Almost all founders are looking for that elusive investor to work with. The investor that believes in the company’s vision, provides unequivocal support to the founders, can tolerate risk and pivots, can help with strategy an execution, takes initiative, and is happy to stay out of the limelight! Superstars come in all shapes and sizes, irrespective of the fund-size or the cheque-size!
After evaluating over a hundred exciting companies a year, and interacting with intelligent and determined founders, we understand from their perspective the top 3 things superstar investors do that separates them from the rest:
Superstar investors are not stingy with their intellectual assets
Superstar investors do not believe that they must seal the deal before they can offer their inputs. A founder said, “We once had an investor who tantalized our team with the promise of varied ideas they looked forward to exploring once the round is over, but offered no preview.” The founders went ahead with the investment, only to realize no ideas that they hadn’t already considered. “It was super naive of us!” the founder sighed.
Strongest investors often realize that even their best ideas are meaningless without execution. And hence, they do not fear “giving away the milk” to a potential founder. Someone who pulls out a notebook and starts jotting down ideas, chalking a plan, or brainstorming a design during the evaluation stage telegraphs a mindset of investment in their work.
Superstar investors share their contacts freely
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Superstar investors understand that facilitating mutually beneficial relationships will strengthen their own reach. In contrast, investors who are cagey or unsure about connecting with other people almost always tend to see success as a zero-sum game: their win will mean my loss! “This always prevents hoarders from reaching superstar status” another founder quipped.
“We were gearing up for our seed round, and meeting prospective investors. An investor said, if we agree to their terms, they would open the round within their network which could help us close the round quickly. We had commitments for half the round, so it was not like we were starving for capital, but many cash-poor startups that really need capital might fall for such behavior! We didn’t end up taking their money because they did not have similar companies in their portfolio, and they never made the introductions. But it left a sour taste. They left opportunities open for other investors in their network for whom our company could have been a better fit.”
Superstar investors prioritize quality over quantity
Superstar investors look at the company vision, and the founding team to gauge their interest. Only after vetting these qualitative details, do they dive into numbers. “We like investors checking our round-size and valuation-range beforehand because everyone prefers their ranges. A series A round would not fit an angel, we understand that. But when an investor starts drilling down on valuation before even understanding our business model right in the first meeting, we quickly understand their motivations.”
A superstar investor is your teammate, not someone you perform a transaction with! You enter into transactions with vendors or consultants, not with your home team!
Another founder said, “In our first meeting, an investor expertly depicted the competitive landscape, and started discussing strategy. They enquired about our plan for scaling up the supply chain and how we envisioned unit economics to be at scale. From there, they mapped out key variables to track, spelled out how to measure them effectively, and also provided inputs on successes and failures surrounding certain strategies from their experience. In a 45-minute meeting, they also helped enumerate ways to enter revenue-sharing agreements and turn certain costs into variable payments which greatly helped our bootstrapped startup! The investor knew what value they can add, and did not hold back their knowledge. They showed up, helped us without any quid pro quo, and gave us a preview of what was to come in the long run. We were SOLD!” The founders agreed to a lower pre-money valuation with the investor because they KNEW the value the investor could add, would trump a hundred expensive consultants working on sweat equity.