IOSG's 9-Year Investment Review: Six Types of Founders We Won't Invest In.
Interviewee: Jocy, Founder of IOSG
Written by: Joe Zhou, Foresight News
After nine years of investing, we gradually realized one thing: the hardest question to answer is not "what kind of founder can succeed," but rather—assuming the track is right and the direction is correct, why do some extremely qualified founders still fail to survive?
Half the answer lies with the founder, and the other half in the direction they chose and the timing of their entry. Having gone through four cycles, certain patterns have begun to repeat—even though each founder's story is different and each market context varies.
But one conclusion has become increasingly clear: successful founders each have their own brilliance, while failed founders share striking similarities.
Over nine years and hundreds of invested projects, we've seen too many Web3 entrepreneurs rise and fall. Behind every failed investment is a real cost—ranging from millions to tens of millions.
To avoid repeating the same mistakes, I built a "Failed Founders Database." The purpose is simple: to prevent myself from stepping into the same river twice.
The capital market never gives a "do-over" option, but we can turn others' pitfalls into our own signposts. Laying these failures bare is not only to improve our own hit rate but also to help more entrepreneurs avoid detours.
6 Portraits of Failed Founders
I have a habit: every quarter, I individually review the deals each colleague is handling; every six months, the entire team aligns deeply; at the end of the year, I pull up a list and lay out all the successful and failed projects we've invested in.
The first half of 2026 has just ended, and during this review, we supplemented and summarized a "Portrait of Failed Founders." With this database, we hope to turn the pitfalls we've stepped into into muscle memory and avoid fatal reefs in advance.
After four cycles of repeated verification, these failure patterns have gradually become clear—though each founder's story is different and each market context varies, the underlying logic is surprisingly similar.
However, before diving in, it needs to be clarified: the following patterns fall into two categories. One is at the level of founder traits, related to a person's emotions, resilience, judgment, and self-awareness; the other is at the level of project structure, related to structural choices like token design and capital strategy. The former is about people, the latter about things.
Founder Trait Category
These issues are rooted in the founder's personality, mindset, and internal drive. They have nothing to do with technology or track, but are often the first culprits that kill the project.
Type 1: Emotionally Unstable
This is the most fatal type. When a project faces an 80% drawdown, concentrated community attacks, or three consecutive months of no progress, the founder's reaction almost determines whether the project can survive.
Failed founders fall into emotion at these times—repeatedly justifying themselves on Twitter,爆发ing internal conflicts with co-founders, or arguing with users in community groups. Successful founders, under the same pressure, spend the first week拆解ing problems and making Plan B.
You don't have to wait for a drawdown to see this. You can test it before investing: politely push back on his core assumptions during due diligence and observe his reaction. Some founders will debate seriously with you,坚持ing what should be坚持ed and修正ing what should be修正ed, remaining steady throughout; others immediately become defensive or even counterattack when questioned respectfully. The latter reveals a problem that is exposed earlier and more reliably than how he performs during an 80% drawdown.
Type 2: Lack of Hunger / Has a Safety Net
This type is easily overlooked because it's not "conspicuous."
If a founder has a sufficiently soft safety net behind him—whether family wealth, a high-paying fallback at a big tech company, or a "it's okay if it doesn't work" mindset—his choices in the darkest moments often deviate from the optimal solution. Entrepreneurship is a matter of life and death; without the foundation of "full commitment," it's hard to cross cycles.
We once discussed a project in the IC, and there was a huge分歧 in internal voting that day. It was a team that both Paradigm and a16z were willing to bet on. The founder had an excellent family background and was an LP of several US mega funds (top VC firms with over $5 billion in assets), and these mega funds were also willing to support him. Looking at the investor structure alone, this was one of the most beautiful deals we'd ever seen.
But the debate over this project lasted until 1 a.m. that day. Finally, I cast a veto.
