As the founding chair of TiE Vancouver Angels, and steering committee member for TiE Global Angels, the world’s largest angel investor network, I get a lot of questions from founders and people new to angel investing.
While there are no “sure things” in the world of startups, there are some key learnings that I’ve found over the years that can increase the likelihood of success, even if it doesn’t happen overnight.
Why do some startups fail?
You are bringing something to the market that didn’t exist before. That is full of unknowns. Think of Christopher Columbus setting sail in the wide ocean saying that “there’s land somewhere over there and I think I can find it before I run out of food and water.” There are no maps, no navigation system. The whole adventure is powered by strong beliefs on the parts of the founder and early investors. Sometimes you are lucky and you find America, and other times – you don’t. This is why the success rate for startups is not high and this is why when someone succeeds, the results are financially spectacular.
How can you increase a startup’s chance of success?
Napoleon said that in order to win battles, the generals need to be either good or lucky. And that he’ll take lucky over good any day. I would say the same for founders. Trying to guess if a startup is going to be successful is not easy. Sometimes you can do everything right but the market just doesn’t support it and sometimes you can do everything wrong and the clown car just falls into a gold mine by accident. Good is good, but lucky is better.
What to look for in founders?
Amongst other things, you are looking for emotional intelligence. You are looking for stubborn but configurable. Someone said it really well – “strong opinions, held loosely.”
How to be successful in angel investing?
The way to make a million in angel investing is to start with $10 million. On average, out of 10 investments, 5 will fail, 3-4 will be zombies – living but not much else happening and 1 will be a blockbuster. But – you don’t know which will be which. It is like gambling. Except that if you do it enough, you are the house and the house always wins. It will take between 6-9 years to see any money, but the house wins.
What is a good time to raise seed money?
From the founder’s perspective, you want to raise as soon as you can where the dilution is still reasonable. From the investor’s perspective, as late as possible when the risk is reduced but the cost is still cheap. For every startup these curves intersect at a point and they raise money.
Maninder Dhaliwal is an angel investor, the Managing Partner at Startup Studio – Accelerator and Venture Fund, Founding Chair of TiE Vancouver Angels, and serves on the global steering committee for TiE Global Angels, the largest angel investor network in the world. She is speaking at Unite the Prairies 2023 on May 24th – 25th, 2023 in Saskatoon, and at Alberta Innovates’ Inventures 2023 on May 31st – 2nd, 2023.
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