With big investment rounds being announced and new VC funds being launched almost on a weekly basis, it’s an exciting time to be a startup founder and have never been more
opportunities to raise funding.
But what is lacking is an understanding for entrepreneurs in what the other side of the table – what investors are looking for.
I recently sat down and did a podcast interview with two prominent investors in the community: Shelli Trung, an angel investor in real estate tech, fintech and social impact businesses, and Paul Naphtali, co-founder and managing partner at Rampersand.
At the early stages, investors put a particular focus of their investment decision based on the characteristics of the founder. This is because at the early stages of the business, the value proposition is likely to change and the overall business model is likely to pivot several times until you find the right fit.
As a result, an investor is more likely to see a successful return on their
investment if they back high quality founders more than high quality ideas (the sweet spot would be a mixture of the two).
So the question is what characteristics does an investor look for in founders?
Here are some of the things that both Shelli and Paul mentioned stand out to them in high quality founders.
Startups by nature have limited resources with which to play around with. High quality founders are resourceful and have an ability to find solutions or ways to overcome their lack of resources.
This could include running a creative viral campaign over social media rather than having a large social media budge to play with, or leveraging of their networks to get things done.
2. The ability to bring other high quality people around them
Talent attracts talent, so naturally a good founder will surround themself with other equally talented people, be it as co-founders in the business or advisors that can help them gain industry connections and resources.
3. Confidence and conviction
According to both Shelli and Paul, they both look for confidence, optimism and a little craziness and in a startup founder.
There will be plenty of doubters and people you hear no from. To succeed in a global industry or to “change the world” you need to have confidence and conviction in your
ability to turn the business into the long term goal that you see.
4. The ability to take on feedback
That confidence though needs to be balanced by your ability to take on feedback from others.
As both Paul and Shelli mentioned in their interviews, an inability to take on valuable and constructive feedback is a large red flag for investors because it indicates that the individual will be difficult to deal with.
5. Sticking to their word and over-delivering
Investors are looking to invest in people and trust is a large aspect of that.
Whether it’s the opportunity you are providing to investors or certain things you say you are going to do (follow-ups, additional information etc), investors are looking for certain clues as to how reliable you are as a person for them to invest in you and your startup.
They are also acutely aware that not everything will go as planned. They want you to be open and honest about what you are struggling with so they can assist you through their expertise or networks.
Along with the personal characteristics they look for, both Paul and Shelli shared how to reach out to investors, what makes them invest in particular ideas and what their investment process looks like.