Image via blog.JohnSpence.com

Successful startups are all about turning ideas into action quickly and efficiently. These actions must be the hard part, since entrepreneurs always seem to come to me with ideas, and ask me for help on the actions. That has always seemed strange to me, since the magic is supposed to be in the ideas, and the actions are the same for every business.

In fact, the actions required to start and run a business are well documented, the subject of many books, and taught in college courses across the land. As confirmed to me by John Spence in his book on this subject, Awesomely Simple, turning business ideas into action consists of six essential strategies:

1. Build a vivid vision. Having a clear, vivid, and compelling vision in your head is without question an essential component in building a successful company. But that’s not good enough. The vision has to be documented and communicated in a way that makes it vivid to every member of your team, your customers, and your investors.
2. Team with the best people. The best people are highly talented and motivated individuals who are also masters of collaboration. The future of your startup is directly tied to the quality of talent you can attract and keep. You must create a winning culture that people love.
3. Practice robust communication. Open, honest, frank, and courageous communication, both inside and outside the organization, is critical. The key skills can be learned, and include deep listening, logic versus emotion, and reading body language. According to Spence, this is the biggest problem he has to deal with in client organizations worldwide.
4. Cultivate a sense of urgency. Get things done. A fast, agile, adaptable organization makes the important things happen now. Urgency is allergic to bureaucracy. Reward fast action. You set the model for your startup. You become what you focus on and become like the people you spend time with.
5. Enforce disciplined execution. Build a performance-oriented culture that demands quality in every operation, encourages continuous innovation, and refuses to tolerate mediocrity. Most organizations execute only 10 to 15 percent of their major goals. Do a periodic effectiveness audit to check your operation. Then fix it.
6. Show extreme customer focus. Put feedback mechanisms in place to know that you are consistently delivering what customers truly value. Attitude and listening are the keys. Superior customer focus can drive as much as an 85 to 104 percent increase in your profitability.

It should be pretty easy to see the interdependence and synergy among the six principles, each building on the next, all the various elements working together to create a highly successful business. But you don’t have to go out and address all six principles right now. Pick one that will create leverage immediately, and begin with it.

Spence defines three simple watchwords that will lead to business excellence – focus, discipline, and action. If you are missing any of these, the outcome will most certainly be mediocre. Once you start accepting mediocrity, you become a magnet for mediocrity.

Your great ideas deserve more than mediocre actions. Simple actions done in an outstanding fashion are far more effective than complex and time consuming actions done poorly (thrashing). Also, don’t be fooled into thinking that “simple” means “easy to implement”. Start now to turn your innovative ideas into action. Every entrepreneur loves a challenge.

US angel investors have been a robust source of seed stage capital for years.  More recently, we have experienced significant growth in the number of funded seed stage deals, due to the emergence of accelerators, super angels and new seed stage funds.  Unfortunately, we are now suffering a Series A startup funding crunch, that is, a lack of seed stage follow-on capital in the range of $1.5 to $7 million, funding which a decade or more ago was the sweet spot for venture capital.

Over half of angel rounds reported recently by groups who are members of the Angel Capital Association were syndication among multiple groups (from the Halo Report).   Formal seed stage syndication activities are operating among US angel groups in the Northeast, the Pacific Northwest, the states of Ohio and Texas and elsewhere.  These syndication efforts routinely fund round sizes up to $2 million, but few larger rounds.  Can we devise a syndication model which would enable US angel groups to syndicate Series A rounds between $1.5 million and $5 million, or even higher?

