Good Stewards of Capital
The single most important thing you need to show an angel investor.
Angel investors hear countless pitches from all kinds of entrepreneurs, some of which are extraordinarily capable scientists and visionaries who have fantastic technical solutions to a problem. Many times, these entrepreneurs stumble when trying to explain the business.
Nobody Cares About the Technology
Inventor/entrepreneurs can get wrapped up in their wonderful technology. This is expected – they have thought about this problem and the technical solution for a long time, sometimes years. They have invested countless hours on this project. It is their baby.
I met an entrepreneur recently and asked for a ‘quick’ overview of their medical device business. I got a very detailed (and lengthy) explanation of all the previous solutions and then we dove into the details of the product.
Turns out that they already had FDA clearance, some meaningful sales, and a bunch of inventory ready to ship.
I did not really care about the technology. I was sold when they said ‘FDA clearance’ and ‘sales.’ But I was tragically worried about the entrepreneur’s competence based on their ‘quick’ overview.
What Do I Really Want to Know from an Entrepreneur?
The single, most important think I need to know:
Will you be a good steward of capital?
I want to know if the entrepreneur will make good business decisions. If so, I can trust them. If not, I cannot trust them. It is that simple.
What Does A Good Entrepreneur Look Like?
My favorite entrepreneurs of all time were young mothers who were both trained as engineers.
Any time I would meet with them and brainstorm new ideas about business opportunities, marketing techniques, or whatever, they had only two responses.
One response was that they had already conducted an experiment on that idea, and they would go on to explain what they learned from the experiment. The other response was a discussion of how they could create an experiment to test that hypothesis.
As an angel investor, I had complete confidence that they would be a success. I liked their business model, but I liked their approach to the business model even better. Even if their business model never worked, they would figure it out and find a better business.
Their success was not guaranteed, but it was a lot less risky when they had data-driven techniques for making decisions. Some of their experiments were imperfect and they got the wrong data or misinterpreted their data. However, the fact that they were committed to a data-driven, test-and-learn philosophy made them a solid bet.
Did I care what their business was? Did I care about their technology? No. But I am confident that they will continue to grind away to find the best use for that capital.