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Indian-origin venture capitalist shares top reason startups fail in first two years: 'Founders fall out'
Indian-origin venture capitalist Reece Chowdhry said most startups fail in their first 2 years because co-founders fall out or lack alignment.
Indian-origin venture capitalist Reece Chowdhry says the biggest reason early-stage startups collapse has nothing to do with funding, product-market fit or competition, but the relationship between their co-founders.
Chowdhry, the founding partner of Concept Ventures, told CNBC Make It that most young teams split within two years because co-founders clash, lack shared vision, or simply don’t know each other well enough.
Chowdhry’s firm, launched in 2018 and billed as Europe’s largest pre-seed fund, focuses on backing startups at the ideation stage. It recently raised $88 million for its newest fund, and Chowdhry says founder chemistry is the single biggest filter in his investment process.
“I think 80% of our decision is on founders and we are typically the first investor in every company we invest in,” he told the outlet.
“The number one reason companies typically fail in the first 18 to 24 months is that founders fall out with each other or don’t get along, don’t have the same vision alignment, purpose, and so that is something that we think is really important,” he continued.
Chowdhry added that during initial meetings, he tries to understand how well founders know each other, how aligned their values are, and whether their answers match when interviewed separately. "If I gave the New York Times’ dating questions, would they match up to a level where you would really intimately know people at their core?” he said.
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‘The whole package’
Beyond co-founder dynamics, Chowdhry said that he looks for four other traits - obsession with a specific field or industry, relentlessness and grit, a growth mindset, and evidence of exceptionalism in something outside of work, such as sports or chess.
Chowdhry’s firm was an early backer of the $3 billion voice-AI firm Eleven Labs, co-founded in 2022 by childhood friends Mati Staniszewski and Piotr Dąbkowski. He said their “domain obsession” and strong team dynamic were decisive factors in his investment.
He added that his investment decision in early-stage startups involve examining “the whole package”, rather than just one founder. “It has to be a package and I think what many VCs optimize for is they’ll meet the CEO typically and they’ll put a lot of lens on the CEO, although 50% of the business is two people or three people,” he explained.