The following model has been proposed*:

• Form a trial working group of at least a dozen angel leaders with specific business vertical expertise and representing a significant number of deep-pocketed investors with interest in funding Series A deals in this business sector.  (If this model is successful, expand by forming additional working groups in different business verticals.)
• Any working group member could bring a Series A deal to the group.  The assumption is that, in most cases, the group local to the deal likely participated in a seed round earlier, assisted in governance since the seed stage funding, has completed due diligence for the Series A fundraising  and plans to invest in the Series A round.  But the local angels need substantially more capital than is available within their group to close the Series A round.
• After a short review, the working groups agrees the proposed Series A deal is likely to generate enough interest with participating groups to close the round.
• When the working group’s response is positive, the company is submitted to an agreed-upon third party for the following analysis:
  • Deep due diligence
  • Total funding requirements assessment
  • Extensive exit appraisal (value, options, timing)

Estimated cost for analysis:  $10-25K, paid for by company

• When the analysis is complete, the independent third party reports to the working group.  In those cases when the report is appropriately appealing, the angel groups represented by the working group close the Series A round.

In order to test the feasibility of the proposed model, nine leaders** representing angel groups across the US were interviewed and asked for their comments.  These comments were consistent among the responses:

1. Most importantly, there is significant need for a syndication process among angel groups to facilitate Series A funding for promising startup companies in angel group portfolios.
2. A model similar to the proposed model may be feasible; however, it is unlikely that angel groups will agree to pay a fee for independent third-party expert analysis on deals that are ultimately not funded.  Taking the expert fee from the proceeds of a round is reasonable.  Expecting angels to fund experts for unfunded deals is not.

Additional findings from the interviews are as follows:

• A key to syndication success is familiarity and trust.  Networking among members of the Angel Capital Association has led to substantial seed stage syndication in the US.
• There is a relationship between proximity and the likelihood of syndication.  Neighboring angel groups have co-invested in deals for many years.  However, national networking opportunities are leading to greater interest in national syndication.
• Co-investment among those angel groups with specific industry segment interest and expertise is growing.
• Making syndication work requires human resources – drivers who are willing to spend the time necessary to keeping the activity on any single deal moving forward and committed to championing the ongoing effort over an extended period of time.
• There are some efforts underway to promote Series A syndication, especially in the Clean Tech and Life Science sectors.  Unfortunately, these efforts have not, as yet, been highly successful, perhaps due to lack of appetite for Series A deals or due to under resourcing of human and financial capital.  These efforts to syndicate Series A deals do not seem to have been as successful as those activities with a focus on funding seed stage startups.

Summary

There is uniform agreement, indeed enthusiasm, for a working model for Series A syndication among US angel groups.  Unfortunately, it would appear from this survey that this enthusiasm is not as yet matched by a consistent commitment among all parties to provide the resources necessary to operate the activity.

*Full credit goes to Tom Churchwell (ViMedicus, Inc.) and Rick Herbst (Sikich), working with the author, to develop of the proposed model.

**A hearty thank you to the following angel leaders for this input:

From the US East:  Michael Cain (Wilmington Investor Network), John May (DC Dinner Clubs) and Catherine Mott (Blue Tree Angels)

From the middle of the US: Karin O’Connor (Hyde Park Angels), Jamie Rhodes (Central Texas Angels) and Tim Keane (Golden Angels),

From the US West:  Steve Flaim (Tech Coast Angels), a leader of the Sierra Angels and Sacramento Angels, and the author (Vegas

Valley Angels and the Frontier Angel Fund)

Each provided important information however the author assumes full responsibility for all findings and conclusions.

I’ve had the pleasure of judging several dozen real business pitches in the past six weeks. Some were pitches for angel investment at the Willamette Angel Conference, an angel group in Oregon. More to the point, others were for the University of Oregon New Venture Competition, the Rice University Business Plan Competition, and the University of Texas’ Venture Labs competition. 

The three business plan competitions I participated in were all MBA-level contests organized by the entrepreneurship-related faculties at the three schools. They all invited startups from dozens of different schools, including several from other countries. 

Judges read business plans first, then hear the pitches, then ask questions, and vote for winners. If you’re an angel investor you’re familiar with what works and doesn’t, you’re interested in startups, and you’ll enjoy judging in one of these competitions. You see some great plans and smart people. 

