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?

 

 

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