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Ever wonder why some startups soar while others crash before even taking off?

According to Carles Reina, an early backer of AI startup Eleven Labs, two instant dealbreakers will make him walk away.

For investors, spotting red flags early can save a lot of money and headaches. For founders, knowing what not to do could mean the difference between landing that big check and walking out empty-handed.

So what is Reina’s first red flag? A founder who can’t actually build the thing they’re pitching, since that can often mean slower growth, higher costs, and a tougher road to profitability.

“If one of the founders is not technical, like literally cannot build products, is not a researcher or something like that, I just don’t see the value in that because they’re not going to be able to move as quickly,” he told CNBC (1).

(He told the EU-Startups podcast that the opposite is also true: The world is full of companies that built “crazy good products” but failed on the marketing side — both are needed for success (2).)

In the fast-paced startup world, founders who can roll up their sleeves and code, design, or engineer their products have a major edge. They can pivot faster, troubleshoot in real time, and adapt before competitors even notice a shift. It’s one thing to have the idea, but Reina believes that it’s key to look for founders who can execute.

Just look at Eleven Labs. Co-founder Mati Staniszewski holds a first-class degree in mathematics from Imperial College London.

“It was really interesting to see he was thinking about the problems of the entire ecosystem before even actually having any product, or before even actually talking to any real potential customer,” Reina said. His technical fluency impressed Reina so much that, after their first meeting, he was willing to jump on board as an investor.

Reina’s second no-no is a founder diving headfirst into an overhyped, overcrowded market.

He says when too many venture capitalists chase the same hot idea, valuations shoot through the roof, and reality can quickly get lost in the noise.

It can often lead to a lose-lose cycle of startups scrambling to justify inflated valuations, while investors compete to offer better terms (1).

Read More: Are you richer than you think? 5 clear signs you’re punching way above the average American

Reina’s philosophy is simply to prioritize execution over excitement.

If you’re thinking of investing in a new business, consider whether the owners or founders have technical depth, subject matter expertise, and a track record of actually getting products to market. Pay attention to how they talk about their product. Do they light up when they explain the “how,” or is it just a lot of hype and sales jargon?

Reina talked about red flags, but here are some green flags for investors:

• Hands-on founders who understand their product inside and out

• Founders have chosen an underserved market with real pain points, not just buzzwords

• The business is building a balanced team with members who bring complementary skills to the table

• They’ve got signs of real traction, such as early users, working prototypes, or growing revenue

For founders, being “investor-friendly” isn’t just about schmoozing; they have to demonstrate substance.

The founder doesn’t need to write every line of code, but they should understand the product and be able to articulate how it works, why it’s different, and where it’s going.

What else makes a founder appealing to investors?

• Having the right mindset. Being a founder is risky, and most successful entrepreneurs have the passion, motivation and confidence to do things in a new way (4)

• Knowing your tech, your customer, and your market and being able to speak to them

• Proof of execution: Bring prototypes, traction, or early user data, and don’t inflate your numbers (5)

• Having a solid, focused go-to-market plan. If you’re clear on how and when you’ll reach milestones, you’re sharing your journey with a potential investor and hopefully getting their buy-in

At the end of the day, startup success involves a lot of luck, but it also takes a combination of hustle, grit, skill, strategy and timing.

So whether you’re pitching or investing, remember: go deep, not wide. Because in the startup world, hype can fade quickly, but execution and old-fashioned hard work endure.

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

CNBC (1); EU-Startups podcast (2); Entrepreneur (3); TechCrunch (4); TechCrunch (5)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.