Do investors and specifically Impact Investors, invest in ideas, impact opportunities or the teams within those businesses? An interesting questions and certainly one that has received much debate at a recent networking meeting between business angels and entrepreneurs, I attended in London. Most investors would tell you that it’s the idea that they are interested in but if you look at the ideas who receive investment and the people behind them its often easy to identify why one idea received funding and another not.
But it would be unfair to say that it’s the team only. As an African investment company we will normally consider a whole range of criteria/ Of course there is the team, very much at the heart of the our consideration. But then the opportunity to bring about real environmental, social, educational or community impact with an opportunity is a ket priority for us. In addition, we would then look at the benefit our business model can bring to the business and whether we can inject further momentum into the business. So, yes the idea may be attractive but as the investor I’m looking at the person who I will be working with, what are their qualities, are they someone who can take guidance, are they argumentative (not always a bad thing by the way), are they creative, do they have contacts. All these issues have to come into play.
An age-old adage from investors and entrepreneurs is they’ll always take an “A-quality person with a B-quality idea”, and not the other way around. This means I’ll happily invest in a person or team I believe can produce a successful business.
In terms unsuccessful investments, ask most business angels about their mistakes and the answer is usually people-centric. They regret or focus on investing in the wrong person, not the wrong idea.
Look at these key characteristics of a successful business relationship. Each is crucial to a profitable and enjoyable experience, long before any amount of capital are made or lost.
Believability, Trust, Communication, Leadership, Determination, Creativity. These plus the aforementioned Execution and Ability to Change are what make a business successful over time.
As an investor, you want the opposite of the guy who’s chasing a lifestyle business. You want the most determined business leader you can find to lead your investment to the promised land of a profitable exit.
Why Does the Idea take a Backseat?
Because most businesses start off doing one thing, only later to figure out what really works.
It’s more about talent, determination, and adaptability to change than the multi million-Rand idea. Surely you are clear about this.
So yes of course as an entrepreneur you need to focus on your business plan, and as the investor you consider the break even point and growth opportunity of your investment but these need to go hand in hand with a workable relationship that can strengthen the ability of the idea to be a winner.