Co-founder of Independents United and CEO of Distill VenturesView Author Profile
Investors need to look beyond business plans to find the entrepreneurs with the best ideas.
Corporations and industry leaders investing in start-ups and accelerators might be transforming business relations for good, but do they really know what they should be looking for in a business partner? More often than not, the answer is no.
Look beyond the idea
First thing’s first, if you want to invest in a start-up you need to look beyond the idea to the person behind it – the entrepreneur. More and more individuals are calling themselves entrepreneurs these days, but it’s not a title you can pick and choose – it’s a mentality and a lifestyle.
A true entrepreneur carries irrational belief in their product or service. It’s not simply about new product development (NPD). Anyone can build a case for an NPD based on facts, rational thought and adaptation, but true disruption comes from having white space ideas that boast a level of irrationality that nobody else believes will work.
One of the biggest pitfalls we see is corporates trying to look for themselves in entrepreneurs before buying into an idea. But looking for something that you already have won’t deliver the goods. It’s the star quality in entrepreneurs that sets them apart; their sense of purpose.
Don’t look for someone who’s skilled at presenting or writing business models, because founders are driven by a mission that’s got very little to do with making money. That’s not to say they don’t want to make a profit but the money is not what drives them.
A great entrepreneur is passionate about a problem in the world that needs solving. Put quite simply this is what you should be looking for.
On the charm offensive
It goes without saying but any good entrepreneur needs charisma. That’s not to say every entrepreneur needs to be gregarious and outgoing, but they must have ability to connect with people. For example, having a personality that shines through on Instagram, or making compelling YouTube videos will give their idea or product a human face.
More than ever before we’re experiencing a drought in consumer trust, forcing brands to deliver transparency and engage in honest conversations. Therefore, seeing the founder behind the brand speak out about why and how they got started gives consumers something they can identify with.
They start to believe that this brand might have a reason for existing, other than just generating shareholder profit and are more prepared to trust it.
A learning curve
Once you’ve identified a good idea and a strong personality in an entrepreneur, you then need to make sure the individual possesses the ability to learn and learn fast, which is crucial to their success.
There are plenty of entrepreneurs with brilliant businesses today but where will their business be in five years’ time? If the entrepreneur has no capacity, or limited capacity to learn new skills, then the answer is nowhere. The business will not progress, it will not adapt, and it will eventually suffer a demise.
Knowing when to walk away
It’s also imperative that an entrepreneur recognises which bit of their business journey they’re best at.
Knowing your strengths is paramount if you want to create or develop something that will not only disrupt a sector, but has the longevity to adapt and evolve moving forwards. But a great entrepreneur doesn’t just understand what works, they also have the savvy to walk away and admit when something isn’t working.
Investing in something is as much about investing in the founder as it is in the idea itself.
Before parting with your angel investment ask yourself: Does this person have purpose? What does this brand, company, founder, product have that no-one else has and will find it hard to replicate? And perhaps most importantly – is there any magic?
Stop looking for yourself in an entrepreneur, and focus on the unique quality that sets the entrepreneur apart - the irrational belief in their idea.
Shilen Patel is co-founder of Independents United, an innovations agency.
Investors' Guide: Put The Entrepreneur Before The Idea