The Baseline

As an investor, establishing a clear baseline is essential. This set of criteria outlines the types of businesses you want in your portfolio. For instance, you might choose to invest solely in technology companies, creating a non-negotiable rule for yourself.

Another key factor could be geographical focus; you might prefer startups located in the U.S. and Canada, or concentrate on Latin America or the Middle East. Additionally, you might consider the current valuation of startups compared to their projected future valuation, opting to invest only in early-stage or series A rounds.

Your baseline parameters should also account for market size, ensuring that the startup addresses a market within a specific range. By defining these parameters, you position yourself not just as a source of capital, but also as someone who can offer industry expertise, connections, coaching, and resources.

The Brand

Top-tier investors are inundated with pitches from startups seeking funding daily. Typically, they find few suitable matches. By applying your baseline, you can eliminate around 95% of these proposals, leaving only a small fraction that may still be unprepared or misaligned with your goals.

I recommend that anyone who meets your baseline and shows promise should receive a response—one that includes a task or follow-up action. More than half may not follow through, but those who do are worth further consideration.

As a new investor, you may not yet have a flood of opportunities coming your way. To draw these prospects in, you need to cultivate a strong personal brand. This involves participating in live events, engaging in discussion panels, launching a social media presence, or even collaborating with someone who already has an established online brand.

The goal is to attract entrepreneurs rather than chase them, and a strong brand will facilitate this attraction.

Finding the Right Entrepreneur

With a well-defined baseline and engaged entrepreneurs, you are ahead of the game. However, just because an entrepreneur is responsive during the fundraising process doesn't guarantee continued engagement after securing funds. The last thing you want is for your investment to falter due to a lack of communication and support.

Trust your instincts when evaluating potential partners. If something feels off, heed that intuition. Conduct a series of live meetings with responsive entrepreneurs to assess their core team's capabilities and the leader's coachability.

While there may be multiple founders, it’s crucial to have a clear line of leadership. A well-defined leader is essential to avoid internal conflicts within the startup. Assessing the character of this leader is equally important; one method could be taking them out for an informal meeting, like a round of golf, to gauge their demeanor.

For those new to investing and lacking an established brand, consider shadowing a more experienced investor, selectively investing alongside them, or even building a rapport to gain insight into their strategies.

Successful Entrepreneurs

The timing of a startup’s offering is a critical determinant of its potential success. You must evaluate whether the market is ready for the product or service at that moment. If the answer is affirmative, the next consideration is whether the startup team possesses the determination to succeed.

As a guideline, I tend to shy away from startups making their first genuine attempt at something novel, as the likelihood of failure is generally higher. Conversely, seasoned entrepreneurs with a clear vision and the ability to rally others around that vision are prime candidates for investment.

Prior experience in corporate environments, such as management consulting or banking, often enhances an entrepreneur’s chances of success. Those who have experienced failure in previous ventures bring valuable lessons that can inform future endeavors. In fact, founders who have been ousted from their startups can be particularly promising, as they may be driven to prove their worth.

Investors should also pay attention to entrepreneurs who face obvious challenges; their determination can yield impressive results.

Conclusion

Identifying the right entrepreneur for investment is both an art and a science. Success hinges on attracting top talent through a solid personal brand or by aligning with reputable brands. Ultimately, the crux of your investment strategy should not rest solely on the startup's idea but on the timing and the capabilities of the team executing it.

If you seek further personalized insights, feel free to connect with me on LinkedIn.

Cheers.