Cameron Chell here again.
Last time, we talked about how to find the action-oriented founders who are willing to do whatever it takes to get the job done.
Not every founder is this action oriented, and as investors, it’s our job to pick the winners out of the bunch.
Today, I want to talk about another characteristic that even the strongest founding teams may lack: transparency.
As investors, we tend to have an expectation of transparency from a startup’s founding team.
But here’s the thing. Not everything is going to be transparent.
Every single management team will always have their best foot forward. This isn’t a matter of a team’s integrity… but more often than not, their discretion.
This proper discretion is the key to a team closing sales, attracting the right talent, and getting financed.
In fact, if a startup doesn’t have problems, it’s not going to be successful.
If your startup is not pushing the envelope, it’s not going to be disruptive.
And if your startup isn’t disruptive, it’s not going to have the opportunity for a large valuation.
Now, there are four key areas I like to focus on in terms of being able to understand what’s happening inside of a startup: sales, product, talent, and finance.
And while each one of those is extremely important, sales is the one area I emphasize more than any other.
This is just a sampling of the questions you should be asking a founding team before you invest. But the long and short is that by asking these simple questions, you’ll get information about everything else within the business.
You’ll hear about how the company doesn’t have enough money to get the product done on time… or how they have to go through another financing round to bring on a particular customer or get a new product version done.
You’ll hear about how the team may need to recruit additional talent, or how they’ve just lost some talent. You could even hear about how they have the very best talent, or how they’re on track for success.
And of course, you’ll hear about the product specifically, what customers are saying about the product, and why things are either happening slowly or much faster than expected.
However, there’s a huge difference between asking the right questions and asking too many questions.
Next time, I want to talk about exactly how to toe that line, and what strategies you can use to make sure you’re adding real value to your portfolio companies.
Have a great rest of your holiday weekend, and I’ll be back soon with another update.
Talk soon,
Cameron Chell
Last time, we talked about how to find the action-oriented founders who are willing to do whatever it takes to get the job done.
Not every founder is this action oriented, and as investors, it’s our job to pick the winners out of the bunch.
Today, I want to talk about another characteristic that even the strongest founding teams may lack: transparency.
As investors, we tend to have an expectation of transparency from a startup’s founding team.
But here’s the thing. Not everything is going to be transparent.
Every single management team will always have their best foot forward. This isn’t a matter of a team’s integrity… but more often than not, their discretion.
This proper discretion is the key to a team closing sales, attracting the right talent, and getting financed.
As an investor, if you think your startup doesn’t have problems just because management is not highlighting them, you’re being naïve.
Every startup – just like every other enterprise – always has crazy challenges. Things are never quite what they seem, and that’s to be expected.In fact, if a startup doesn’t have problems, it’s not going to be successful.
If your startup is not pushing the envelope, it’s not going to be disruptive.
And if your startup isn’t disruptive, it’s not going to have the opportunity for a large valuation.
However, as angel investors, it’s crucial that we understand the difference between problems that propel a startup’s growth and problems that could drag a startup down.
The trick lies in reading between the lines, asking the right questions of the founding team, and focusing on the right details to dig into what’s really going on underneath the surface.Now, there are four key areas I like to focus on in terms of being able to understand what’s happening inside of a startup: sales, product, talent, and finance.
And while each one of those is extremely important, sales is the one area I emphasize more than any other.
By focusing your questions on sales, you’ll actually hit every other part of the business.
Now, nine times out of 10, the managing team will want to talk about anything else but sales. Either that, or they’ll very quickly revert into why sales aren’t happening…- The product isn’t ready…
- There’s an upgrade coming…
- Pricing is still being worked out…
- The market is tough…
- Competition is fierce…
- And so on.
If a company isn’t making money, chances are, you won’t either.
That’s why it’s important to get all of the sales-related information you can before investing in a company. Here are a few questions that I like to ask…- Who are the top three customers that we are implementing with right now?
- Why did those customers like or want our product?
- Is the customer paying? What are the price points?
This is just a sampling of the questions you should be asking a founding team before you invest. But the long and short is that by asking these simple questions, you’ll get information about everything else within the business.
You’ll hear about how the company doesn’t have enough money to get the product done on time… or how they have to go through another financing round to bring on a particular customer or get a new product version done.
You’ll hear about how the team may need to recruit additional talent, or how they’ve just lost some talent. You could even hear about how they have the very best talent, or how they’re on track for success.
And of course, you’ll hear about the product specifically, what customers are saying about the product, and why things are either happening slowly or much faster than expected.
In other words, always bring your questioning back to sales, and everything else will come out of the woodwork.
By asking sales-related questions, you can make sure you’re putting your money in the right spot… before you even invest a penny.However, there’s a huge difference between asking the right questions and asking too many questions.
Next time, I want to talk about exactly how to toe that line, and what strategies you can use to make sure you’re adding real value to your portfolio companies.
Have a great rest of your holiday weekend, and I’ll be back soon with another update.
Talk soon,
Cameron Chell
Follow @angelsandentrepreneurs
I love this article! Thanks for sharing. I am investor and start-up’s founder looking for investment!. An investor, during his due-diligence process, told me that he does not trust my clients’ testimonials! We asked him why. His answer was that, people get paid for testimony. We explained that ALL testimonials are from REAL clients happy with their Dental Wig in their mouth!. Unfortunately, we #BlackOwnedBusinesses should go extra miles on and on…Also, Investors often ask questions like if know the answers. The startup is here solving a problem. Investors, ask questions about sales, to identify the startup’s weaknesses and make some suggestions. And if you don’t know, just SHUT UP and and hold on your anxiety!. I don’t like anxious people. We women achieve when we are excited.