Unlike the old days of the early business plan competitions — University of Texas’ Moot Corp was the first, in 1984 — these are no longer academic exercises. These are mostly startups that will launch. Teams that competed in just the three contests I mention here in the last 10 years have raised close to a billion dollars in venture money between them. For example, Auditude, the 2005 winner of both Texas contests, was purchased in 2009 by Adobe for $120 million. 

And the entrants come from all over. A Thai company tied for first place in the University of Oregon competition last month, and an Indian company just won the University of Texas competition last weekend. A British company and several other Thai companies got into the finals of these three. 

And judges are a mix of venture capitalists, angel investors, and successful entrepreneurs. So if you are one of those, then I recommend you check with local universities or with bizplancompetitions.com to see what competitions take place close to you. 

(Image courtesy of Rice Business Plan Competition)

Kentucky Derby (AP/Photo David Goldman)

In today’s business startup environment, if you don’t move fast, you get run over. Without a sense of urgency, people and businesses just can’t move fast enough. Speed is the driver because customers have a zero tolerance for waiting, and there are always competitors gaining on you.

John P. Kotter, in “A Sense of Urgency,” delves into the how-to required of entrepreneurs on that first step, avoiding pitfalls along the way. He is convinced that increasing the sense of urgency is the toughest of the steps necessary for effective change.

Urgency is not frantic activity born of excess energy, anger, or frustration. These do result in high activity levels, but results will be slow in coming and often misdirected. Here are six more positive steps to increasing a true sense of urgency, according to Kotter:

1. Behave with urgency every day. Always demonstrate your own sense of urgency in meetings, interactions, memos and e-mail, and do so as visibly as possible to as many people as possible. You are the role model for everyone in your organization. If your tone or actions lack urgency, it percolates quickly to everyone, and you reap what you sow.
2. Consistently communicate urgency. Urgency is a set of thoughts and feelings, as well as a compulsive determination to move and win now. Aim for the heart, not just the mind. Look for the element of every story that will compel employees into action. Make employees feel empowered, not stressed, to buy into the need for urgency.
3. Create action that is relentlessly aimed at winning. Make sure your actions are exceptionally alert, and focused on success. Show some progress each and every day, and constantly purge low value-added activities. Be quick to reward the winning actions of everyone on the team.
4. Bring the outside in. Be on the lookout for compelling data, people, video, websites and other important messages from outside the company. Strive to connect internal activity with external happenings and challenges. Highlight competitor wins in the marketplace, and continually challenge your own team to do better than competitors.
5. Find opportunity in crisis. Always be alert to see if crises can be a friend, not just an enemy, in order to destroy complacency. Think of crises as potential opportunities, and not only dreadful problems that automatically must be delegated to the damage control specialists. But don’t assume that crises inevitably will create the sense of urgency needed to perform better.
6. Deal with the urgency-killers. Remove or neutralize all the relentless urgency-killers, people who are not skeptics but by their actions keep a group complacent or create destructive urgency. Examples are people who are always “too busy” or stretch every task delivery beyond reasonable limits.

One of the main obstacles to a sense of urgency is complacency, which often sets in after a success. When the CEOs and employees are riding high on a wave of profits, complacency can creep in unnoticed. It’s easy to hand out rewards and praises without looking down the road and outside the box. Eventually a competitor comes along to trample you into the dust.

Another frequent obstacle is the false sense of urgency. The enemy of urgency is a full appointment calendar, when everything becomes urgent. Here you need flexibility, smarts, and guts to reprioritize less important tasks, or purge them altogether.

Finally, eliminate fear, both fear of failure and fear of success. Fear thrives in an environment where people get punished for mistakes and discouraged from experimenting. Fear of success means people worry that success will bring uncomfortable or distasteful changes.

So my challenge to each of you is that you wake up each day with a sense of urgency both at work and in your personal life, and practice the recommendations above. Constantly critique your business and look for opportunities to improve. Lead by your actions, and the team will follow.

This is about a deal my angel group turned down. 

