When it comes to investing in startups, investors are not only evaluating the potential of the business idea but also the qualities of the founders behind it. Startups can have an innovative product, a large market opportunity, and a sound business plan, but without the right team behind it, success can be elusive. This is even more the case in 2023 with investment more difficult to secure.
Based on several interviews with prominent angel investors, we explore the key traits that investors look for in startup founders. From passion and grit to adaptability and communication skills, we delve into the qualities that can make a startup founder stand out and increase their chances of securing investment.
1) Passion
Investors want to see that founders are passionate and committed to their startup. They want to see that the founders are willing to work hard, make sacrifices, and persist through challenges. This is a stronger requirement than ever during a more challenging economic climate.
Roxane Sanguinetti is an investor with Alma Angels and co head of the London chapter of Women in ETF’s. She says: “I think my founders all have in common an insane sense of dedication. They are so incredibly passionate about their cause and are the most hardworking people I have ever seen. They have all brought in impressive results with limited financial backing.”
Experienced Angel investor Noel Duigan has personally invested in 12 businesses in the past year. He agrees: “You need to be vested. A product or service driven from need, not greed, will always win over investors. The market is over-saturated with people making a dash for cash off recycled ideas. Founders need to be passionate, driven, and fully committed in the longevity and future of their company. Hand sanitiser during a pandemic doesn’t cut it.”
2) Deep expertise
Investors look for founders who have deep knowledge and experience in their industry or niche. They want to see that the founders have a unique insight into the market, and understand the problems they are trying to solve.
According to Marla Shapiro- CEO of HERmesa – a UK based angel syndicate:“I would say that great founders/teams have strong founder/product or market fit. Ideally this means that you have deep experience in a sector that has led you to creating an innovative product and that you have the network to find the first paying customers. Or you have some killer functional experience that will allow you/your team to out-execute others.”
3) Patience and grit
Angel investors want to see that founders are in it for the long haul and have the qualities to see through difficult times and challenges. This is especially true in the often tortuous fundraising process.
According to Andy Ayim MBE, founder of Angel Investing School: “The tech industry over indexes on intelligence and being smart. In reality, entrepreneurship is more about perseverance, grit and luck. Fundraising is hard work for most, there is no shortcut. If I get a deal on a Friday that closes on a Monday, I simply say no as I need time to nurture a relationship and understand the founder and vice versa so they can get to know me.”
This is a perspective David Pattison, experienced angel investor and author of an award winning book about fundraising agrees with: “Too many entrepreneurs think that they are almost ‘owed’ the money and it should come quickly and with few strings attached. Every entrepreneur should respect your potential investors and their money.”
Ayim says: “Founders will need to foster relationships and play the long game with investors to build trust and show they have a plan to survive and thrive throughout this climate. Gone are the days for now of investing in scooters or deep tech companies with no clear business model.”
4) Adaptability
Investors want to see that founders can adapt to changing market conditions and pivot their strategy when necessary. They want to see that the founders can quickly identify and address problems as they arise. Key to this is having enough self awareness to not be too wedded to one approach.
Addy Windsor-Clive, investment manager at Regenerate Ventures says: “In the AgriTech sector all the founders are very mission led and pivot easily as a result of feedback from industry experts. Also founders shouldn’t be afraid to give away equity.”
According to Sanguinetti: “A successful founder can also be one who realises their own limitations and know when it is time to sell or to step away from the business, even when it does not maximise their profit, but it ensures their team and the business can carry on.”
5) Communication skills
Investors want to see that founders can effectively communicate their vision and strategy to stakeholders, including investors, employees, and customers. Key to communication is also the ability to listen and take onboard feedback. Also to provide timely and regular updates with investors who are parting with their hard earned capital in support of startups.
According to Duigan: “Regardless of when you invested, a good relationship means consistent updates. There is a challenge for founders to find a sweet spot between the management of their workload, and the stress it entails, alongside the expectations of their investors.”
According to Shapiro: “We look for thoughtful people who ask for advice. Founders get a lot of advice; not all of it valuable! But, knowing when to put up your hand and ask your investors for help and the maturity to weigh the responses goes a long way towards building a successful company.”
To summarise investors are looking for founders who are passionate, knowledgeable, adaptable, have patience and grit and great communication skills. In a more challenging investment climate, character counts.
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