Startups Need Builders & Sellers to Scale

If you’re building or investing in a startup, two key ingredients are required to get from zero to one—the Builder and the Seller.

At Groove Capital, we’ve seen over 1,000 teams since we first started investing in 2021. When you invest at the earliest stages of a company’s lifecycle, there’s very little data to work with. Where later-stage investors may pore over historical financials — running calculations like net revenue retention, churn, customer lifetime value, etc. — those numbers simply do not exist for a company that is pre-revenue.

In place of figures, Groove focuses heavily on the founding team.

At our investment stage (pre-seed), the team is often two to three founders, most of whom have been working on their business for the last three to six months, they’ve built a prototype or minimum viable product (MVP), they may already have revenue (depends on the category), and they are looking for funding to scale their business to the point where they can raise a few million dollars from the region’s Seed Stage investors.

When looking at a team, we’ll probe to better understand the work experience, business model experience, and startup experience of the people leading the company. Have they done this before? What advantage(s) do they have over anyone else that could pursue something similar? What’s motivating the founder(s) to pursue this business in the first place? There’s a 100% chance that this person or team is going to encounter adversity, so what’s driving them to push through it?

In addition to their experience and motivations, we pay close attention to the composition; do we have the right people in the right place to get this company to the next level? At this stage, every team has gaps. The best ones know exactly what they are and when to fill them. But at the very beginning, identifying two key roles and whether they are filled consumes most of our investment committee discussions.

Who is the Builder and who is the Seller?

These functions are widely known and talked about in startup circles, though they are often not addressed. In Traction’s EOS model it’s called the Visionary and the Integrator; both are equal in importance and critical to developing a much larger business. When studying some of the world’s greatest business success stories, you may recognize the names of these notable Sellers—Jobs, Buffett, & Zuckerberg—but right next to each one of them is a necessary and equal contributor (the Builders)—Wozniak, Munger, & Sandberg.

We often run into teams loaded with Builders, and no Seller. These teams reliably over-build and struggle to raise money or make sales, because they are uncomfortable asking for money.

On occasion we’ll run into a Seller that has not yet paired themselves with the right Builder. These teams make big promises, but often miss their goals and timelines.

Builders can learn to sell and Sellers can learn to build. However, the more we see, the more I’m convinced that the best founders gravitate towards the function that comes most naturally to them. And given that all startups are short on time, it’s best to have people focus their energy where they can make the largest, most immediate impact.

When both functions are present, and where trust between the two is formed, a magical tension occurs. The Seller pulls the company into the market by getting people excited about something that doesn’t exist. The Builder charts the course between the possible and impossible, making sure that the expectations of all key stakeholders are either met or exceeded. Together, they create a new reality.

A team that casts an exciting, big vision, while consistently materializing that vision, is a team that will win 9 out of 10 times. Those are the odds that we like to invest in.