What to Look for in a Founder as an Investor

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CRM & Tech : 6 min read

What to Look for in a Founder as an Investor

Imagine being able to say you were the one who “discovered” Facebook, Amazon, or Netflix.

Or being able to say you believed in a company like Uber or Airbnb right from the start, so you put your money in them—and made a killing by doing so.

In hindsight, these companies seem like obvious investment candidates. Surprise surprise, however, it’s a lot harder to predict a company’s success before it actually happens (as you’ve probably discovered by now).

In 2007, no one would’ve predicted that Netflix would be the blockbuster hit (pun intended) it is today.

Well, except for the VCs that did.

Yeah… their original $1,000 just turned into $90,000 this year, but let’s not dwell on that.

your netflix investment could be worth over 100x of what it was

The point is, recognizing a company’s potential and foreseeing its chances for future success can be tough. What you can do is focus on what—or who—you can see: does the company’s founder got what it takes?

If a founder’s got these five traits, they just might.

1. They’ve got a great personality.

“Personality… what? What does that have to do with the amount of money a startup can make me?”

Well, think about it. If this whole investing thing works out (which is the reason we’re here), the founder of that startup is going to be in your life for a long time—maybe even forever.

So yeah, being able to stand them is important.

When you’re listening to a founder explain why their idea is worth your money, be sure to also observe whether their attitude is worth your time. If they aren’t putting in effort to build a positive and honest relationship with you (aka. the person with the cheque), you can’t count on them to have the skills to build relationships with future prospects, which is kind of important if they want to make sales.

When meeting with a potential new business partner, ask yourself: Can you see yourself working with this person long-term based on their personality alone?

Pro-tip

Put your capital to work 🚀

Learn how VCs can better manage relationships with portfolio companies, founders, and more with this handbook.

2. They have industry knowledge + experience.

Knowing a medical software company you’re about to put money into knows a little something about the medical x software world is a lot more reassuring than if they were totally new at this, right?

A founder who knows the industry they’re going into will make it clear in their pitch deck as well as in their conversations with you. If they don’t, chances are they haven’t done enough research to back their idea which is always a red flag.

It doesn’t necessarily mean they’re a lost cause, but it is cause to be a little worried about betting millions of dollars on them.

Going back to our Netflix example, founders Reed Hastings and Marc Randolph certainly weren’t new to the business world. They both had experience working at and operating large tech corporations previously. In other words, they knew what they were doing.

Even though “Netflix” was a totally new concept at the time, they had the industry expertise and the knowledge they’d gained in their past roles in similar fields to successfully push their product.

A key question to ask:

Does the founder have relevant experience from other places or transferable skills of some kind—anything on their resume to show they’ve handled large ventures in the past (and had success doing so)?

3. Their BTS efforts are as impressive as their show.

Picture this: a founder just blew your mind with an amazing presentation on their revolutionary product idea. They’re super confident their idea’s going to take off and they’ve got you believing it too. The little voice in your head (or wallet) saying “take my money” is getting louder and louder.

Let’s pause there.

Target thought they would do really well too when they decided to open up in Canada, until they were forced to shut down less than two years later with more than 2 billion in losses.

Needless to say, it was big news in Canadian media.

target shut down closing sale

This was definitely a shock to a lot of investors, considering Target’s tremendous success in the United States. Heck, even Canada was excited. Target’s idea to venture north looked totally promising.

Their problem? They didn’t dedicate enough time and resources to the behind-the-scenes stuff. Doing a more thorough competitor analysis, better researching pricing strategy, and being just a tad less ambitious (they opened 124 stores in 10 months) would have helped, to start.

The point is, don’t focus solely on the presentation. What the founder’s got going on behind the scenes is just as important.

Here are some things you should find out:

  • Do they have the logistics pinned down?
  • Do they have a market penetration strategy?
  • What’s their growth strategy?
  • Most importantly, are they set up to effectively manage customer relationship (aka. the biggest deciding factor in their long-term success)?

4. They know people.

You can tell a lot about a founder by who their network’s made up of.

Do some sleuthing (or you know, just ask them) and find out who else they’re working with, who their contacts in the business world are, and who their allies are.

A founder’s network translates into where they currently stand in the business world. It’ll tell you who else they’re in contact with, who their influencers and mentors may be, and who else they might be pitching to. You may also be able to find out who’s already invested in them, which could help you made your own investment decision.

For example, if the founder of an electronics startup has connected with a bunch of VCs known for investing in the tech and electronics field… it’s safe to bet they’re pitching to them too. Maybe you find out one of these VCs has already pledged an investment; if they happen to have a good reputation for picking good founders, you may choose to follow suit.

5. You’d pay for their product.

Okay, so the founder seems like a nice enough person and a little research on their network and background proves them to be pretty legit as well. They’re well-spoken and their pitch deck is pretty.

But would you, as a consumer, buy their product?

Whether or not people are willing to pay for this founder’s product is what it all boils down to at the end of the day. If everything else checks out and the product is solid, they might really be the next big thing.

Ask yourself:

  • Would I pay for this?
  • Does this product or idea solve a real-world problem?

Remember: the gems aren’t always obvious, and the next billion-dollar idea can sometimes be something as simple (or arguably, plain genius) as a website that lets you stream your favorite shows and movies for a monthly subscription fee.

Speaking of simple plain genius ideas…

You’re going to need somewhere to manage all your portfolios.

Yes, we’re about to pitch ourselves to you, but for a different type of investment.

Copper is the CRM that empowers you to truly and effectively invest in your relationships with business founders.

Below, we’ve got a one-minute video showing you how.

We could tell you what’s behind the scenes as well, or you can see for yourself by signing up for a free 14-day trial—no credit card needed.

(Seriously though, if you want to talk to someone, we can set that up too. We’re all about building them relationships. Contact us here.)