about 10 mistakes founders make which decreases their existing investors’ confidence. The entire list is great but some of his best points are: “Blaming macro issues and externalities 100%. Sometimes, the market is down. Sometimes, your customers do struggle. But this is never 100% the root cause of any post-revenue SaaS company’s problem. Highlight the macro issues, but don’t blame them 100% for your issues.” and “Being too slow. Too slow to make key hires. Too slow to evolve the product. Too slow to change. Investors know the best founders evolve quickly. When it takes founders 9–12 months to see issues and take action — investors know that’s too slow. Too slow to win, and sometimes, too slow to make it.”

HOW TO VENTURE

Shifting deal terms. The last few years have been characterized by an abundance of venture capital. In 2021 especially, due diligence periods were often shortened (or eliminated), valuations were frequently inflated and terms generally favored the company. However, as the market has continued to sour there has been “a paradigm shift in the market back to investors, with deal terms becoming more friendly to those putting up the cash.” Specifically, deals are now more likely to have lower valuations and “an increase in protective provisions like liquidation preferences, redemption rights, ratchets and tranched financings.”

PORTFOLIO NEWS

Forter’s VP of APAC, Joe Lee, explained the main threats to e-commerce, revealed the impacts of major fraud, and shares his top three tips on how to thwart fraudulent activity.

Planable’s CEO, Xenia Muntean, shared her strategies for building authentic relationships that can help a business thrive.

Reco’s CTO, Gal Nakash, covered how to secure collaboration tools without disrupting business.

Levity created a short video on what is AI bias, how it can be encountered in real life and how it works.