My Eight Startup Investment Principles 💰
What do I look for when investing in startups?
🤑 an AWESOME founding team that executes really well and swiftly. We’ve all heard that while ideas are worthless, execution is everything. I love founders who are biassed for action, who get things done aplenty, find creative solutions to problems or circumvent them altogether. I admire those who know how to create shortcuts to achieve goals and targets, those who aren’t afraid of trying on risky things, picking the road less travelled and.. pissing people off, particularly if they have a vested interest in entire industries running in an old school way.
🤑 a founder-market fit meaning the founders have ideally experienced the problem they are trying to solve themselves (generally the more frustration they’ve experienced with it, the higher the motivation!). Alternatively, they are intimately familiar with this particular industry having, for example, worked in it for years.
🤑 traction, traction, traction. I’m a sales girl, I know what it means to be able to sell. The team needs to have commercial hunger and be able to demonstrate results quickly, even without a fully fledged product or service. I have invested in pre-revenue startups before but these have always shown they have thoroughly researched their future customer base (as per the lean startup model) and have letters of intent, MOUs and more.
🤑 coachability - I really like founders who are awesome but humble and know well that they don’t know everything and pull on resources around them (including me, where appropriate ☺️) to help them understand their position better and avoid potential roadblocks.
🤑 technical capability - since I invest in startups either powered by technology or with a technological solution, it’s crucial that there’s a technical cofounder or one of the first hires has a technical background (and experience of building and scaling tech products) instead of this crucial activity being outsourced and not fully within the founding team’s control.
🤑 large addressable market (TAM) - as an experienced investor, I know that 9/10 businesses I put my money in will either fail or stagnate/never reach a point of exit. This makes it necessary to invest in those that have the potential to scale really fast in a huge market - so that the one or two who succeed have significant room for growth.
🤑 quality of the idea. Obviously, the actual business idea matters too! On one hand, I love a good “moonshot goal”, a truly disruptive idea which can totally change the dynamics of the industry the founders operate in. On the other, I tend to steer clear of mad visionaries who have no sense of pragmatism to know exactly what steps they need to take in the next six months to bring them closer to achieving their vision. I usually ask the founders I meet: if everything goes super well, what will the world look like in ten years as a result of the success of your business?
🤑 tax advantages - so far I’ve only invested in UK based companies that are (S)EIS qualifying and registered. The tax advantages (30-50% of investment sum can be written off personal tax bill) are simply to good to pass by.
Why are financials not on this list? While it’s useful to see that the founders understand how budgeting works, can create projections etc, at seed startup stage (which is where I invest) almost everything is an estimation. So whilst other Angel investors may pay a lot more attention to financial due diligence, I don’t. On top of this, some investors pay more attention to how a given investment opportunity fits into their current portfolio. I choose to remain open-minded (while I tend to stay away from the types of opportunities where I, and my close network, don’t know anything about the target market).
For more on startup investing, workplaces of the future and wholesome leadership, check out my book “Laid Bare”, currently on Amazon’s Hot New Release list.
https://paulinatenner.com/book