You’d think that investors would consider the quality of the business before the character
of the entrepreneur. But time and time again when you talk with angels or VCs, you hear
the expression, “Bet the jockey, not the horse”—meaning, the entrepreneur or founder of
the startup is more important in the funding decision than the business itself.
This evaluation is not simply based on the founder’s past experience. Granted, serial
entrepreneurs with proven track records are far more likely to be funded than first-timers
(60 percent versus 45 percent), and they also receive funding earlier (on average at
twenty-one months in business, versus thirty-seven months for a first-time founder).2 But
when it comes to evaluating a startup for financing, investors consider the temperament of
the entrepreneur (and the entrepreneur’s team) as much if not more than the startup’s
product or service. As The American Angel 2017 report says, “First and foremost, angels
invest in people. The quality of the founding team in terms of both experience and
personal characteristics are most critical to angel investors.
The bottom line is this: The initial bet that they’re taking is really about you. Investors
must know you, like you, and trust you before they will fund you.
You should learn more about developing a strategic network that will allow you to get “warm” introductions to potential funders, which will help with your being known, liked, and trusted. However, once you’ve got the introduction, it’s up to you to present yourself and your business in such a way that an investor will want to give you money. As a serial entrepreneur turned VC investor Mark Suster writes in his blog, Both Sides of the Table, “Fundraising is a sales process. The investor is a customer and they have money to spend but only for a limited number of companies. They are buying trust in you that you will build a large business that will be valuable. I believe entrepreneurs must demonstrate three essential qualities to win investors over: character, confidence, and coachability. Then founders must be sure to avoid any red flags or dealbreakers that might get in the way.