First and foremost: I’m not a professional investor. I’m what some call a “business angel” – I give some money to entrepreneurs, usually for them to burn quickly and get nothing in return 🙂 But in the meantime, I learn a lot from the founders and their businesses, sometimes I teach them a thing or two from my experience, and we have a lot of fun together. So, take this with a pinch of salt.
I’ve reviewed all the “passes” I gave from the last two years on qualified deal flow. That is, projects that passed the triage and where I had at least two meetings with the founders and team. And I realized that over 75% of rejections were due to one main reason: the founding team. So, I figured I would write this to use as a reference for the next project I give a pass on.
These are the things I typically see:
– Lack of a Strong CTO Co-founder: I typically invest in tech-driven companies. If you don’t have a strong CTO co-founder, I will have a lot of doubts. Note: Giving that person 2% equity is not a co-founder. Every case is different, but generally, I like to see how the tech person is as involved as the business one. Note that strong does not mean necessarily with tons of experience. Strong in terms of commitment!
– A swarm of Cheerleaders and Butterflies: Startups tend to over-scale on people at the beginning, and some founders don’t realize they don’t need that much people (or advisors) but that they need to wear 20 hats at the same time. Sometimes, nice projects or convincing founders attract a lot of these. Early cheerleaders, advisors, and supporters take money, time, equity, or all three, but not always pull their weight. Beware of them specially if they don’t put money in. I have seen many companies going down the drain because of this issue.
– You don’t need a head of sales: As a CEO, you are the main sales rep, the marketing one, and ideally, the one talking to customers as well. You are trying to get to your Product-Market Fit (PMF). You won’t achieve that by delegating client touch. If you (and your founding team) are not out there selling your stuff, you got a problem.
In short. I like it when I see a founding team of pigs and no chicken in the fable that you can find in my book “The CTO Toolbox” (And that you can find here: https://lnkd.in/eBZzQrGv Sorry for the shameless promotion 🙂 ).