The software looks excellent. I wanted to use it immediately. There’s urgent and widespread market need. It’s obviously proprietary too. It’s a crowded noisy market, but it feels like this one has a real shot at it. Furthermore, the entrepreneur behind it is proven. The software grew out of the needs of a successful professional service business. There’s relatively low risk of failure. 

So why did we turn it down? Because this one doesn’t need our investment. It’s quite possibly better off growing on its own bouyed by the resources of that professional service company. The entrepreneur could get it past cash flow break-even and continue growing so it would never look back.

We don’t want to end up with a minority share of a company that has no incentive to exit. Not all good businesses are good investments. 

Image via WickedStart.com

In sports, mental toughness is defined as the ability to focus on and execute solutions, especially in the face of adversity. If anyone in business ever needed mental toughness, it’s an entrepreneur. Investors tell me that startup success is all about execution, all while facing determined competitors and overcoming customers’ resistance to change.

Dr. Jason Selk, in his book “Executive Toughness,” talks about mental toughness with analogies between sports and business, but he never takes it all the way to entrepreneurs, where I believe it can have the most impact. So here is my interpretation of the fundamentals he outlines, adapted to the language of a startup:

1. Define the win for your business. A startup is not a parlor game. With a for-profit startup, it’s all about solving a problem that embodies real pain, for real customers who are willing and able to pay for a solution. For social entrepreneurs, it’s all about making the world a better place. Figure out early what it takes to win, or you will lose by default.
2. Adopt a business vision that fits your self-image. In every case, you need a long-term vision that drives self-fulfillment and self-image as well as business success. Assess your strengths and weaknesses, and visualize how these will lead to business success. If the vision doesn’t fuel your passion and match your skills, you won’t like the lifestyle.
3. Establish real business goals and processes. It’s hard to achieve things that have not been defined, and the steps to get there are not clear. I recommend a business focus on a one-year timeframe, with a limit of three product goals and three process goals.
4. Prioritize the priorities. Prioritize or perish should be every entrepreneur’s mantra. Accountability requires splitting your big product goals into daily process goals and scheduling them to completion. Don’t get distracted with the unimportant.
5. Practice accountability through self-evaluation. Learn to look in the mirror every day. No evaluation means no awareness of how you are doing, which gives you no basis for improvement. Good performance does not require perfection, which is unachievable.
6. Control your emotions to control your performance. Learn to control the degree to which your nerves and emotions are engaged and on alert. By maintaining basic mental stability and physical fitness, and preparing yourself intellectually you will function more effectively and successes will grow.
7. Prepare to say the right thing. Practice your response to the three most common situations you face. Creating and documenting scripts, like your elevator pitch, for key interactions help you and your team maintain focus. They build confidence and reduce the anxiety that often gets in the way of leadership performance.
8. Prepare mentally every day. Your mind can be strengthened every day, just like a muscle. Complete a mental workout every day to dramatically improve your focus and ability to execute consistently. It’s one of the most effective methods known for training your body and mind to stay under control and perform to your potential.
9. Develop a relentless and optimistic solution focus. Replacing all negative thinking is one of the most critical pieces of your mental toughness puzzle. Approach all solutions one step at a time, where a step is any improvement to the current situation. Remember that a focus only on problems will likely cause more problems.
10. When you set your mind to do something, find a way to get it done, no matter what. While a relentless solution focus is the mental step, discipline is the action step that makes solutions materialize. In this way, discipline delivers success. Make discipline a habit by limiting temptation and conscious practice.

We all need these fundamentals of mental toughness to succeed and lead in today’s business environment. It takes more than market knowledge and technical skill alone. That’s the fun part of the challenge to most serious entrepreneurs. If it was easy, anyone could do it. Are you ready to step up to the plate?

Image via TheRiskAlliance.com

You have probably heard plenty of times that being an entrepreneur is a risky business, and investors talk all the time about reducing the risk. Yet everyone seems to have their own view of key risk drivers for startups, and I’m no exception. I don’t agree, for example, that the first priority is to avoid startups with a high attrition rate, like trendy restaurants and entertainment.

