My Personal Criteria for a Startup Investment

From 30 Early Stage Investments Over 24 years

I love visiting startup companies in a mini trade show environment. It gives me an opportunity to meet the people who are working at the companies. I much prefer this as an initial introduction. To me, it is much more revealing, more intimate, than a formal seven-minute stage presentation. Such was the case at the Atlanta Tech Village Christmas party last year.

$64,000 Question

I walked into the community room and locked eyes with a young man standing in front of the TrustStamp booth. I walked over and introduced myself.

He said, “I’m Chris Kiser. I’m the Customer Success Manager for TrustStamp. I just today heard your name from Virginia Persons. She told me you lead a meeting called Angel Lounge at the ATDC for angel investors.”

“That’s right. We’ve been meeting weekly for the last three years. Our purpose is to become better angel investors,” I said.

Then he asked the $64,000 question, “What makes you want to invest in a company?”

I Want to Invest

It was interesting how he asked this question. He personalized it. Most articles you’ll read on this subject answer the question, “What are the criteria which make a startup attractive to angel investors?”

David Cummings answered this question in a blog he wrote back in November 2017. He came up with the three components of a successful startup. He’s beautifully captured them in the simple rhyme: team, stream, and not a meme. I like what he’s done here. A quick and effective checklist for evaluating deals.

I was stunned for a moment when Chris hit with such a direct and personal question.

In what seemed like an eternity but was a couple of seconds, the potential answers fired through my mind. I gave him the simple answer: great team, great idea, and great market. But here are my personal criteria.

If I can check these boxes, then I want to invest.

1. Entrepreneur

A capable and likable entrepreneur with proven character and clear customer-focused motivation.

2. Problem

A big enough, well-defined problem the entrepreneur is aiming to solve.

3. Solution

An idea which solves the problem and makes sense with the entrepreneur solving it.

4. Buyer

Must know who they are selling to and why they will buy it.

5. Interest

A problem I care about and a solution that interests me.

6. Sustainability

An agreement on how this startup will eventually make a profit and what it will take to get there. This is sustainability.

7. Value-add

I bring something to the table in addition to the money. I see it, and the entrepreneur sees it. I need to be valued in the deal.

I have invested in over 30 early stage deals over the last 24 years. I wish I had these criteria when I got started. But wisdom is what you get when you don’t get what you want.

Wisdom can only come with experience. And experience for an angel investor begins after you write that check.

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2 thoughts on “My Personal Criteria for a Startup Investment

  1. That is a great list! Thanks for sharing Charlie!

    My favorite starting point is “timing”. It’s a tough one to forecast, but I want to see that the team has done the research and has data to support the timing is good and getting better.

    • Timing. I believe the closer we can get to figuring out timing the smaller the opportunity but the greater the chance for sustainability. That said, I still believe we should work toward understanding timing as best we can. This is the purpose of Y Combinator, Flashpoint and other incubators. They are all focused on defining authentic demand. But some of the crazy, big opportunities happened in some cases by simply being in the right place at the right time. And that’s God’s timing.