From Founder To Funder: Insights From Angel Investors With An Entrepreneurial Background

From Founder To Funder: Insights From Angel Investors With An Entrepreneurial Background

Different insights getty One of the first signs of a maturing startup ecosystem is when successful founders start investing in the next generation of promising entrepreneurs. These founders-turned-funders are, like all investors, striving for returns commensurate with the risk they are taking but are also driven by a desire to give back.

“You feel compelled to give other people a chance, an opportunity which someone afforded to you at one stage in your life. I really believe that even the smartest entrepreneurs in the world – Steve Jobs, Sergey Brin, pick anyone – I promise you, at some stage in their journey, luck played a role; another angel investor played a role; another advisor played a role. So I think we have a duty to contribute. I’d like to see more entrepreneurs do it,” shares David Giampaolo, successful entrepreneur, investor and CEO of Pi Capital.

A liquidity event linked to their own company – be it an acquisition, IPO or a secondary – is often what enables founders to start investing. Once they become investors, having enough exit opportunities in their portfolio can further re-engage them, as Giampaolo highlights: “I feel strongly that venture funds who invest at a later stage also look to give angel investors an exit so that that ecosystem can continue to be fed. It’s very important that there’s a round trip: people invest, three to five years later, hopefully, they sell some of their stakes, and they reinvest. It becomes a flywheel.”

Having seen both sides of the ecosystem, these founders-turned-funders approach angel investing through a slightly different lens – one that can inspire other startup investors too. What to look for in startup founders

Most investors value founders who are intelligent and resourceful and who they believe have the ability to lead and execute. There is also an appreciation for founders who have deep knowledge of their chosen industry, a big ambitious vision that’s often at odds with the status quo and a commitment to making it a reality.

Angel investors who’ve been founders themselves tend to have a better understanding of the journey other founders are about to embark on. This puts them in a good position to spot otherwise underrated founder traits.

“I think what is perhaps underrated for exceptional founders is an understanding of their personal growth trajectory and ability to grow further. No one is perfect, but there are some who strive to constantly improve themselves, and there are some who have reached a peak and do not strive for much more. Exceptional founders are constantly trying to improve themselves and those around them. When investing in founders, it is not always about what they have previously done, but rather predicting what they are about to do and whether they can grow and adapt to new and bigger challenges as well as to how the world changes,” expands Zehan Wang, former Co-founder and CTO of Twitter-acquired Magic Pony.

Marie Outtier, who co-founded and led, also acquired by Twitter, adds: “I look for founders who have a contagious energy and can demonstrate deep knowledge of, one, the industry they chose and, two, of what it will take for them to win. It’s easy to tick the first box, the second one requires self-awareness – the most underrated trait that exceptional founders have.”

Beyond self-awareness and a growth mindset, these founders-turned-funders often look for entrepreneurs whose motivation goes beyond making money. “When someone pitches me and says they can sell this thing in two years, that usually spooks me. If you sold something in two years, you got lucky. I’m looking for someone who wants to build something. They’re not thinking about an exit. They’re thinking about creating,” says Giampaolo.

Given that venture investing is not about incremental steps and founders who are just trying to make something marginally better, investors are favoring out-of-the-box perspectives. “I like backing neurodiverse founders. So much innovation has happened by people who think radically differently. I like finding people whose brain isn’t wired the same as most and who also have a big vision to change or improve something that I personally find important,” stresses Chris Adelsbach, exited founder and active fintech investor. “I then look to see that the founder has a supportive team and co-founders who can execute on the vision.”

Heini Zachariassen, who founded Vivino, highlights courage as an often forgotten trait. It takes courage to start a company and it takes even more courage to make the difficult decisions that are required to build a great company. By contrast, […]

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