TRC 005: 6 Traits of great investors
Mar 16, 2023Read time: 5 mins
The Six Traits of Great Investors
Investors come in different shapes and sizes. Some are great and are valued by founders. Others are less good and become unwanted baggage.
How can you tell them apart?
Before you raise, the only sign of investor quality is whether they believe in you enough to invest. The level of their investment measures their value to you and your business.
But what if you are in the position of being able to choose your investors?
If there are several offering similar money and terms?
How do you choose between them?
To answer this, we spoke to founders who have raised money.
What makes an investor valuable to them are all the non-financial factors.
Here are six you can use to judge the investors you meet:
1. Motivation
What matters most to them: your success or theirs?
Investors are not donors.
They will make decisions based on whether a business represents a good investment opportunity.
They will have metrics for how they measure success and want to achieve these.
But great investors don’t just invest in businesses.
They invest in founders. They make the founder’s success their goal
2. Attitude to Risk
Early stage businesses are risky.
There is a wide spectrum of possible risk, and it is good to know where investors are on it.
If investors accept too little risk they may hold you back when you have to change direction.
If they accept too much risk, and are willing to gamble the future of your business, then they are harmful to your prospects.
Great investors take a balanced view, operating across the risk spectrum based on the market context and opportunity.
3. Supportive
To be successful founders need support.
They need more than a transactional relationship with their investors.
At the very least they need to know investors have their back.
Great investors share the burdens of founders, helping to find solutions to major problems together.
Speak to other founders they have invested in.
4. Patience
Patience is an investing virtue.
If you believe in something, give it the time it needs to succeed.
If investors become impatient, they’re really signalling they aren’t committed to your cause.
They’re willing to compromise for short-term gain. Great investors are there for the duration.
5. Value-adding
Money matters, but not as much as you’d think.
If investors don’t add value, the only contribution they make is the value of their funds.
Great investors find ways of adding value to your business, making contributions greater than the sum of their investment.
They shorten your learning curve, introduce you to new networks, and become evangelists for your cause.
If they are great, they will be able to demonstrate some of this before they invest.
6. Savviness
Not all investors are sector experts.
Some haven’t successfully scaled a start-up.
Great investors have the knowledge and insight you need to guide you to a successful endgame.
They know when to help or sit back, when to challenge or concur, and what to focus on when.
Every founder seeking funding is really looking for the right kind of investor.
Use this list as a guide to help you judge what any potential investor might be able add over and above their funds.
TLDR
- Motivated by your success
- They won’t gamble your entire business
- They help you solve big problems
- They are committed
- They bring value beyond the funding
- They have the savviness you need
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