Here is my own priority list of key risk drivers that every entrepreneur and every investor should evaluate and minimize in starting a business:

1. Team experience and depth risk. Here I’m talking about both the experience and track record of the founders in starting a business, as well as their experience and knowledge of the business domain. Like most professionals, when I get a business plan, I flip first to the founders section to see if it is a balanced team who has been there and done that.
2. Market and opportunity risk. There is always less risk with a well-defined problem in a large and growing market. All the people in China is a large and growing market, but all the people with cancer is much more well-defined. It’s hard to make money in a shrinking market, or with a solution that is “nice to have” versus painfully needed.
3. Competitive risk. Think seriously about the number and clout of your competitors. Having none is a red flag (may mean no market), but having more than a couple of large ones may mean this is a crowded space. Even in an open space, you need intellectual property, like patents, to keep potential competitors from overrunning you.
4. Financial risk. Very few businesses can be started without money. You as the founder will be expected to put your own “skin in the game.” The business plan should be realistic about how much cash will be required to break-even, and how big the return will be for investors in the first five-year timeframe.
5. Market entry strategy risk. The selection of an inappropriate pricing, marketing, or distribution strategy is a large potential risk. For example, many new social websites proclaim that they will offer a free service, and live on ad revenues (not likely in the first year without a huge marketing investment).
6. Political and economic risk. Sometimes founders are just in the wrong place at the wrong time. Recessions are a tough time to sell luxury goods. Under-developed countries may have a strong need for your product, but are often unstable and dangerous. Four specifics include tax rates, tariffs, expropriation of assets, and repatriation of profits.
7. Technology risk. New technologies, especially those characterized as “paradigm shifts” or “disruptive” may have long and costly acceptance cycles, or may run into unpredictable performance or manufacturing problems. Medical technologies have costly legal testing requirements, approval processes, and insurance validation.
8. Businesses with high attrition rate risk. Certain business sectors have historical high failure rates and are routinely avoided by investors and many founders. These include food service, retail, consulting, work at home, and telemarketing. On the Internet, I would add new social networking sites, and new matchmaking sites.
9. Operational risk. Some businesses require huge support or administrative infrastructures. For example, vehicle fuel improvements require service stations and maintenance shops nationwide, before they are viable. Even small operations can have breakdowns of specialized equipment and complex support processes.
10. Environmental risk. A nuclear reactor built on an earthquake fault line is a huge risk. Evaluate your business and location for sensitivity to floods, hurricanes, and catastrophic pollution problems, like an oil spill in the Gulf of Mexico.

The biggest risk of all is starting a company, any company, for the wrong reasons. See my related article “10 Perspective Checks on Your Startup Aspirations” for a good start in this category. If your startup is clean on both of these lists, you will most likely build a successful business, get the funding you need, and have fun at the same time. What more could a budding entrepreneur want?

It’s a fine line between an audacious-yet-successful marketing stunt and a total disaster. So fine that most marketing executives in charge of brands who have anything at all to lose often defer to safer approaches. Recently though a couple of daring and brilliant stunts have caught my attention, deserving a post with some deeper insight.

Much has been written about TriNet’s Yam Trader idea. Gust was among the hundreds of companies that received a yam in the mail (literally), prompting our CEO to stop by and visit their booth at SXSW. I later connected with TriNet’s Director of Marketing Ken Narita, who was wonderfully open to share their experience. As Ken described, the idea came about when they were faced with the reality that it would not be easy to break through the clutter at SXSW. A bold and funny execution would fit well with SXSW, where creativity abounds and formalities are practically non-existent, enabling companies to go a little wild with very limited negative repercussions to their brands. Hundreds of CEOs of target companies were sent yams, along with an offer to bring them to their SXSW booth to redeem their gift certificate. In addition, people were directed to YamTrader.com, a campaign micro site that re-directed them to TriNet’s real website. Ken reported that the initiative was very successful, with a conversion rate (herein defined as people who brought their yam to the SXSW company booth) in the double digits. While the definition of conversion here does not equate converting a prospect into a customer, Ken estimates TriNet was able to schedule at least 50 meetings as a result of this stunt, in addition to all the great publicity and increased brand awareness that was generated as a result of this bold direct marketing initiative (isn’t it great when a side effect of a direct marketing effort is brand awareness?). Similarly, Unreal Candy had the Easter Bunny go around SXSW apologizing to people for all the bad candy he’d been giving them all these years (Unreal Candy is the maker of all-natural, unprocessed candy). Albeit practically risk-free, this stunt was remarkably simple and creative, generating huge word-of-mouth activity and positive brand coverage.

