Secrets from the Frontline of Tech Startup Investment

By Cameron Chell CEO Podium Ventures ( www.PodiumVentures.com)

When it comes to tech investing, there’s a well-worn rule which says; the smart know tech, the rich know money.

While innocuous enough, the statement seems to me a little out of date and risks missing altogether those individuals on the very front lines of tech investment who blend the line between entrepreneur and investor and make it their business to see the whole picture. For these, the statement should read more like this; the smart know tech, the rich know money but successful investors know people.

During my 20 years in the tech startup space, the most successful enterprises I’ve come across all have one thing in common; they have extraordinary people.
When the brilliance of an innovation begins to fade, it’s the people within a startup who will innovate again. When throwing money at a problem doesn’t create a solution, its brilliant people who will step in and solve it.

Inevitably, when working among highly-driven and creative people, in what can be a stressful and heady environment, there are particular dynamics which occur, and in order to get the best results, the most successful hands-on tech investors I know have commonly mastered two things; managing egos and knowing when the right people are in the right place.

When the Product must come second

Startups are notorious for their pivoting and changing ground. The vast majority of the time, it is simply how they survive. The company as it starts out will almost never be the same as it is at the end of its life cycle. Even after a few months the focus might be entirely different and that’s why the product should always be considered as a second priority.

Like kids at Christmas, new investors tend to get fascinated by the latest technology. Part of the entrepreneur’s job is to sell the sizzle and hope the steak matches up and, as investors, we buy into that potential.

However, while having an incredible product is important – it can give a company a starting edge or an additional barrier to competition – like the old saying goes “products don’t sell themselves”. When a product reaches the end of its lifecycle or begins to falter, pivoting is impossible without the right people. When investors overlook the strength of the team behind a product and get sold entirely on the product itself, they risk being severely disappointed when the weather changes as there are no innovative people to guide the ship through stormy waters.

Finding that spark of creation

Another key target for savvy investors is ‘creative’ startups, meaning those in the business of creation rather than those searching for a piece of an existing market. For investors, to find startups which are innovating in this way, looking to make an entire marketplace grow or create one from scratch, makes for a very attractive proposition. If done well, growth for these types of businesses can be steep and industry precedents set.

Part of my work is with a project called Sustainable Startup (http://sustainablestartup.com/. The project delivers principles which help entrepreneurs to manage their creative processes in order to set up their organisations for long term success.

For investors looking to find the most promising opportunities, having a keen understanding of the various differing dynamics at play within startups and seeing how well talent is being utilised and strategic thinking being implemented, can be used to gauge how a startup is likely to fair in the long term and how safe any investment would be.