Sunday, February 10, 2013

An Angel Investor's 3 Rules For Investing

New York angel investor reveals three personal, less standard, emerging “rules of the game” in investing in early-stage entrepreneurs.
By Adam Quinton (Managing Director, Golden Seeds & Angel Investor)
Pretty cool seeing two Women 2.0 posts on two companies I invested in (appearing on the same day) celebrating $1 million funding rounds forFlixMaster and The Muse, respectively. I signed up for these two last year, my first full year as an active angel investor, along with three other investments (EpiEP, Consensus Point and Thrive Metrics).
Seeing FlixMaster and the Muse (well done, Erika Trautman and Kathryn Minshew) on the screen got me thinking… what did these investments have in common? Was there any coherence to my investing approach? (I hoped so!)
Like most all investors, I am trying to identify compelling solutions to real world pain points that address big potential markets. So far, so obvious. But, stepping back, I concluded that three of my other personal, less standard, emerging “rules of the game” (hopefully successful ones) are as follows:

#1 – Diversity matters

I have always been a big believer in the decision-making benefits that stem from diversity of thought. When it comes to tech and on the gender front that means having one ore more women as a key players on the management team and as a founder/owners – in fact, all my 2011 class have women CEOs. (OK, The Muse is the exception that proves the broader diversity rule – with a three person but all-women co-founder team.
As a recent HBS article pointed out, all-women teams have superior collective intelligence to all-men teams!

#2 – Multiple founders

I can see more clearly now what at first was at first more intuitive. (And getting to know the data around this just reinforces the conclusion.) Namely that solo founders plough a lonely and tough furrow.
Multiple founders, and crucially complementary ones, are likely to have much better success rates.

#3 – Passion is key

When it comes to founders, yes their domain expertise matters to me. But passion and commitment matter I think much more than most of the resume. In fact, based on my (limited, I accept) early stage experience, some of the smartest ideas seem to come from people who have primary expertise in areas peripheral to their new business.
Maybe they have a greater ability to bring fresh and indeed disruptive insights to the table? (Exhibit A being co-founders Erika Trautman at FlixMaster and her husband Cameron McCaddon.)
It will be a some time before my rules of my game get validated or not but so far so good!

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