Investing in Startups is much like training Pokemon
A good business angel is like a good Pokémon trainer. They find a startup and coach it, open doors, help it through difficult times. With a bit of luck, the startup will grow, evolve and, when it’s time to battle the other startups, come out on top.
Adventuring vs demo-daying
In Pokémon, the best trainer doesn’t just stride out into the tall grass and toss balls at whatever happens to leap out at them; that’s a fine shortcut to ending up with a PC full of Pidgeys. No, to be ‘the very best’ you have to first decide what you want. What region are you in? What do you want to achieve in the long term? What Pokémon are you going to be battling at the next gym? Only a fool would approach Cerulean with a belt full of fire types.
It’s much like reviewing startups you may want to invest in.
In life, as in Pokémon, first define what it is you want and then go out and find it. Scout out accelerators and incubators, co-working facilities, universities — and all the different forms that demo days crop up in.
Screening vs er… screening
Once you’ve found out where the elusive startups frolic it’s time to start screening them to see which make the grade. When conducting due diligence you want to give the startup the full 360: review the team, the product, the financials, the business plan, who else is investing. Leave no stone unturned. Don’t worry if you don’t know much about conducting due diligence, there’s a guide for that.
Catching vs investing
In Pokémon you’ve got to throw a ball to catch it. With startups throwing a cheque would work, but most will accept a bank wire.
Training vs mentoring
So, once you’ve caught a startup it’s time to help them grow. Keep in mind that there’s good mentoring and then there’s interfering. Opening doors, making introductions, sharing how you got out of similar tricky situations is all good mentoring. Haggling them for updates every week, trying to run the business yourself, that’s interfering. With luck the startup will grow, evolve, and ultimately be worth a lot more than it was when you invested.
Battling vs battling
At the end of the day, both Pokémon and startups come down to who wins, whether that’s in a stadium or a battle of market share. Your startup will face stiff competition from others who are backed by angels and VCs working to make them the best that they can be.
Originally published at www.linkedin.com.