January is always a great month to reflect back on investment decisions made in the prior year, and hopefully gain some intelligence to aide the process of investment selection moving forward. This past year, the combination of a worldwide pandemic and national political upheaval, provided unique challenges to the startup community, founders and funders alike. Stressful times tend to magnify both the strengths and unfortunately the weaknesses of leaders. Whether it was the ability to quickly shift to a remote working environment, understand and respond to changes needed in the business model, or to communicate honestly with both team members and investors regarding the strategy moving forward, the environment of 2020 was challenging for all.
One thing that does not change, no matter the environment, is the importance of the team, especially the CEO and other C-Suite executives. A great idea without the ability to execute is just a great idea. As I would assume is the case for many early stage investors, my portfolio contains the full spectrum of “What was I thinking” investments to “ I am so excited to be a part of this great company”. In most cases, a major factor in the difference in categorization is the quality of leadership. I am a bit old school in that once a founder has demonstrated an unwillingness and or inability to communicate honestly with investors, it is difficult for me to trust them in the future. Watching how the CEO interacts with other members of the team can provide very useful insights into both their character and leadership skills.
“Wisdom stems from personal accountability. We all make mistakes; own them…learn from them. Don’t throw away the lesson by blaming others.” Steve Maraboli
How then does an investor avoid the pitfalls of adding more “What was I thinking” investments to their portfolio? For me, it means digging even deeper into the background and character of the founding team/C-suite and relying on members of the various angel groups with whom I co-invest to help with this process. It is also heeding that small voice in the background that raises concerns, hopefully early enough in the process.
I am looking forward to 2021, which holds hope for an end to the pandemic and the transition to a new administration with strong leadership and commitment to the ideals of this great country. In setting my investment strategy for 2021, I hope to add to my “I am so excited to be a part of this great company” portfolio by focusing on strong teams building great and meaningful businesses. Several of my investments over the past year have been in focused funds such as Portfolia – which have provided me access to female-founded companies in the FemTech and Active Aging spaces, both verticals poised for growth. I am privileged to be a member of both Golden Seeds and New York Angels, two investment groups that provide opportunities to co-invest in great companies in collaboration with strong and experienced early stage investors.
Happy New Year !