Some investors put a lot of stock in startups or founders who have subject matter expertise. Jeanne Sullivan, founder of Starvest, loves to hear from founders who are doing something totally new, in which case, how can you be a subject matter expert. After all, as she said, “the Wright Brothers didn’t have a pilot’s license.“
We host a breakfast every two weeks with one investor and a small group of entrepreneurs. We prefer this over filling the room with 100-400 people, as investors tend to say things in a smaller group and impart information that might not come out during the Q&A in a larger group. Since it’s summer and many of the investors are away – which means that we’re only hosting one breakfast in July and one in August – we felt that this might be a good time to share some of the information that they’ve share with us (and the attendees) with you:
6 P’s to know
Howard Morgan, founder of Idealabs with Bill Gross, Founder of the New York Angels, founder of First Round Capital and Chairman of B Capital – Facebook co-founder Eduardo Saverin’s fund, offered the 6 P’s he looks for in a company: people, product, plans, profits, passion, and persistence. Product also includes knowing the market you are going after, and planning mostly means financial planning. Morgan also believes that one of the most frequent startup mistakes is coming up with the wrong pricing, whether it’s too high or too low. Test, test, test, wash, rinse, spin, repeat.
When he said Persistance, he meant that yes, every startup hits roadblocks – investors want founders who are persistent and passionate about what they’re doing and who will prevail: that they won’t let stumbling blocks stop them.
For those overly aggressive founders out there – and we all know at least a few – ‘persistence’ does not mean that he may need to take out a temporary restraining order.
Being an entrepreneur – especially a founder – is a lonely and tough business. In fact, it does have a pretty high depression and suicide rate, sorry to say, so Peter Shankman, angel investor and successful serial entrepreneur, remarked that it’s important to have honest, supportive people around you. Think people who will critique rather than criticize you – which isn’t helpful to anyone. As Peter advised, “if you can’t change the people around you, then change the people around you.”
Are you sure you need an investor?
One of our favorite pieces of advice we ever heard came from Steven Messer, a very successful serial entrepreneur and angel investor who advised entrepreneurs not to go to investor, but rather, build a business and go the funding route only as a last resort. “Why would you want to go to an investor?” he asked. “Frankly, you’d get better terms from the Mafia.” By the way, we are under no circumstance advising that you do that and neither was Steven Messer.
Joshua Siegel of Rubicon Ventures advised attendees to make sure to network with each other when attending events. You never know who’s in the room and how they can help you with your product, with building your team or whatever else you may need that you may not even know yet that you need. Adam Quinton of Lucas Point Ventures also advised not to go to events just to meet or speak to the speaker/panelists: to network with fellow attendees; you never know what might come from it. Do business with each other, he said. Your next customer or strategic partner might be in the room.
Siegel also advised people to go to events and meet investors, even if they’re not yet looking for investment. Always good to establish a relationship early. In fact, the earlier, the better.
Choose your investors wisely
David Arcara of Laconia Ventures gave the same advice. We hosted him last June and he said that that week he was writing a check to a founder whom he had met the previous August. And who had been following up with him and keeping him in the loop as to his progress ever since. Said David, you want to get to know your investors. I’m sure that you’ve heard that getting involved with an investor is like a marriage and that is not true. If that marriage goes bad, you can get a divorce. You cannot divorce your investor. That union is for the life of the company. You’re stuck.”
Each investor offers a unique perspective, and every single one has imparted some gem that, trust us, was more than worth the price of admission. They’re also there to listen to the entrepreneurs, who also introduce themselves, and let’s be honest: you never know what you’ll hear – and they don’t always know where they’ll find their next investment. Then again, it may be simply another proof point of that adage that we’ve heard ad nauseam our entire lives: that breakfast is the most important meal of the day. Onward and forward.