Smart Investors Evaluate the Founder More Than Their Pitch. Here's How You Can Persuade Them You're Investable. Good investors are more interested in getting a measure of you, not solely your business idea. So what traits are they looking for in you?
By David Newns Edited by Kara McIntyre
Opinions expressed by Entrepreneur contributors are their own.
I've invested in more than 25 world-changing, disruptive businesses in the last decade. These innovative companies have made women safer on the streets, children more protected online, people healthier and given us all more fun via some of the world's most entertaining creators. Here's the thing: While all the businesses had a completely new concept at their heart, I invested in the founder more than the idea.
What I've learned as a serial entrepreneur and investor is that a business doesn't need to have the best idea in order to be a worthwhile investment — they need an investable founder. Just think about the world's most recognizable entrepreneurs today. Do you know Elon Musk for city guides, Jack Dorsey for a podcasting app or Richard Branson for a student magazine? Of course not. Behind every famous entrepreneurial idea is a pivot or evolution from a determined, skillful founder.
Every investor has a healthy appreciation for the unreliability of ideas — so often at the mercy of external influences out of your control — versus the reliability of people. If you have successfully returned 10 times once or twice, you will have already proved yourself a worthy, reliable investee — but what if you haven't? Highly experienced investors have developed an instinct and shorthand to find founders worth investing in.
Many new entrepreneurs misunderstand this, so focus on the wrong things in crucial meetings to raise capital. In the "shark tank," the founder might think it's most important to draw attention towards bullet point three on slide five of their deck, but investors only looked at the headline (as they do with every slide) in order that they can instead peer into your soul. They're more interested in getting a measure of you, not your idea. So what traits are they looking for in you?
Related: Here's What's Brewing in the Minds of Startup Investors
1. A superhuman determination to succeed
People have different reasons for wanting or even needing to succeed. Many that I know like to have control over their lives, from making their own lot better to improving the future for millions (or billions) of people. Whatever is feeding your determination to succeed, make sure it's a deep well.
To win, entrepreneurs typically endure relentless decision-making, constant risk-taking and strings of failures. The successful ones are more right than wrong, have great ideas to manage risks and turn failures into opportunities.
Determination must be a lifelong habit, too, as founders should have a strong sense of urgency (procrastination won't fly) yet also have an unusual amount of patience (as their idea can take years to come to market or generate profit) combined with persistence. No wonder so many entrepreneurs run marathons and ultramarathons, as being a founder is the ultimate endurance test where resilience is the name of the game.
2. Endless curiosity
Being able to remain insatiably curious allows entrepreneurs to continuously seek new opportunities. So rather than just settling for what you think you know, show investors that you always ask challenging questions and explore different avenues.
Incidentally, this curiosity can usefully extend to skepticism, especially about technology. On the one hand, you should be able to pull things apart from a quality point of view, and on the other hand, you should be able to really focus on what problem you are solving. In the words of my business partner, Chris, "Question everything."
For a killer combination, put curiosity together with a willingness to break the rules that you're questioning. Asking, "Why has no one done this?" could identify a great opportunity to disruptively innovate.
Related: Do You Have These 6 Personality Traits? You're More Likely to Score Investors
3. Commit to building a great team around you
It's true that, as an entrepreneur, at first you are the proverbial "chief cook and bottle washer," you are doing every role in the business. To grow, you need a team, and to exit (which you will, one way or another) you need a team to run the business after you have moved on. So smart entrepreneurs show interest in building a great team around them.
That's not only co-founders but indeed the total management team that's in (or going to be in) the company. Back to the curiosity point, founders who know what they don't know are really valuable. More than that, ones who can put their ego to the side and see there are specialists — who are better designers or marketers or whatever — are gold.
4. Focus on execution more than the idea
There are new ideas to be discovered, and that's one reason I'm optimistic about the future. We live in a dynamic world, so new ideas are always needed. That said, a great team can execute a mediocre idea, make it great and make a great company. So investors look for your ability to execute. They want to see an exceptionally talented product and technical leadership with domain expertise.
So, if you're building a product for a specific market or an ecosystem, ideally you have brilliant experience in that world. When billionaire investor Peter Thiel's fund was investing in cleantech entrepreneurs, they quickly realized that the people wearing suits to pitch for capital were salesmen with no real technical expertise, so they instituted a rule to never invest in cleantech founders wearing suits.
5. Old-school hard work
We've all heard stories about entrepreneurs sleeping in the office at night. I'm not saying that's optimal; however, you will work harder than you ever have in your life. Ever tried running a startup and running an investment raise at the same time? They're both full-time jobs, but no one else can do it — it's all on you. Beyond that, it's true that the person who works more hours is almost always going to succeed or do better than the person who works fewer hours, and investors will be looking for a solid work ethic.
Related: Beyond the Basics: 5 Surprising Qualities Investors Seek in a Winning Team
6. Be a good storyteller
Being able to articulate a bold vision and your mission, as well as your personal story that brings you to the investment pitch is incredibly helpful. It's about amazing storytelling. When he took over Tesla, Elon Musk said fossil fuel will run out, so we need electric cars, but because they're expensive, Tesla will make the most luxurious ones and rich car owners will fund the development of mass-market ones.
That's great storytelling that let investors see the opportunity, made rich car owners feel good and mass market owners feel excited about the advent of cheaper electric cars. When you're captivating, and of course have great control of your commercial numbers, you're going to be able to raise money.
