The one question you should never ask an angel investor

If there’s one question I hate being asked more than “so, what do you do?”, it’s “so, you’re a tech angel, what technology do you invest in?”

Apps? Drones? AI? Shared economy? Wearables? Lithium? The list goes on.

When I started investing at the angel stage I found myself being drawn to the bright flashing lights. Sexy things like gaming (peripherals), coupons, nanotechnology and so on.

I invested because I believed they would be the “next big things”. This was before the term “unicorn” joined the ranks of tech lexicon. But even knowing the risks, I still thought everything I had invested in would be huge.

With time and experience I’ve come to some realisations and had some epiphanies. These lightbulb moments tend to dawn on me in Australia, where I spend most of my time. It’s a country still new to the startup ecosystem and mentality.

More often than not, I’ve had to deliver the news to an entrepreneur that I’m not going to invest in their startup.

Their facial expressions vary from “you killed my wife/child and shot my dog” to “thank you for your time, I hope it’s alright to keep in touch and let you know how I’m progressing”.

Which facial expression makes an appearance also has a direct correlation to the experience level of the entrepreneur.

Sometimes, if I’m being pitched to in a group, there will be a discussion afterwards, almost like a debrief. But it’s much more common that I find myself being pitched to solo, and doing the post pitch wrap in my head. It goes something like this:

Did I understand the pitch? The market? The technology?

Once those are out of the way, a whole new series of questions need answering.

  • Do I have the connections to ask for advice if I don’t?
  • Do I even want to take this further?
  • Is there a market for it?
  • How big is the market?
  • Is this any good?
  • Is it needed?
  • Does it already exist?
  • Who else has invested in the startup?
  • What else has the entrepreneur done?
  • What did I think of the entrepreneur?

Of all these questions, the most important one is the last one: What did I think of the entrepreneur? Who were they? Where did they come from? How did they come to be here? What did they do before? What are their likes/dislikes, hopes, dreams, desires etc?

Startups are everywhere and ideas are a dime a dozen. Every entrepreneur believes they’re making the next big thing, even if they’re not the next Uber or Airbnb.

But it’ll be huge, and there will be demand for it.

Sorry to burst the bubble, but all things being equal, your investments will fail and you will lose your money. Once you make your peace with this realisation, you can then start to ask yourself not “what do I invest in?”, but “who do I invest in?”

And what’s the answer to that question? Well that’s the easy part. Someone you like, someone with the same values, someone who knows what they’re doing and is realistic about the potential, someone you can be honest with, without repercussion, a good listener that is driven, passionate, resilient and tenacious.

Investing in the early stages of a startup is a journey. A journey of years and, I hope, decades. There are lots of ups and downs. You’ll be sharing the journey with the entrepreneur. You’re investing in their dream and while you can’t control the journey’s route, you can at least undertake it with someone you like.

And if you’re going to lose your money, and you are, you don’t want to lose your money to someone you don’t like.

So why don’t I like asking the question of what I invest in? Because it’s not a simple answer, and people want a simple answer – I should make an app for that.

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