What I have learned about investing in startups
The last 18 months have been great for our accelerator (http://www.acceleratr.co) with our portfolio boasting one successful round of crowdfunding, two going into Series A funding, and good levels of real bonafide profitability in half our invested companies. We’ve also had a few disappointing failures which have taught us a monumental amount about the anatomy of success.
I have made the mistakes so you don’t have to.
The TOP 20 things I have learned about investing in startups:
- I like founders who aren’t straight out of university and have some experience of how difficult life really is (clue: it’s bloody difficult).
- Just because someone uses a CTO title doesn’t make them qualified to be one.
- If you are competing with US-funded startups then “we’re better than they are” means absolutely zero.
- Be careful with founders with rich parents – with a gilded safety net failure is not feared as much as it should be.
- If you’re going to pivot, then do it quickly, and when I say quickly I mean within a month of someone first mentioning the word.
- It’s almost always better to back the startup that has a 70% chance of making you a million pounds than the one with the 0.1% chance of making you a billion pounds.
- Your product/service may solve a very real problem but only if people can use it incredibly easily. Never underestimate how lazy the average person is. Sometimes 2 clicks is 2 clicks too many.
- Almost every startup has underestimated their marketing cost requirements.
- Digital marketing isn’t always cheaper and more effective than offline marketing. Judge all channels on their merits and within the context of each particular business.
- I won’t invest in a startup if I email them on the weekend and they only respond on Monday. Harsh but true.
- Timing is the most important determinant of a startups likelihood of success.
- Work ethic is the second.
- Most startup founders shouldn’t be actually running their businesses from Year 3 onward.
- Different people have a different definition of MVP. Most of them are wrong.
- Be helpful even if you don’t plan to invest. Karma is real.
- Ideal number of founders is two, but not with 50/50 shareholding.
- When everyone says “yup, I’d definitely use that if you built it”, it doesn’t indicate in the slightest that they actually will.
- Every feature has a maintenance cost.
- Never allow more than 20% of your angel investments to be moonshots.
- Demand formal board meetings.
Do you agree? Any to add?