By Roei Samuel, Founder and CEO at Connectd
Much like a train journey has multiple stops where passengers get on and off at different stations, startup founders and startup investors are largely on the same track, just at different stops along the way.
Ambitious entrepreneurs setting out on the expedition to take their innovative new product or service to market have a long journey ahead of them. Many investors are at the other end of the line; after founding, growing and exiting their company, they’re now at a point where they’ve acquired the capital to be able to invest in those following in their footsteps.
Some founders may get off the train a little early or perhaps take a different track, but if they continued, they’d likely make successful startup investors.
And there are clear reasons for this beyond mere experience in growing a company.
It’s a people thing
The most successful investors focus on the people behind the business as much as (if not more than) the business itself.
Business is, at its heart, a people thing. Those who have been a founder themselves will know what it takes on a personal level to succeed.
Founders turned investors will be able to identify the right character traits and therefore the right people to grow a successful company. This indicates they’ll be more successful with their returns.
Been there, done that
No one can really ‘learn’ how to grow a business. It’s most definitely a role that requires practical experience. But you can’t get experience without throwing yourself right in at the deep end and starting a business.
Since navigating this terrain in such a way is ultimately a case of trial and error, it can be fraught with potential pitfalls and mistakes.
But if a founder has an investor on hand who has travelled the same journey, made the mistakes, learnt what they’ve needed to learn and overcome them, you’re going to be a whole lot more successful.
Being able to provide first-hand advice to your portfolio companies will be essential in your success.
Understanding the startup roadmap
The combination of the experience and understanding that former startup founders have gathered through growing their own businesses also helps in becoming great startup investors.
You have a clear understanding of when it is best to invest in a company, what success looks like and what to expect from a company’s growth. You’ll therefore make better decisions in the companies you look to invest in.
This past experience will also mean you’re connected to the right people, customers and other investors to the benefit of the companies you invest in. This is why it can be very fruitful to invest in companies in industries in which you have plenty of relevant experience.
Having an understanding of the whole roadmap means you’ve seen a company through from entrance to exit. First-time founders are often wrapped up in the heavy demands of growing an early stage company when, in fact, the exit should be as much of a consideration. Having been through this journey, you’ll be able to bring that much-needed perspective to the founder(s).
Conclusion
There are many ways that an individual can invest in the startup ecosystem.
Whilst each has its own nuances in terms of levels of commitment and responsibility, the core skill of identifying the best startups to invest in, and to support a startup in an investor role, remain similar across the board.
As a successful founder, you have the skills required to succeed in the role of investor, putting the companies you work with (and therefore the investments you make) in a great position for growth.