The reason was that I thought what this founder wanted to do was too challenging to human nature. His idea was to build a crypto bank in the African market, which required building a local team of hundreds for ground promotion and execution. The founder himself grew up in the US and China; to make this happen, he had to actually move to Africa, start a business and live there long-term, and immerse himself in the front line. He repeatedly emphasized his determination in the meeting, saying he would unhesitatingly go deep into the local African market.
But it was precisely this kind of "everything seems right" team—top institutional endorsement, perfect investor structure, and the founder's verbal determination was impeccable—that we finally pressed the pause button. Later, although the project successfully conducted its TGE, it was far from their original vision of becoming an "African neobank."
This is the same logic as the "execution machine." A team can get full marks in every dimension that can be scored: institution, structure, resume, determination, plan. But the most critical thing in entrepreneurship is often the one that cannot be scored—whether there is an irreplaceable fit between this person and the thing he wants to do. Checking all the boxes makes it easiest to ignore this question.
We've reviewed this many times since: the problem was never that he wasn't good enough, but that he was so good that we almost forgot to ask the only important question—would a person who grew up in the US and China want to, be able to, and be willing to spend the next five years of his life on the front line of ground promotion in Africa?
Type 3: Uncontrolled Ego
The external manifestations of this type are often "well-decorated execution machines" or "professor-type founders."
First, the execution machine. Founders with an extremely refined OKR system, a deck like a McKinsey report, and who list "execution ability" as their first advantage—according to our data, these people raise a lot of funds but attract fewer subsequent investors and have poor exit performance. Because they are good at finding optimal solutions to known problems, but the most common thing in the Crypto industry is that the foundation changes. A well-decorated house is much more fragile than a rough one.
But to add: whether an execution machine is a problem depends on the track.
In already verified mainstream directions, distribution, recruitment, and repeated execution are the key to winning, and a well-decorated execution-type founder may be the best choice. The problem only arises in emerging, non-consensus directions—where you need people with more imagination and courage to explore ambiguous areas. So this is not an iron rule, but a judgment of founder-market fit.
Next, the professor-type founder. Their technical understanding is usually the deepest in the room and deserves respect. But we pay special attention to two questions: first, whether they truly understand business and are willing to make compromises for business implementation; second, whether they are coachable, willing to learn, and willing to change.
When a professor treats himself as a teacher and VCs as students, the project usually gets stuck. Technical depth does not equal product judgment, let alone business execution.
We have also invested in founders with extremely deep technical backgrounds and strong business acumen. The key is not academic qualifications, but whether they treat technology as a means and business implementation as an end, and whether they are coachable.
There's another more hidden layer: fallback.
People from big tech or academic backgrounds often have good fallbacks. Once the project starts to decline, they are more likely to return to the comfortable path of big tech or academia. This doesn't mean they are weak founders, but it may mean they lack the hunger of having no fallback and having to prove themselves. We value the drive of "having no place to retreat if you lose."
Finally, there's the path-dependent type—those from big tech or previous cycle winners who directly copy their打法. We call this "using the methods of the last cycle to do things in this cycle." Dai Yusen recently made a similar observation: "It's hard to beat ByteDance by following ByteDance's rules." Similarly, winners of the last era are most likely to lose to the next era.
Project Structure Category
These issues relate to how the founder understands the underlying architecture of the project—what the token really is, how to design the capital strategy, and whether they have personally experienced the cruelty of cycles.
Type 4: Token-First, Not Product-First
This is unique to Crypto and one of the most dangerous types.
It's different from the previous types—the problem is not in the founder's personality, but in his choice of project structure. But this choice itself will in turn reveal what he truly considers the core.
Typical manifestations: keeping revenue and equity in an independent corporate entity, using tokens only as a financing tool, and token holders having no claim to real business cash flow.
We believe whether the token is a financing tool or the backbone of the product determines whether the founder can cross cycles.
The judgment standard is simple: if the token becomes worthless tomorrow, does the project still have value? If the answer is no, then the token is everything to him, and the product is just its packaging.
Type 5: No Day 1 Exit Thesis
This is a principle our team has always emphasized—"Exit before Entry."
