5 Traits Investors Look for in Entrepreneurs

What do investors look for in an entrepreneur? This month I’ve been reviewing submissions for my local angel group. I found this excellent list of 14 Ways to be a Great Startup CEO, posted at OnStartups by Jason Baptiste. And that reminded me of my own list, 10 Traits of Successful Entrepreneurs, which I posted a few years ago, before I joined the angel investing group. Both of those lists, against the background of what I’m doing this month, remind me that what makes a successful venture, or a successful entrepreneur, isn’t necessarily the same thing that makes a good investment opportunity for outside investors.

Hint: there’s a difference between a good business and a good investment. There are a lot more good businesses. A good business can make its entrepreneurs happy, while a good investment has to make the investors happy. Investors aren’t employees. They aren’t building themselves jobs. They need to get actual money back, sometime in the future, to get a return.So what makes an entrepreneur attractive to investors? First, let me clarify that this is just my opinion, not the results of primary research, and not a reflection of Gust or its founders. What follows us my personal list – what I think are the most important traits of entrepreneurs as seen through the eyes of investors.

  1. Previous experience with one or more startups. Interesting: my number one trait for investors, isn’t on either of those two lists I cited above. But I see it in action and hear it in investor meetings more than any other single factor. Investors don’t want people to learn on their money. There’s no substitute for having walked through that dark wood. And having lived through a failure is better than starting for the first time.
  2. Dream weaver. Jason starts with “be a keeper of the company vision.” My list includes “vision for what they can build. Imagining a happy future. Dreaming.” And “transferable values” too. The best businesses are built on making the world better. Change the world. Do something people need done. Make people glad you exist. Cheesy perhaps, but vision drives success.
  3. Story teller. And I don’t mean liar. I mean you communicate the kind of truth that resonates with customers, investors, and media, and the rest of the world. Jason says “be a great communicator.” You don’t just build on a need, you tell the story of that need and its solution. Every solution is a story of a problem.
  4. Solid foundations. Integrity, values, and hard work. Trust. Jason says “absorb the pain for the team,” which is part of that. My list includes “willingness to work hard.” I also have “a sense of fairness” when dealing with vendors and employees.
  5. Real relevant skills. The founders have to know what they’re doing. Jason cites “technical knowledge and skill set.” I don’t expect every founder to know every skill set, but people tend to divide into great markets, great technical people, and even great sales people or financial wizards. And it’s better to not be great at everything. My list includes “knowing what they don’t know.”

I could go on. I like Jason’s mention of being able to say no, and being able to break things down into sizable chunks (like milestones) He also talks about being able to link between the company and its product, and between the company and its investors. And I particularly like Jason’s “find the smartest people and defer on domain expertise.” And I like my points on being able to make mistakes and deal with failure, and also listen well, and shut up often.

Final point: never believe a list of traits of entrepreneurs. Every entrepreneur is different. Every startup is different.

 

 

Tim Berry , Founder, Palo Alto Software
April 10th, 2012