How would you rank the importance of what an investor looks for? Is the idea first, then the team, experience and business plan?
This question belies a common myth: that all investors are somehow identical, and want the same things, in the same order.
This is just not true.
There are many different types of investor, and each has their own preferences and processes when it comes to deciding what they’ll put their money into.
This is both good news for entrepreneurs – because it makes it more likely that if you have a good idea you’ll get it funded, and bad news – because you need to work hard to find that “right” investor for you.
Most investors are happy to explain their criteria. It makes sense for them – that way they screen out opportunities they won’t like.
Their websites, or blogs, or reputations are good sources for this information. It’s also worth checking out emerging sites like AngelList where they will profile themselves and let you know what they’re looking for.
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You should do your research here, to avoid wasting both your and their time. The market is small!
What you’ll find is a mix of criteria. Some people who are interested only in specific industries, or specific territories; some who are interested only in certain stages of your company’s evolution (seed, acceleration, Series A, etc).
Be clear about what you want and target the right ones. It’s also sensible to talk openly to all the investors you get to meet with about other options – it’s a pretty open community – and most people are happy to suggest other investors.
Having said all of this, I think that increasingly the consensus is that the most important thing is team. A great idea executed by an average team is only an average business, whereas an average idea can be turned into a great business by a great team.
It’s more and more apparent that most businesses will “pivot” a few times before settling on their killer model.
Few end up delivering exactly what they planned to in their first business plan. So the idea and the business plan (in my view at least) are there to validate the team and its credibility. They’re like a Plan A, which a smart investor knows are a good start point but not necessarily the end game.