Do you have the traits that make investors want to give you money and support you?
If you’ve been around the startup ecosystem for even a minute, you’ve no doubt heard the saying the investors don’t invest in ideas, they invest in people. In most cases this is the truth. It’s easy to get caught up in the idea that the startup concept you have is so amazing that investors will flock to back you, the truth is that you have to be an “investable founder”.
Why do you have to be an investable founder and what does that even mean?
Let’s start with the why. It’s actually simple.
First, an investable founder will generally give you more confidence in their ability to pull the whole startup thing off. Starting a company is hard and the things that make a founder investable will probably make them seem better equipped for the challenge.
The fact is that the great majority of the time, there are at least a few people running around looking to raise money for almost identical concepts. Imagine for a moment that you were in the audience of several demo days and saw variations of essentially the same idea. If you wanted something meaningful to distinguish which one to put money into, one thing that separates the identical ideas is that they have different founders. If you found one founder to be more investable than the others, it would make it easy for you to choose which one got your money.
You need to remember that most angel investors and most venture capital firms only make a handful of investments each year. That could be from among 1,000+ ideas they’ve seen. Ideas, even good ones, don’t create successful businesses. Planning and execution does.
Second, founders who are not investable, are just not people that you will want to commit to being connected to for the next 3-7+ years. You’ll see why more clearly when you see the list of what makes a founder “investable”.
What makes a founder “Investable”?
For the sake of brevity, here are my top 5 things that make a founder investable:
- They have to be likable and charismatic. Most investors in early stage deals want to help good founders as much as they want to make money. To want to help you, they generally will have to like you. In addition, being likable and charismatic is a trait that can significantly help the business. It will help you recruit and retain key talent, close strategic partnerships, and woo investors, among other things. Founders who aren’t particularly likable might have trouble with some or all of these essential CEO jobs.
- They have to be smart. I know that everyone of you is saying “I’m smart” and you’re probably right. But investors are looking for “Smart” with a capital “S”. They want to be dazzled with the way that a founder’s mind works. How they think about strategy. How they look at their market. How they bring new insights to old problems or see patterns that other people miss. You don’t have to necessarily be a rocket scientist, but you should be smart enough to see something that most people wouldn’t.
- You have to be willing to learn. The worst type of founder is the one that comes off like they already know everything. The fact is that knowing a lot is great. But knowing what you still need to learn to become a great CEO is better. You can spot an investable founder when they get questions about their concept. The best ones show that they have thought about the question before, done the research and have an answer, or they use the question to consider new possibilities, things they missed, or new things they have to learn.
- They have to be willing to consider to new information. Startups are notorious for making pivots. Many of the best known startups began their life doing something other than the thing they became famous for. Investable founders have the ability to reassess when needed and use new data to chart an alternate course. Some founders come across as determined to follow one course until it works… new information to the contrary be damned.
- They need to show a strong tie between their history and their ability to run their particular startup. Whether it’s the years that they spent gaining the subject matter that is critical to the success of the venture, the time they spent developing the technology that powers the solution, their role leading a similar team or building another company, there should always be something that suggests that a particular founder has an advantage over other founders with the same concept.
I’m sure that some of the other investors out there will have other things to add to this list, and I invite their comments and additions.
Any traits to avoid?
On the flip side, there are some traits that quickly make a founder seem un-investable. My top 3 here would be:
- Arrogance. The type of founder that dismisses people that “don’t get” their concept.
- A lack of commitment. The founder that isn’t full time. Hasn’t invested a lot of time and at least some money in their
- A lack of diligence. The founders that don’t know what competition exists or the regulations and protocols specific to their industry or don’t fully understand the technology they plan to use. These are also the founders that don’t research which investors invest in their stage or their industry.
If you have most of the 5 investable traits and none of the 3 un-investable traits, you’ve got a better than average chance at raising money. Not necessarily for the venture that you are working on at the moment, but eventually. Investors remember the investable founders. They like them. Sometimes they want them to come back when they have a better idea. And sometimes they decide that you and you current idea will be one of this year’s investments.
I hope you found these tips on being an investable founder helpful. Work on making your investability clear from the start.
What other traits do you think of when you think about who is investable and who isn’t? Let me know by leaving a comment below. You can also reach me here to ask questions.
Published by Tony Clemendor
Tony has lived in the startup ecosystem of Silicon Valley for 25+ years as a founder, adviser, investor, community building, and Founder Coach. He’s on a mission to help good founders become great founders.