What Do Angels Look For?

Startup Investor Jeff Clavier, talks about what he looks for when investing in startups.

What makes a startup appealing to an angel investor? To find out, I talked to Jeff Clavier, an angel investor I’ve known for a few years.  Clavier’s venture capital firm, SoftTech VC is based in Palo Alto, California, and has invested in over seventy five startups since 2004. These have been mostly in the consumer Internet space and include the personal-finance service Mint (sold to Intuit), MyBlogLog (sold to Yahoo), and Truveo and Userplane (both sold to AOL). So what does Clavier look for in a startup?

Ideas and companies that appeal to an angel

  • Think big and think clearly! A twist on an existing idea is not enough. You need to be 100% better or different and have clarity around what you are doing. “Aaron Patzer, for example, recognized the complexity of Intuit and, at the age of 26, designed Mint to meet the needs of his generation – people who value the immediacy of the web, simplicity and their free time.”
  • Understand your ecosystem. Know your market and your competitors. Don’t think “We’re the only ones” or “We Know Better.”
  • Don’t go it alone. Build a smart team. Clavier prefers to invest in teams rather than one-person ventures. Members of a team complement and challenge each other. Intellectual smarts and street smarts are both important.
  • Validate your idea. Build a prototype. Whatever you do, add metrics, measurement points, and A/B testing. Survey your customers and bring the results to the meeting with investors.
  • Be determined. Be prepared to work hard and see it through to the end.

Attracting the attention of an angel

  • Put something out on the web and see if it gets traction. Traction leads to attention.
  • Use trusted referrals using LinkedIn, Facebook or other social media connections.
  • Don’t cold e-mail.  Keep it short if you must, but it’s usually a waste of time.
  • Develop a 30-second elevator pitch and look for opportunities to present it at events attended by investors.
  • Join startup incubators such as TechStars, Seedcamp, or Y Combinator.

Approach investors only for the things they invest in.

  • Preparing to meet with an angel
  • Adapt your pitch to the context of the meeting.  The goal of each pitch is to get to the next pitch. Too often, people put too much information in one pitch.
  • Don’t include an exit slide in your funding pitch. You should be thinking about building your business.

Watch the short video below to learn what Jeff Clavier believes are three mistakes startups make when pitching to investors.

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