Seed Capital From Angel Investors: Basil Peters, CEO and Fund Manager, Fundamental Technologies II (Part 6)

By guest authors Irina Patterson and Candice Arnold

Irina: Do teams have to have prior business experience?

Basil: I don’t require that. I don’t think it’s a good filter, because if you look at the track record of entrepreneurs, there’s very little correlation between whether it’s their first venture or their third or fourth or fifth and success. Very often the greatest success is from the entrepreneur’s first company.

For many people, and I often say this when I’m speaking to groups of students, the best thing you can do with your life is to go from being a student directly to being an entrepreneur. That is the easiest transition.

So, I encourage students to go directly into becoming entrepreneurs just like I did. There’s a whole range of reasons why that’s a good idea; maybe we can talk about it at another time.

But there’s another fascinating statistical process, and that is if a person is a good entrepreneur, you won’t get a chance to invest in his or her second company because they’ll have made some money. They won’t need your money anymore. It is very hard to invest in a second startup of a really good entrepreneur.

Irina: What do you do when a single founder with no team comes to you?

Basil: I don’t usually invest in single entrepreneurs. These days, most of the time, it’s a team that is successful. That said, there’s usually a leader. The CEO usually is a leader. And the easiest and first sale that an entrepreneur has to make is to some other entrepreneurs to build that team.

If there’s only one person, there are a lot more failure modes in a company that has one person in it. I personally much prefer to invest in a team, even though there’s always one strong leader . .. . or maybe two. Maybe there are two cofounders who are more equal, but usually there’s one.

Irina: So would you suggest they go and find a team?

Basil: Absolutely; find a team before contacting the investors. Ninety-nine percent of the time, I would say that’s the right thing to do.

Irina: And what character traits in a founder would clinch the deal for you?

Basil: One day I want to write a book about that. It’s a very important question. For decades now venture capital investors have tried to understand what the characteristics of successful entrepreneurs are. The trick in investing would be to identify the next Steve Jobs or Bill Gates. There are things about entrepreneurs that are consistent.

There is a growing body of knowledge around what it is that makes an entrepreneur successful. Investors are getting smarter. After doing this for a few decades now, I think I’m getting better personally at applying some of those types of rules to determine who are the entrepreneurs I want to invest in.

Some of the characteristics are that the successful entrepreneurs are always incredibly driven, they’re always very bright, they’re always absolutely honest, and they’re always good leaders. They often have personality defects, which are typical of successful entrepreneurs. They usually have a significant amount of self-doubt. All entrepreneurs have self-doubt, but the good ones have more self-doubt than the mediocre ones, interestingly. I’m going to write a blog on that one of these days.

Successful entrepreneurs usually haven’t reached the stage in their lives where they have a good life balance. If you’re sitting across the table from an entrepreneur and he is talking about balancing his life, he better be fairly wealthy. It’s not something that young, aspiring entrepreneurs are able to have. There’s a whole range of things like that. I could literally go on for half a day. Those are some of the most obvious criteria that predict success.

This segment is part 6 in the series : Seed Capital From Angel Investors: Basil Peters, CEO and Fund Manager, Fundamental Technologies II
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