If a founder can't explain on Day 1 how he plans to exit in three years (acquisition, token liquidity exit, or IPO of the company itself), his financing narrative in front of investors will keep changing.
It's not so much that the founder must figure out how to exit on Day 1, but that he must understand the capital strategy and the order of milestones: what does this round of financing need to prove? What data can unlock the next round? What will the future return path for investors look like? Early projects are often emergent, and the final exit method—merger and acquisition, token liquidity, or IPO—may not be certain. But "what this round is for and what the next round will rely on to take over" must be clear.
Failed founders usually say: "We are raising funds for a bigger vision." Successful founders will say: "I'm raising this round today to be able to take over the next round in 18 months, and the indicator for the next round is XX."
The Last Dimension
The first five types share a common background—they are all red flags (note: Red Flag in the investment context means a danger signal or warning signal).
Specifically:
- Founder trait red flags: emotionally unstable, lack of hunger/has a safety net, uncontrolled ego
- Project structure red flags: token-first, no clear capital strategy
But the sixth type is different. It's not a red flag, but a pricing issue.
Type 6: No Full Cycle Experience
Crypto has a complete cycle every 3 to 4 years.
A founder who hasn't personally experienced at least one full bull-bear cycle will seriously underestimate his vulnerability during his first bear market. This is not a matter of ability, but of experience—you don't know what that pressure feels like if you haven't seen it.
This item has become our hard sizing policy: early teams without full cycle experience will have their initial investment amount limited to $250,000 or less.
The judgment standard is simple: what were you doing in 2018 and 2022?
But this type is different from the first five.
The first five are red flags that help us identify "who to avoid." The sixth is not a red flag; it answers another question: "Who can we bet on, and how much?"
Strictly speaking, lack of full cycle experience itself does not constitute a veto—it's more like a pricing factor. People who have experienced a full bull-bear cycle often know better how to manage volatility, deal with community pressure, and handle the psychology of the down period. But there are always exceptional geniuses who haven't experienced a cycle.
So our approach is not to give up directly, but to hedge with sizing: early teams without full cycle experience have their initial investment amount controlled at $250,000 or less, and we increase the investment after seeing stronger evidence of execution.
Reverse the Failed Portraits, and You Get the People We Like
Listing the failed portraits is not to label people, but to help us clearly know: conversely, what kind of people are worth betting on.
Type 1: Obsession with the Problem
The best founders are not interested in a problem—they are consumed by it. He has thought through edge cases, user behavior, how competitors will react, and what the second-order consequences are. He is not pitching a product to you; he lives in that problem. This is the hardest signal to fake in a reference call—you can feel whether a person is really with what he wants to do 24/7.
Type 2: Second-Time Entrepreneurship + Non-Consensus Vision
I particularly value second-time entrepreneurs who have had failure experiences.
The failure here refers to setbacks at the project level and understanding the reasons, not the fatal personality flaws mentioned earlier. The two are completely different.
Failure is nothing; the key is whether you can figure out where you fell after failing.
More importantly, he must have his own non-consensus thesis—not someone who follows Twitter trends and second-hand information, but someone who truly thinks independently and dares to make counter-consensus judgments.
Type 3: Good at Communication + Controlled Ego
Communication ability deserves to be singled out because it's so critical. A founder needs to clearly explain complex ideas—to users, investors, partners, employees, and the community. We've seen too many technical genius founders who write beautiful code but can't express themselves clearly. In the end, the project ends up in a state where if the person who can communicate externally is absent, the entire project goes silent.
As for ego, it's more subtle than imagined.
We don't want simply "low ego." The advantage of low ego is being coachable and willing to listen to feedback; but a founder who wants to be first, wants to prove himself, and can hold on in adversity needs a little ego as fuel. The real danger is uncontrolled ego—rewriting the story when performance is poor, always putting himself on the right side, and turning a blind eye to contrary evidence.
So the key word is not "low ego," but "controlled ego": ambitious, but not delusional.
Type 4: No Evasion, No Limits, Resilient Willpower
In the Crypto industry, you are exposed to public spotlight and high pressure