I've noticed that some entrepreneurs seem to have no trouble attracting investors, while others with a great business plan struggle. The reality is that "angel investors" are humans, and personal traits often make or break the relationship, even before the investment is considered.
On the top line, angel investors look to invest in entrepreneurs that have an almost unwavering passion and sense of urgency. In the business, this is commonly called "fire in the belly." If you don't have it, you probably won't succeed, even with funding.
Of course, this fire has to come in concert with a variety of visible characteristics that indicate that you, as the entrepreneur, have the attitude and practical skills to make it happen. Here are some key ones they look for:
- Talks and writes well. Can concisely explain the unique, compelling value of the proposed venture in written terms and in oral presentations (elevator pitch), recognizing that some investors rely more on one than the other. Listens before answering questions.
- Networked and connected. Successful entrepreneurs already have a visible network of trusted suppliers, potential customers, partners and even investors. These are critical to any venture. A successful track record with previous investors is a home run.
- Full disclosure attitude. Clearly willing to provide details of weaknesses as well as strengths of the proposed venture, and the challenges ahead. You must be willing to welcome the participation of the angel investor in the company, at least at the advisory level.
- Values intellectual property. Convincingly presents a patent, trademark or other "secret sauce" that can create equity value, not just current cash flow for the owners. This has value now, and is critical for maximum value in a merger or acquisition.
- Not in a heated rush. Calm and self-assured, rather than desperate. Can show milestones achieved, as well as planned, which indicate rational expectations. Allows sufficient time to find capital, including due diligence time for investors.
- Realist. The best entrepreneurs recognize and accept things as they are, and react accordingly. They are quick to change their direction when they see that change will improve their prospects for achieving their goals.
- Domain experience and expertise. Investors realize that passion is no substitute for knowledge and experience, and every business is more complex than it might look on the surface. They will pay a premium for someone who has "been there and done that."
At the stage during which the angel is normally investing, the entrepreneur may be all the angel has to go by to decide whether the deal is worth pursuing. The technology or product may be at an embryonic stage. There may not be any customers to talk to in order to evaluate the market need.
The investor, in order to eventually be successful, has to spot not only winning technologies but winning people, and all investors have a slightly different view of what a winner looks like. So, of course, they try to guess the internal traits, like honesty, dedication, vision, intelligence and leadership based on external traits listed above.
If you think you want to be your own boss and run your own business, look in the mirror to see if you have the right traits to be an entrepreneur in your domain of interest. Better yet, ask a real friend, who won't just tell you what you want to hear. We can't change you, but you can change yourself, if the current pain level or the future reward is high enough.