These two cases got me thinking about the “must-haves” for a company to successfully create and execute these bold marketing initiatives. Here are a few:

• Empowered marketing team – the whole point of such strategies is that, by definition, they may not naturally fit with the company’s traditional ethos at first sight. There’s a surprise element that magnifies the potential for word-of-mouth and press coverage. When a company lacks a strong marketing culture, marketing presence and tactics are often determined by the comfort zone of the product/tech teams, or by that of other senior executives. These ideas rarely see the light of day in a consensual, cross-disciplinary decision-making process. It takes an experienced marketing leader to sell these ideas internally and inspire confidence in his/her ability to execute them properly.

• Ability to stay tasteful – bold does not mean tacky or distasteful. While few people can argue against the concept of healthy candy, it is not that simple to make the case for yams. Nonetheless, differently from some other vegetables, a yam carries no bad connotations whatsoever even in the minds of the most twisted people. If anything, it’s perceived as an incredibly neutral item, which actually contributed to intrigue its recipients even further. It’s too neutral to be clearly a joke, yet playful enough to get a great number of people to investigate it further. Home run.

• Fit (in some way, shape or form) – a stunt like this may not fit with the company’s traditional ethos, but it must be a fit with the context in which it is presented. Yam Trader was perfect for SXSW, and may have been completely out of place at a serious HR conference where very limited marketing appreciation can be found.

• Proper ability to manage media relations – good press coverage is a desirable effect of such stunts. However, to ensure coverage is indeed positive, a company needs to have its personnel trained to speak and present their initiatives in the right light. And since there’s a lot of group thinking in the press, having good relationships to trigger the positive chain reaction is crucial.

Finally, if you decide to take the wild route for a creative marketing stunt, make sure you have the goods to back it up. Few things are more detrimental to a brand than empty promotional efforts that are not supported by the product experience. If you don’t have the goods to back it up, don’t over-expose yourself. It will only make your brand more vulnerable.

Today, more than one third of the United States population falls into a financial demographic known as the “mass affluent”. Unlike the headline-grabbing ultra-rich, the mass affluent are people with assets between $100,000 and $1 million, or annual incomes over $75,000. Historically, the 33 million American households in this category have invested for their future in one of three ways: by putting most of their money into personal hard assets such as a primary or secondary residence; by investing their liquid assets into professionally managed mutual funds or their employer’s 401K program; or, for the more adventurous and/or sophisticated, by investing directly into specific stocks and bonds purchased through (and often recommended by) a large brokerage firm.

In contrast, those higher on the economic scale, such as High Net Worth (HNW), Ultra High Net Worth (UHNW) and institutional investors (including university endowments, pension funds, insurance companies and the like) have traditionally seen their highest returns coming from another class of investment: so-called Alternative Assets.  This catch-all term covers virtually everything that is not a stock or bond, and includes things like hedge funds, private equity, venture capital, real estate, natural resources, and even collectables like art and wine.

The purveyors of these assets have typically not targeted the mass affluent for a number of reasons. These include SEC restrictions that limit access to many alternatives to only Accredited Investors (people with over $1 million in assets or $200,00 in income), and economics that make it more productive to aim at getting one institution to invest $10 million, than it is to getting 1,000 people to invest $10,000 each. But the world is changing rapidly, and over the past decade access to these higher risk, higher return investments has become available to an ever wider swath of the investing public.

