What angel investors look for in startups
Over 700 investors attended the 2016 Angel Capital Association’s Summit at the Pennsylvania Convention Center last fall. Here are a few key takeaways from what angel investors are looking for in a company that is worth their while from this event. This is what investors are looking for in startups, so entrepreneurs and founders need to heed from these insights.
1. Notable founder profile
“Entrepreneurs need to elevate their personal profiles,” “We’re interested in knowing what the founder is all about and how much they have invested in this.” A founder needs to show deep drive and passion in order to seal the deal. “They need to show that they would do anything to be successful: run through walls, never take no for an answer,” Have GRITS
stamina and perseverance.
2. Solid team chemistry
Besides showing commitment for the company and the knowledge to bring value, investors look for smooth and risk-free interaction among members of the startup team, to ensure long-term stability. When the founders face a problem and face some resistance, “They need to convince investors and their team how they are going to work together on this and solve it”. The Team chemistry and culture must be perfect. The team members must have complementary skill sets.
3. Awareness of competition
“You’ll hear often from startup companies that their product doesn’t face any competition,” that is absurd, there is no such thing as this the first time…“Make sure you invest in someone who truly understands the market they’re trying to access (Market-fit)” An honest assessment of the rivals that a company will have to measure itself against is a boost of confidence for investors. Founders should not be falling in love with their idea/concept but rather be fully in tune of their competitors gaps and weaknesses.
4. Skin in the game
The investors gave the aspiring angels a word of advice to identify worthy investments: a tried and true measure of a founder’s commitment to an idea is their willingness to put up part of the cash or assets. Personal debt or equity is a sign of trust in the potential worth of an idea.
5. Willingness to compromise
While discussing the terms of the deal, a startup seeking to have access to cash must be willing to offer some say in decision making to the initial investors. In turn, angels must compromise to reach a fair balance. “All founders want to keep as much control as they can,” “As investors, we must understand that it’s the founder’s company. We never want to take the entrepreneurial spirit out of the founding team and, frankly, that means making sure they keep some control.”