Hey Startup Investor,
Daymond John here.
I’ve seen the startup world from both sides of the table, as an entrepreneur and an angel investor.
Over the last 12 years alone, I’ve invested in around 100 different startups led by some of the most talented founders in the world. Listening to these pitches – and more – has been one of the best parts of my career by far.
But for every company I’ve decided to support, there have been plenty I didn’t. As angel investors, not every pitch will blow you away… and not every single company will ultimately be successful.
That’s why I have a set of specific characteristics I look for in every single company and founding team before I make an investment decision. Today, I want to share the most important ones with you… Because a pitch that can’t answer these four questions likely isn’t worth your time.
Let’s get started.
1. Do they understand their product and their industry?
One of the most important things I want to see in every single pitch is a founder who knows what they’re talking about, both from a business perspective and an industry perspective.
Product and industry go hand-in-hand. First, a founder needs to explain their product or service to me in a way that’s precise and to the point. I want to hear a story. What’s the problem and how does a founder’s product solve it? And why is this the best product for the job?
I also want to see a proof of concept. In other words, I want to see that there’s some type of product/market fit… that they were able to sell a certain number of units or make a certain amount of money. I don’t need to see anything too crazy, but I do want to see that the product has potential.
2. Are they smart with their money?
I don’t want to invest in a company that’s going to waste my money. Plain and simple.
When I’m listening to a pitch, I want to know how a founder plans to use my investment, whether it’s for product development, marketing, making key hires, or more. They need to have a plan.
When founders don’t have a plan, it can lead to them rushing in and spending too much money too quickly. Entrepreneurs should take slow and steady steps, not only to make sure that every dollar has a plan, but that they’re learning how to be even smarter with their money along the way.
Plus, founders who are smart with their money can scale their products even better than those who aren’t.
3. Do they have great customer service?
Business is all about customer service. There’s nothing more important than the relationship a company builds and maintains with their customer.
That’s why I want to see a founder who’s in tune with what their customers want. What are their customers saying about the product? What do they like about it? What are their main pain points?
I want to see a founder who’s focused on providing solutions in the name of stellar customer service… not making money. It’s really easy to tell when you’re speaking with a founder who doesn’t care about their customers and only cares about their bottom line.
At the end of the day, look for founders who are customer-obsessed. Loyal customers are a brand’s best friend.
4. Are they honest about their company’s shortcomings?
This is a tough one. Many founders are reluctant to share mistakes they’ve made, problems they’re facing, and anything else that may paint their business in a poorer light.
But it’s that kind of honesty that gives me faith in a company and its team, if it’s presented correctly. I don’t just want to hear what the problems are… I also want to hear the actionable steps a founder is taking to solve them.
I’ve been an entrepreneur long enough to know that it’s impossible to avoid some kind of mistake or failure. As an investor, I want to help a company solve their pain points while making sure that my dollar is being used wisely and effectively.
I want to trust that a founder will work hard to make every dollar count.
At the end of the day, you’re investing in founders, not companies. Founders are the ones that will ultimately lead their companies to success (or failure), so it’s important to invest in the people you trust.
I can boil these four questions down into a single sentence: I want to invest in founders who are smart, customer-obsessed, and honest. In your own angel investing journey, you should look out for these same characteristics, too.
Do you agree? Drop a comment below to let me know exactly what you look for from every startup company and their founders.
That’s it for today, but keep an eye out. Next week, I want to share the single best piece of advice I ever received during my career as an entrepreneur and angel investor.
We’ll talk soon,
I totally agree with everything you said and believe they are the building blocks to great entrepreneurs and great companies!
I watch Shark Tank every week and it’s my favorite show! Keep helping people realize the dream! 😊
I’m single if you’re interested! ❤️
Daymond , thanks for the insight. I believe a company to be successful has to have 4 things: 1. A smart leader with a clear vision. 2. An intense focus on the customer.3 superior design processes and 4. Flawless execution.
Thanks for the insights. I’m very new to Angel investing and trying to learn wherever I can.
This is such great advice! I’m glad that some of my skepticism about certain of the start-ups is justified. Thank you so much!
Thanks for showing up and contributing your great talent. I believe you will have a higher volume voice here as I’m seeing from your writings and presentation to the group.
And besides you have some great looking clothing to go with that incredible talent. I am involved in a very small way here as an even smaller investor but if this market keeps going the way it has then some of these starts have a good chance.
Few know all but hopefully many know even more. Or the reverse.
Good luck in whatever you do Sir and thank you for affording me the opportunity to learn from you.
Charles H. Curry II
I like your conclusion to item # 4.
Honesty & transparency!!!
Research opportunities that disrupt an industry, look for successful experienced CEO’s, entrepreneurs and team, do your due diligence, address TAM, rinse and repeat.
Daymond, I will take your advice as well as I can. However, I have looked at the company instead of the founder vs. considering if the founder is offering a product that is needed.
I look for a company scalability, liquidity, and their team,experience.
You say “it’s really easy to tell when you’re speaking with a founder who doesn’t care about their customers and only cares about their bottom line.” I’m getting into this website after a long time absent. Can you give an example that I can look up and see for myself?
Great insights. I use them when making a decision to invest with the weekly help from this awesome platform. Thanks Daymond!
Waiting for your help and support
I totally agree. I have invested in just about 200 startups and knock on wood, not one has failed me yet. Thank you for all of your advice and comments. I appreciate everything you do.
I only invested in one startup and about to invest in a second one but yes all that you said I too believe but I also look at the longevity of the business how does it affect our lives and where is it going to be in 10 20 years is it a fad or is it something that will be needed now and in the future, but what do I know I’m self-taught and very new to this but that’s what I look at
Yes I agree. This model is used and has worked for selecting good investment securities, grant rewards, and so many other successes in our lives.
Thanks for the insight, I too am new to Angel Investing and need this kind of advice.
Also the product must be unique