Frank Rotman, co-founder of QED Investors, discusses his journey from Capital One to venture capital, sharing insights into entrepreneurial challenges.
Frank Rotman, co-founder of QED Investors, discusses his journey from Capital One to venture capital, sharing insights into entrepreneurial challenges, hypergrowth, and the importance of founder-market fit. He touches on surviving business mistakes and building companies in the early waves of fintech.
I break it into five core components, not just three, when you really think about it. You know, the first one is they have to have a very compelling problem statement. Right? Like what they are attacking can't be a manufactured problem. It needs to be a real problem out there in the world. You know, something that is unsolved and something that is actually quite large. Second, they have to show up with a solution statement. And yes, it's going to change over time. But every business you build is a pairing between a problem statement and a solution statement. And when those two things go together incredibly well and you just feel it and you know it, um that's the making of a really interesting business. And again, it will change over time, but if the founder can't articulate this combination of a problem and a solution statement, they they probably haven't thought about the space enough
to be investable. Um the third one is really the go-to-market motion, which even though when you're backing early stage companies, they don't know exactly how they're going to find the customers, it's actually a way of probing how well the founder knows the market they're in. You know, and the go-to-market motion really helps you dig under the covers. A business where you're going to have to build awareness for your product. Is this a business where you know, there's already latent demand for the product and you just have to tap into it? Like how does the founder think about building awareness and growing this franchise? Because if you can't find customers, doesn't matter how good the problem and and solution statement is. You know, the fourth one is really about um you know, founder and founding team market fit. You know, the knowledge base. Why should you trust this founder with this
problem? You know, and do they have domain expertise? Are they going to have to build domain expertise around this? And some of the most impressive founders, they've just been in and around the space long enough that they know the difference between how an MBA would tear apart the industry and only get some of it right and how the industry actually works. at that. And then the fifth it is really about um can they create a destination? Can they paint a picture of a destination that everyone would be jealous of owning a piece of? Right? Can they paint this picture of a financial outcome, a financial machine, uh a customer base that they're actually serving? Like however they view the future, it has to be compelling enough to be worth all of the headaches about eating glass every day as the founder, encountering problems every day. Because one of the things that I've learned is building a
small business is just as hard as building a big business. So, you might as well be able to describe a big one. And if you can't describe a big one, then you have to rethink what you're doing and why. So, it's a bit about the vision and about the founder market fit and their ability to be able to describe the problem that they're tackling and how they're going to find customers. And if you can put all that together, then you probably have a company and a founder worth investing in.