Mystery solved - what business angels and VCs really invest in...

Over the last few years, I've had cause to spend quite a lot of time pitching and chatting to business angels and venture capitalists, which has given me something of an insight into why they invest in some businesses and ignore others.

I've also spent a fair bit of time with entrepreneurs who are trying to put together business plans, which they think will garner interest and then money from those same angels and VCs.

I can report with full confidence that there is a big mismatch between what angels and VCs really want.... and what entrepreneurs think they want.

The biggest mis-conception amongst entrepreneurs is that either the business idea or the numbers in their financial projections are the key thing that investors are looking for. The reality is that the investors are looking for one thing above all else:

PEOPLE!

Specifically, the question they are looking to answer is this: "If I invest my money in these people, will they make the business a success?"

This question has several components to it:

1. Is there evidence that they are capable of successfully executing this kind of business, in this kind of market?

2. Is there good reason to believe that they are intent on growing the business to be a large enterprise, rather than in order to fund a nice lifestyle?

3. Is there evidence that they are sufficiently determined to keep pressing on, even if things don't always go their way?

The bottom line, for investors, is this:

If the people are right, and the proposition turns out to be wrong, they'll change the proposition to make it the right one. However, the right proposition in the hands of the wrong team will fail anyway.....

All the best,
Patrick Moore

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M: +44 (0)7765 999561 - MSN: LondonBassPlayer@hotmail.com - Skype: patrickmoore