How to angel invest, part 5: good founder qualities (and red flags)

You’ll get more out of this series if you’ve read part 1 (high-level angel investing guidelines), part 2 (debt, equity, and key terms), part 3 (company stages), and part 4 (deal flow).

Because angel investing happens at very early stages, you’re taking massive risk to back a company before you’ve seen any evidence of success. You may not have customers or even a product. Thus arguably the most important piece you have to evaluate is the people behind it. And hopefully you know them already.

Products pivot, companies flounder, and markets change, so the one constant will be the people you’re backing. You’re betting on them to be tenacious, dedicated, and adaptable.

Much of this assessment of the founders is gut instinct, based on your knowledge and experience with exceptional people and their characteristics. But these guidelines can help you hone your thoughts:

  • All of the founders should have a super power: they can do something better than almost anyone in the world. Maybe that’s acquiring users for consumer packaged goods businesses. Maybe it’s recruiting and hiring engineering teams. Maybe it’s building computer vision applications for augmented reality mobile apps. Being an expert fundraiser is a super power in itself.

Red flags on founders

Photo by Valentin on Unsplash

Most of these are just the reverse of the positive characteristics above, but here they are in case it’s helpful:

  • They’re in it mostly for the money.

Remember: the people and the market opportunity are the most important pieces of angel investing, in that order. Follow your gut. Great people mean everything in angel bets.

Next up: evaluating the market and doing diligence in part 6.

Questions or comments? I’m sarah(at)accomplice(dot)co and @SarahADowney on twitter.

Operating Partner at Accomplice. Formerly of Ovuline & Abine. I’m an angel investor, writer, lawyer, gamer, & liker of sci-fi & the Enneagram.

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