Startups

One angel’s 3 question litmus test for deciding who to invest in

“I just want to know how will you get 1 paying customer. 1” – Timmins is brilliant. #how2angel #sxsw — Or-Tal Kiriati (@lemino) March 8, 2013 It’s all about you. The strength of a founder is the deciding factor for angel investor Rick Timmins. He has two other questions for entrepreneurs looking for an investment, […]

It’s all about you. The strength of a founder is the deciding factor for angel investor Rick Timmins. He has two other questions for entrepreneurs looking for an investment, but the strengths of the founder carry the most weight.
Timmins is a venture partner at G-51, which focuses on seed stage and early investments in start-up companies. He is also a member of the Central Texas Angel Network.
Here are his criteria and his thinking behind them.

1. How good is the founder?
“I want to know if she listens well, how driven is she, does she take feedback? “If I have any doubts or concerns about the CEO, I won’t do it.”

2. What is the path to getting one paying customer?
“I want the entrepreneur to think it through and tell me the exact path to one paying customer. Don’t tell me how big the market is.”

3. How disruptive is the technology?
“Most businesses don’t want to buy from startups because of the risk and the hassle. Before I invest I want to know what kind of IP do you have? How secure or unique is it?”

“If all 3 aren’t met, I won’t invest,” Timmins said.

Timmins spoke at a Friday session of SxSW, “How to be an angel investor.” Jason Cohen and Rosa McCormick also spoke on the panel.

Cohen, the co-founder WP Engine, said AngelList should be a basic tool in for all entrepreneurs.
“Angel List is to your pitch is what LinkedIn is to your resume,” he said. “It is also very good for social proof.”
He also suggesting using the list as a way to top out a round, but not start one.

A man from the audience asked why an investor in San Francisco would not invest in a company from Los Angeles.
“You have to be in the same room so you can sit down with them, have beers, talk about strategy, whatever you need to do to influence and help,” Cohen said.

Mccormick, the managing director at Wild Basin Investments said that geography was definitely a factor for her as well, but if a colleague in another city recommended a startup, that could be enough to surpass the distance barrier.
“Angels do have good networks, so if a friend in another city recommends a company, we feel like we do have that connection,” she said.