Why Founding Employees are the most overlooked ingredient for startup success

In 2007, a young student from Aarhus Denmark embarked on a doomed mission. But a couple of years later, fate would change the odds against him. Today, he is among the most celebrated Danish founders of our generation.

Peter Holten Mühlmann had noticed a problem. The internet lowered the barrier for commerce. New webshops were constantly popping up. But fraud and bad service followed.

Peter envisioned a software that could help shoppers navigate the mushrooming e-commerce landscape. Like an antivirus program warning you against shops that could not be trusted. He called it Trustpilot.

However, the software needed data. And the most reliable data would be experiences from shoppers. In other words, reviews.

To collect data about webshops, Peter set up a website where people could report bad shopping experiences. Surprisingly, people did. The site found a beachhead among market mavens. The sort of people who find meaning in passing warnings and endorsements to other people. 

Peter started realizing that the reviews might be the product. Consequently, he abandoned the “antivirus” approach and turned Trustpilot into a destination for consumer reviews.

However, a problem arose. How would he make money on this website? Advertising seemed the logical approach, but Trustpilot was not a destination people hung out. Advertising would not be a good way to capitalize, he surmised.

And then it dawned on him. The businesses being reviewed were the customers. Good reviews were gold, and bad reviews were poison. Using good reviews in marketing was worth money. So was the ability to respond to bad reviews.

Trustpilot became a tool to manage reviews. However, this created a new problem for Peter. One that seemingly doomed his startup.

Peter had no experience in selling software to small businesses. Nor did his CTO. The task was daunting, and thousands of startups had shipwrecked on this challenge. 

At the time, software was seldomly sold to small businesses. Only enterprises could afford the high prices needed to cover expensive salespeople in suits doing presentations. 

The pivot meant that the founder team was utterly unqualified to execute the business model. In truth, this is quite common. Founders rarely limit their ideas to their current abilities.

Nonetheless, competence matters. Investors call it founder-market-fit. Investors evaluate how well the founder teams’ current competencies fit the challenges dictated by the market the startup is going after. Founder-market-fit defines whether the founders master the critical disciplines required to win. 

Critical Disciplines. How to win Tour de France

Cycling is a sport. And cyclists are athletes. Consequently, one would imagine that the best athlete would win the most prestigious races. Intriguingly, things are not that simple. 

The world championships in cycling is held every year. And the rainbow-striped winner jersey is a childhood dream for all cyclists. Still, the title of world champion is rivaled by another triumph. Winning Tour De France.

One would think that the same athlete would be a likely winner of both Tour de France and the World Championship. But as many know, that is seldom the case. In fact, this has not happened in more than 30 years.

The thing is that cycling includes different types of races. The World Championship is a one-day event. Tour de France lasts 23 days. Also, the route of the World Championship avoids the highest mountains. Tour de France includes snow-filled alpine peaks. Furthermore, Tour de France has a time trial.

The differences between the two races require riders to master different disciplines. In other words, the critical disciplines of winning the World Championships and Tour de France are different.

Throughout the history of Tour de France, the winners have been marked by mastering both time trials and mountain climbing. In contrast, world champions have been marked by break-away and sprinting abilities. 

The point is that cycling is a sport, but the different races require different critical disciplines for winning them. And trying to win Tour de France without mastering time trials and mountain climbing is a doomed mission. Just like trying to win the market for review management software without mastering small business sales. 

The importance of the Founding Employee

When Peter Holten Mühlmann pivoted to selling to small businesses, he needed someone with a rare competence. Then fate intervened. In 2010, Peter was introduced to someone who could give Trustpilot a winning chance.

Jesper Lindhardt was talented and successful. He had risen through the ranks of Navision, Realtime, SAP, Omniture, and Adobe. Most importantly, his focus was on small business sales. In other words, Jesper had spent 15 years honing the exact critical discipline needed by Trustpilot.

At this point, fate had played its part. Instead, true founder skill took center stage. Somehow, Peter convinced Jesper to abandon his meteoric career, leave Adobe, and join a completely unknown startup to become a founding employee.

Founding employees are probably the most underrated ingredient for startup success. A look at the most successful Danish startups founded by inexperienced founder teams illuminates the importance of this rare breed. 

The founders of Coinify, OrderYoYo, Templafy, TooGoodtoGo, and Planday all attracted one or more founding employees who brought their experience and competence to the startup during infancy. These people mastered the critical disciplines of the business model and gave the startup a winning chance.

After having spent almost ten years as a startup investor, I am continuously puzzled by startup teams that do not master the critical disciplines of their business model. Luckily, certain doom can be avoided. Because true founder skill is the ability to attract resources. And no resource is more important than the founding employee. If you are lucky to meet Peter Holten Mühlmann, he tells you the same.

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