I have been working with the Pipeline Fellowship and other organizations that fund start-ups. When I make a decision, I use a combination of business basics combined with what I believe is important to invest in for the world and its people.
It is important that you don’t over complicate investment decisions. I try to use five criteria consistently as a basis for my evaluations.
Five Criteria for Evaluating an Investment
- Confidence in the leader. Leaders need to be dependable, sociable and open. More importantly, they need to inspire. But I think perhaps one of their most important skills is the ability to listen, because if people listen, they can learn anything they need to learn to be successful. For a leader that means learning what skills the team is lacking, and listening carefully for feedback about what skills in themselves may need a complement. Leaders who spend all of their time talking and telling other people what they think don’t give themselves the time to learn from others. Regardless of how dependable someone is, if they aren’t listening and learning, it is difficult to trust that they will be able to adapt and lead through tough times. When I recommend an investment I want to meet a leader who I see is confident not only in what they know now, but confident in her ability to lead through an uncertain future.
- Alignment to my values. I have to be very honest, and I think it is something that most people find uncomfortable: saying that they make choices not based on some intellectual criteria (yes, like this one), but just some personal preferences for organizations focused on social venture organizations led by women.
- Understanding of the space and my own personal interest. Part of having confidence in a leader is her knowledge of the market. I want someone who can tell me things I don’t know, and who is capable of backing up assertions with solid research and reasoning. But a convincing argument isn’t enough for an investor because the investor needs to care about what you are talking about. I know that sounds harsh, and that quality and knowledge should be enough, but if I’m investing my money, or responsible for investing the money of others, I must care about the outcome of that investment, not just the return. It is also important that I can bring value to the organization, that I can act as a sounding board. People working with start-ups shouldn’t stop at giving money, at least for me, I want to help them accelerate their growth through connections and expertise. I want to know how they see me as a member of their team.
- Identifying few large scalable business opportunities with the solution presented. Understanding a market is just the first step in creating a business. The second step is creating a product or service that solves a problem in a way that either disrupts an existing market, or creates an entirely new one. This can’t just be speculation. I need to see evidence. The best evidence is a business that already offers its solution and has attracted customers—a business with momentum. Going back to the first criteria, the CEO needs to be listening to these early customers to understand what is working, what needs improvement—and even what else they might need that could lead to future, ancillary products or services that can help the business grow and sustain in the future. I get really excited when I meet a leader who can see beyond the current opportunity. Someone trying to learn as the future unfolds and is ready to take the opportunity before it really exists. I want to invest in companies where the leadership is super aware of what is going on in their markets and beyond, constantly sniffing for what’s next.
- Quality and completeness of business plan—and execution! It’s not easy to write a good business plan, but it is easier to write a business plan than to turn that plan into a good business. I want to see a plan that is already becoming reality when I invest. A big indicator for me is a leadership team that has brought together a team with the skills needed for success. They know what they need to be successful, and they have already recruited the people. That is a hard task for a start-up, and if they bring that to a meeting with me, I know they are serious.
These criteria are interconnected—and they need to all be there. So that means an investment must also reflect a well-rounded leadership team that can create, plan, execute and learn. That’s a tall order but a successful business needs to work on all levels, or it will limp into its future and fail the first time it gets challenged. I want to help create businesses that last, and that means applying these criteria to every investment.