8 Things To Look For Before Investing In An Entrepreneur
What would you look for in a founder?
Last week I was asked, “If I had £100,000 disposable income to invest into startups, what would you look for in a founder?” Before I go on to answer this question, I want to share what I have learned from speaking to founders and about myself from previously starting a startup.
Over the last 18 months I have spoken to 147 aspiring entrepreneurs, 4 of which have received initial investment to get their idea off the ground. The remainder continues to bootstrap their ideas for now. The commonality across this group of individuals was that they were female or minority founders. I asked them all what their biggest challenge was to get their idea off the ground and over 70% said “access to funding.” The Product Manager in me was led by curiosity to find out why this problem existed. Three things became apparent:
- Lack of training in product development i.e. creating an MVP, working with developers, customer development, achieving product/market fit (PMF)
- Lack of a network with fellow entrepreneurs who were running startups with traction that they could use as a sounding board
- Lack of knowledge or a network with investors to understand the requirements for accessing capital
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I have been very transparent in the last 12 months in sharing my ambition to start or join an investment team in the next 5–7 years. The goal is twofold:
- Dedicate at least 5%–10% of funds for investing purposely into differentiated deal flow from female or minority-led startups.
- Provide strategic advice on product development leveraging my expertise to help founders test and build products customers love.
This is not to say founders won’t be judged by the same criteria as the rest of the investment teams portfolio companies. Instead, it will leverage my ability to source deals from the community I have access to along with my expertise in developing products at high growth startups. However, how do I help to address the funding gap that exists today?
How Am I Getting Started?
I am a big believer in gaining an inch at a time, growing slowly and patiently over time to achieve my grand vision. What comes naturally to me but difficult to others is my ability to stay disciplined to fulfilling long term ambitions.
Retrospectively there are a number of long term commitments I’ve made that have lasted until today and will continue to make for the next 10 years, such as:
- Property Investments
- Fund Investments
- Career Building (Consulting to Product Management)
- Building a Startup (Mixtape Madness grew to serve half a billion streams for music fans worldwide!)
- Brand Building (speaking engagements, blogging etc.)
- Being a parent
I love the game of inches, I really do. I remember in secondary school when the kids that ran 100m or 200m were the Rockstars. I was Top 5 for cross country but never celebrated. That was the first dot I connected that revealed I was a marathon runner!
Over a month ago my brother informed me that his friend was crowd funding for his consumer goods start-up. I spoke to him, provided advice and feedback on his pitch deck then introduced him to a Private Angel Investor. The investor invested just under £100,000 in seed capital. I am incentivized to help him scale his business successfully. Not because of equity, not only because I believe in the founding teams' ability to execute (although I do), but rather because it builds up my track record too.
Ubuntu: My success is derived from the success of the community'
Reflecting on this experience and my network, I realised that over time I have built up a small circle of early stage investors who are always interested in quality deal flow. In parallel, I have a growing network of female and minority-led startups that reach out to me to help them as they raise funds. This was the logical starting place for me.
8 Things I Will Be Looking For In Deals
- Team & Execution i.e. experience (entrepreneurial or sector relevant), coachability, drive, mission, ability to lead and execute
- Are there any signs of customer or user traction that can demonstrate PMF? i.e. what metrics/ trend data indicate PMF has been achieved?
- Is the company solving a big problem, and doing so in a way where they build some moat/defensibility? i.e. what is the target addressable market (TAM)?
- What is the solution (tech) you are building to address this problem? i.e product
- Does the business model work, does it scale, or if no model today is there a clear and believable plan?
- What are the terms of the deal? i.e. are you raising £500k at a £5m post cap?
- What is the existing competition in the market from startups and established companies and why is your solution better?
- Is there a well thought out go to market/sales plan?
A key thing to assess with all these questions is whether or not the entrepreneur is focused on creating as much value as possible. Numbers 1 is probably the single area I would spend most of my time evaluating before deciding whether or not to share deals with my network of investors.
Even though it is early days, I believe with time I will get better at assessing this and it will make me a better investor in the long term. If you are interested in joining my quarterly mailing list as an investor or you’re an entrepreneur with a winning idea, contact me here