Anatomy of a Successful Startup

by Adam on November 5, 2013

When on panels and at conferences related to investing and entrepreneurship, I’m often asked what it is that makes a startup jump-out to potential investors. In a sea of noise and flash-in-the-pans, what ideas have staying power that will attract investment dollars?

It’s a tricky question, and one that isn’t entirely objective because every investor has different tastes, risk profiles and ideas about what will be worth funding. So with that in mind, it’s impossible to truly say what that secret sauce is, but, one thing that often takes entrepreneurs by surprise is how little the actual idea matters. Or perhaps, how little it matters when compared to team-fit and relationship dynamics.

When making an investment, I’d say 75% or more of the decision is based on reactions to the entrepreneur and his/her team. This cuts in a variety of directions, how the entrepreneur interacts with investors, how s/he interacts with the team, with clients, service providers and others, as well the background of all those involved. Above all else, entrepreneurship is a relationship business, and funders are investing in people, not ideas. They want to see strong backgrounds, passion, synergy in working relationships and feel that entrepreneurs are people who they can work with (and that should also apply on the entrepreneur’s side, make sure your investors are people you want to work with too).

But, with that in mind, you might ask how in the world you can control something as intangible as how someone perceives you. Well, as the old saying goes, first impressions are everything, and entrepreneurs can go a long way to reducing the variables to success. Here are a few tips to keep in mind:

  • Always be aware of interactions with your team as you begin to work together. Make note of areas of weakness and ways that you can improve, and do your best to embody principles of teamwork, open communication and collaboration that any investor would want to see.
  • Before any meeting with an investor, do your research. Find out more about who they are, what projects they’ve worked on, what companies they’ve invested in, and more. There are two main objectives here: 1) you want to demonstrate a thoughtful approach to your meeting, one where you can ask a few good questions about their prior/current experience based on your research; and 2) you are trying to find areas of mutual overlap, where there is shared interest or experience that can provide a touchstone that builds a connection.
  • When setting up a meeting with an investor (whether in-person or over the phone), consider who, if anyone, from your team you’d like to have in the meeting with you. This is an opportunity to show off your strength as a team, so if you are going to be tag-teamming any meeting, make sure to map out in advance how you will present points, so that you aren’t stuck deciding on the fly.
  • Above all, make sure your background and experience are clear, that your passion for the project comes through in many different ways, and that investors leave feeling that you are the right person and the right team to do this. That, above all, is what is going to sell you to the market.

A good mantra that I use, though I have no idea who came up with it, that helps to embody this principle of relationship dynamics:

A great idea executed by a mediocre team will always be mediocre, but a mediocre idea, executed by a great team, has the potential for greatness.

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