What Seed-Stage Investors Want to See in You, The Founder
By: Chris Adams
Tags: Founders, Seed Funding, Startup Life, Dmz

It’s no secret that active seed-stage investors, both angels and venture capital firms, base their success on a form of business clairvoyance. They use their secret formula and their instincts to look into the future.

The methodology that these investors will use can be as individually unique as the businesses they’re evaluating. Some are straight-up quants who will observe and absorb every single number that could measure your business. Others are more holistic and will take a pass if your founder doesn’t make eye contact.

However, nearly all of them will look at one absolutely crucial part of your business: You.

Like it or not, your business will be held under the microscope, and so will you as its founder. I have seen countless founders make and break a deal without even knowing it.

All investors are different. But you can bet that most of them will factor in the following.

1. Your Technical Expertise

To call this a deal breaker in the tech startup investment is a bit of an understatement.

This is not as big of a deal if you’re a non-tech consumer company. But if you’re a tech startup, you need to know how to impress people who’ve invested in other tech startups. There is absolutely no faking this.

There is a reason that tech companies with tech founders (or cofounders) are a staggering 280% more likely to succeed.

Your founding team could have a mix of talent, with some tech people, some marketing people, and some product people. But your CTO had better be the real deal.

2. Your Failures

Believe it or not, your previous failures don’t all count as points against you. If you have failed the right way and learned the right lessons, this can actually impress a would-be investor.

In fact, entrepreneurs with a failed business under their belt have a better chance of success than first-time entrepreneurs.

Being seen as a go-getter who has tried and failed is better than being perceived as someone who’s never failed because they’ve ridden other people’s coattails.

3. Your Expectations for Scaling the Business

Of course, you want to convey the utmost confidence in your company. The sky is the limit, right? Wrong. There is a limit and you need to know it — and investors need to know that you know it.

Roughly 70% of startups will fail because they tried to scale too quickly. Most VCs can probably name a few right off the top of their heads.

If your plans to scale are a little too aggressive, a hyper-focused investor may chalk that up to inexperience. However, if you’re way off, that’s a giant red flag. It likely means that you:

Could be overestimating the market demand Are focusing too much on selling and not enough on developing Both 1 and 2.

4. Your Energy and Enthusiasm

Successful entrepreneurs don’t sleep, but you would never know it from talking to them about their company.

There is also no faking a sincere passion from a startup owner. You can put together the best pitch deck on the planet, with compelling numbers and a super-team of founders in place. But if the founder can’t convey a feeling of genuine excitement about this company to investors, forget it.

We’re not just talking about charisma or the ability to work a room. A lot of times those things can be a facade. There is an intangible and un-fake-able energy that oozes from someone who is authentically excited about their business.

This is the type of energy that you get from people who have quit their jobs and invested their own money into betting on themselves. And these are the people that you can bet will have the courage to stand up to adversity.

Because as promising as you think your business is, there will be adversity.

Your Incubation and Mentorship

Is your business a part of a well-respected incubator, accelerator, or project? Are you being mentored by someone with a proven history in this space? These things carry a tremendous amount of weight with both angel and venture investors.

Your business now has a certain level of pre-approval, so to speak. Someone else with clout or knowledge has seen something in your business, so investors will make sure they see it too.

Of course, every angel and venture investor has their own formula or their own scorecard when it comes to who they will invest in. But you, as a founder, will always be a crucial part of their assessment and their final decision.

Care to share a little bit of your own secret sauce? What do you look for in a promising startup? Let me know in the comments below.