Recently, Bloomberg Television began airing an entire daily show dedicated to the topic: Money Moves with Deirdre Bolton. The Alternative Investment Editor at Bloomberg Television is Bob Rice, who is also Managing Partner of Tangent Capital, and, I’m proud to say, serves on the Board of Gust. Every day on the show, Bob delivers a fascinating, pithy and often funny definition of a financial industry term, in a segment called Bob’s Buzzwords. Now, Bob has taken things to the next level with a great new work on the subject, called The Alternative Answer: The Nontraditional Investments That Drive The World’s Best-Performing Portfolios.

When the book is released on May 14 it will, for the first time, provide a clear, well-written, introduction to the new world of alternative investing strategies, showing how to use all sorts of new products for inflation-protected income, risk-adjusted growth, and long-term wealth transfer. Those of us in the professional angel investing world may already know all about startup investing (covered in Chapter 10), but how about timber, MLPs, hedged strategies, managed futures, infrastructure, cat bonds, peer-to-peer lending…even farmland?!

Bob is a wonderful writer with a quick wit and a highly accessible style (as those will know who have read his previous book, Three Moves Ahead: What Chess Can Teach you about Business (Even If You’ve Never Played), and The Alternative Answer is a must-read for anyone wanting to increase their alpha (don’t know what that means? Hear the answer on Bob’s Buzzwords!)

Image via Schedule.SXSWcom

I’ve noticed that some entrepreneurs seem to have no trouble attracting investors, while others with a great business plan struggle with it. The reality is that angel investors are humans, and personal traits often make or break the relationship, even before the investment is considered.

On the top line, angel investors look to invest in entrepreneurs that have an almost unwavering passion and sense of urgency. In the business, this is commonly called “fire in the belly.” If you don’t have it, you probably won’t succeed, even with funding.

Of course, this has to be in concert with a variety of visible characteristics that indicate that you as the entrepreneur have the attitude and practical skills to make it happen. Here are some key ones they look for:

1. Talks and writes well. Can concisely explain the unique, compelling value of the proposed venture in written terms and in oral presentations (elevator pitch), recognizing that some investors rely more on one than the other. Listens before answering questions.
2. Networked and connected. Successful entrepreneurs already have a visible network of trusted suppliers, potential customers, partners, and even investors. These are critical to any venture. A successful track record with previous investors is a home run.
3. Full disclosure attitude. Clearly willing to provide details of weaknesses as well as strengths of the proposed venture, and the challenges ahead You must be willing to welcome the participation of the angel investor in the company, at least at the advisory level.
4. Values intellectual property. Convincingly presents a patent, trademark, or other “secret sauce” that can create equity value, not just current cash flow for the owners. This has value now, and is critical for maximum value in a merger or acquisition.
5. Not in a heated rush. Calm and self-assured, rather than desperate. Can show milestones achieved, as well as planned, which indicate rational expectations. Allows sufficient time to find capital, including due diligence time for investors.
6. Realist. The best entrepreneurs recognize and accept things as they are, and react accordingly. They are quick to change their direction when they see that change will improve their prospects for achieving their goals.
7. Domain experience and expertise. Investors realize that passion is no substitute for knowledge and experience, and every business is more complex that it might look on the surface. They will pay a premium for someone who has been there and done that.

At the stage during which the angel is normally investing, the entrepreneur may be all the angel has to go by to decide whether the deal is worth pursuing. The technology or product may be at an embryonic stage. There may not be any customers to talk to in order to evaluate the market need.

The investor, in order to eventually be successful, has to spot not only winning technologies but winning people, and all investors have a slightly different view of what a winner looks like. So, of course, they try to guess the internal traits, like honesty, dedication, vision, intelligence, and leadership based on external traits listed above.

If you think you want to be your own boss and run your own business, look in the mirror to see if you have the right traits to be an entrepreneur in your domain of interest. Better yet, ask a real friend, who won’t just tell you what you want to hear. We can’t change you, but you can change yourself, if the current pain level or the future reward is high enough.