Founding Team Evaluation in Early-Stage Venture Capital

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Perustieteiden korkeakoulu | Bachelor's thesis
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Date

2025-09-19

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Major/Subject

Tuotantotalous

Mcode

SCI3025

Degree programme

Teknistieteellinen kandidaattiohjelma

Language

en

Pages

40

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Abstract

Venture capital (VC) is a key driver of high-growth innovation by providing capital for startups. Given that only a small percentage of startups succeed, VCs must be highly selective and identify those most likely to succeed, making deal selection a critical value-adding activity. Despite ongoing debate, the founding team is often cited as the most critical success factor, especially in early-stage startups. However, its evaluation is challenging due to its complex nature, uncertainty, and subjectivity. This thesis explores how VC investors evaluate founding teams in early-stage startups. The study focuses on the evaluation criteria, process, and methods used by investors. As an integrative literature review, it synthesises findings from previous research to provide a comprehensive overview of the topic. Firstly, the findings suggest that team evaluation criteria often consist of five main areas: (1) founders’ relevant past experiences, (2) skills and abilities, (3) personal and motivational traits, (4) team composition and dynamics, and (5) social capital. By assessing these factors, VC investors ultimately seek confidence that the founding team can persevere through future challenges, manage risk and pressure, make sound strategic and operational decisions, and execute them. Secondly, the evaluation process includes multiple stages, and the evaluation approaches and methods vary accordingly. Early stages often involve a lighter assessment of the team, whereas in later stages, especially during due diligence, investors devote more time and focus on team assessment. The methods used by VCs range from informal observations to structured evaluations, depending on the team and the VC’s approach to team evaluation. This study highlights the dynamic and context-dependent nature of VC investors’ founding team evaluation. While literature recognises a comprehensive set of team- related investment criteria and evaluation, their application varies by venture and investor. Moreover, although data-driven approaches have emerged, intuition remains a central element, complementing structured and analytical methods.

Description

Supervisor

Rajala, Risto

Thesis advisor

Maula, Markku

Keywords

venture capital, early-stage startups, founding team evaluation, team assessment criteria, evaluation process, assessment methods

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https://urn.fi/URN:NBN:fi:aalto-202509237258

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[kand] Perustieteiden korkeakoulu / SCI