With countless start-ups and accelerators all vying for that much needed angel investment, it’s easy for legacy corporations and industry leaders to get swept up in the promise of ‘a great idea’, often overlooking the most important selling point of all…the entrepreneur.
Investing in a new product or service can be a tricky business, made all the more difficult when the founder – the personality behind the idea – fails to inspire. With a new company opening every minute across the UK, the country is slowly filling up with budding entrepreneurs. So what should investors look out for in the person behind an idea before putting their money behind a start-up?
Experience in corporate venturing has taught me that the gold dust to any successful and open innovation partnership is the entrepreneur, whose irrational belief in their idea will have you, the investor, also believing their product is primed for unparalleled success.
Why irrational? Because most white space ideas have to have a level of irrationality, where nobody else believes it will work, or has the confidence that it will catch on. Whoever would have thought that people would trust a website as a go between for letting complete strangers use their homes as hotels? The founders of Airbnb did see the potential and thanks to smart investors have created a hugely successful business.. It was an irrational idea, but it worked. Look at it this way; innovation is rational, disruption is irrational. Recognising this irrational confidence in an entrepreneur is the first step in a leap of faith by investors.
If an entrepreneur has charisma and charm they’re sure to make a lasting impression on an investor. If as a large corporation or venture capitalist you’re looking to part with your money, make sure the entrepreneur in question has that special something that sets them apart, so they’re able to connect and impress. An entrepreneur who has confidence and charisma can grow to become a founder of scale.
A start-up with a charismatic founder has something of an unfair advantage compared to a home-grown company without one. If the entrepreneur is marketable they can give their brand a human face and become trustworthy. More often than not an entrepreneur of a successful start-up will have more Instagram followers than the brand itself. They are seen as role models by consumers who can identify with the person behind the product or service.
Sense of purpose
I’ve seen countless investors look for entrepreneurs with similar skillsets to corporates like themselves. This is one of the biggest pitfalls for big corporates, as they often forget the foundation upon which a start-up is built – and that’s purpose. Look for an entrepreneur who is driven by a mission that’s got little to do with making money, but instead is seeking above all else to make a difference. Most start-up founders are passionate about a problem in the world that needs solving, something very few corporates are on the lookout for.
The ability to learn
The ability to learn and learn fast is also pretty crucial to a successful partnership. Investors need to pin-point entrepreneurs who have the capacity to learn and grow. Before investing in that next best thing, ask yourself “Does this entrepreneur have the capacity to learn new skills and skillsets to help grow the company?”
A clear-end game
Not every start-up is destined to reach unicorn status – in fact very few are. Most successful start-ups are more often than not sold off, or absorbed by larger, bigger corporations before getting anywhere close to the billion pound mark. Growing a start-up to corporate status and staying at the helm isn’t necessarily the end-game of every founder. Entrepreneurs who recognise their own strengths and weaknesses along their business partnership journey will help with its growth and success. Sometimes it is about knowing when it might be time to step away and hand the reins over to someone else.
With Brexit looming and uncertain economic times ahead, we could see a new trend of caution emerging amongst already guarded investors. While no single entrepreneur can possess every star quality under the sun, investors can choose where to put their money more wisely, by identifying those key characteristics such as irrational belief and charisma. It’s about creating a win-win partnership, leading to business success for both corporate and start-up.
By Shilen Patel, co-founder of innovations agency Independents United