This excerpt is taken from an incredible interview with Elizabeth Kraus, CSO and Co-Founder at Merge Lane. She is an active angel investor having made over 150 investments in startups, she is also a mentor and advisor, and has been very active in the national effort to improve the entrepreneurial ecosystem and mobilize angel investors.
1) Do I understand the companies value proposition within 5 minutes of talking to them?
A brilliant example of this can be found when examining the value proposition of Uber in 2011, at it’s angel funding round. Simple right?
2) Are they deeply passionate about their business and does their passion get me excited for their business?
This is often shown through willigness to sacrifice. Lets take AirBnB as an example, the founders of Airbnb are guys who couldn’t make rent a few years ago, but they kept turning desperation into creative solutions. In October 2007, eager to make extra money, they noticed that local hotels were booked up because of a conference. So they pumped up some inflatable mattresses and listed their place online as an “air bed and breakfast.” It was quirky and it worked. That little act of creativity became Airbnb, the (profitable) site that allows anyone to list their extra space for rent.
3) Do I trust the founders without question?
This really cannot be overstated more, trust in one’s founder is sometime all us angels have to go on! Much like a marriage, it depends on trust and honesty, perhaps why the investor to investee relationship is often cited as ‘the 7 year marriage’.
“If you don’t have trust then you can’t generate long-term value,” says Bill Aulet, managing director for the Martin Trust Center for MIT Entrepreneurship. “The relationship will be temporary.”
4) Am I inspired everytime I meet with the founders?
This might be a hard one to live upto but when thinking of inspirational, how can one not be inspired by the immense words of Steve Jobs here: “the people who are crazy enough to think they can change the world are the ones who do.” Regardless of what you think of him, if you haven’t seen Steve’s commencement speech at Stanford in 2005, I believe there is no greater inspirational talk. Watch it here.
5) Do I view meeting with the company as a priviledge rather than a chore?
This is important just for mere sanity. The traditional angel will meet with their portfolio companies a minimum of 3–4 times per year. Referring back to the founder-vc relationship as an analogy, whereby the marriage tends to last 7 years, that will be a staggering 28 meetings. If you view the company as a chore, that is going to be an arduous 28 hours.
6) If the tables were turned would I want them to invest in my business?
Taking personal ownership of a hypothetical entity, in this case the company that the team could invest in, often helps to assess whether you do really admire, trust and like the people as much as you think you do.
7) Do I admire and respect the team members enough that I would want them to be board members of my own company?
Taking it one step further, would I allow the team to give me advice. Do they have such a good understanding of what they do that they could help my business improve in some way or another?