As an angel investor, I've invested in 59 startups since 2012, including 3 via syndicates ($10K, $10K and $5K respectively). In addition to this, I've invested in a further 25 companies as an LP, which I've done via Investigate VC in Singapore, and Medra Capital, which is now dormant but used to be based in Malta. Finally, I own shares in 5 companies thanks to earning "sweat equity" as an advisor. By paying attention to these companies over the last decade, this is what I've noticed.
People with natural ability.
If there are two things I've learned from investing over the last decade, they are:
- The best investors back founders, not ideas; and
- Not all founders are equal.
Of course, these learnings are far from exclusive to me. These are widely agreed truisms in the world of startups. It just took me a while to believe them (mostly learned the hard way!).
I now know that a large percentage of startups end up doing something quite different from what they set out to do, and in very different ways. Even a cursory thought about my portfolio reminds me that several companies I've invested in fall into this category.
- The Rattle is in the midst of, I think, its third pivot.
- Coconut switched from a banking product to being an accounting platform for sole traders.
- Zyllem, in Singapore, used to be a consumer parcel delivery platform, and now offers enterprise fleet management software-as-a-service.
- CG Labs (formerly Panya) stormed to fame in Thailand as a trivia app with millions of users, but now supports live streaming of interactive video content for influencers and game developers...
The list goes on.
What's been critical to the survival of these companies, in every case, has been the raw ability, tenacity, and creativity of the founders. Taking them to the next level, however, is going to require a completely different skillset...
The ability to lead.
Startup investing is not just about founders who can stay in the game, it's about backing one or two companies that go on to exponentially greater success than average. The best performing investors, without exception, all have one thing in common - they're in the best deals. I'm talking about the few true breakout companies - Apple, Alibaba, Amazon, Tesla, Uber, Facebook/Meta, Instagram, Tencent, etc. Just one of those portfolio companies turns a poor investor into a rockstar.
In my portfolio, the founders who seem destined for outsized returns all seem to share similar characteristics, above and beyond the tenacity, natural ability, and endurance mentioned above. In my view, these traits make them great leaders:
- Absolute clarity of message, vision, target customer, and the customer's "jobs to be done".
- Dedication to turning the business into a machine through rigorous commitment to process and systems (i.e. not tech solutions, but scalable ways of working).
- Commitment to finding and hiring people who are among the best at what they do (i.e. people who are way better than themselves), then giving those people the space to be successful.
- An innate ability to lead my example through fairness, integrity, the strength to acknowledge their own weaknesses, the courage to delegate responsibility, and the selflessness to put the needs of colleagues and customers ahead of their own.
I believe that, if founders can get these four things right, they can get a lot of other things wrong and still be remarkably successful.
You've got this.