Originally published by Creel Price on LinkedIn: Investibility – What Angel Investors Look For in a Startup
Securing early stage venture capital is notoriously difficult, particularly for first time founders. But what’s often neglected is the other side of the equation - the difficultly for angel investors to differentiate between a company worth investing in from something that is unlikely to succeed. Over the last eight years I have co-invested with my business partner Trevor Folsom in some of his 50 angel investments that have generated 6X returns and include some of the most promising start-ups like Canva, Ipsy and Car Next Door. Over this time, I have observed a set of factors that angels like Trevor look for to identify high potential startups.
We will be sharing this Investibility methodology in more detail at our AngelPitch event coming up on the 5th and 6th of August to help founders maximise their chances of securing capital. In the meantime, here is a brief introduction to what angel investors should be looking for and what founders should seek to demonstrate during their capital raising.
If you start with the premise that early stage investing is a multi-faceted gamble, then you can learn from an industry that is almost a thousand years older than the tech start-up industry – horse racing. Modern thoroughbred racing had its beginnings in the 12th century when English knights returning from the Crusades brought with them Arab stallions that were mated with English mares. This soon saw the nobility wagering on the races. Over the centuries the art and science of picking winners has developed to a stage where a set of factors and formulas exist to predict the chance of success.
Modelling these proven factors translates to an Investibility framework which can increase angel investors' chances of picking a winner. Pictured below, these investibility components are broken into nine “business factors” (white), two “intrigue factors” (black) and four “deal factors” (blue).
Business Factors
Just like horse racing, the nine business factors range from qualitative to quantitative and sit on a spectrum from those influencing survivability (will the horse last the race?) to thriveability (will the horse win the race?). However, riderless horses don’t win races and inexperienced riders are unlikely to have a podium finish. Just like a competent jockey is key to horse racing, a quality founder or founder team is crucial to driving a startup’s success. Of all business factors, investors should focus on the founder first. They will assess the experience, skills, attributes, attitudes, vision and values of founders as strong indicators of potential business success.