Article 5

do it website

StartupRunner, a management consulting firm with an early stage investment arm. Over the past 36 months we’ve run diverse experiments developing a repeatable process for finding investable startups amidst the 1000’s seeking investment:

While I can’t share the proprietary results…the crux of our learnings can be distilled into 3 laws you can use to help build a portfolio of high performing startup investments.


Image result for startup


Law 1: An entrepreneur’s actions must demonstrate their commitment to build a profitable business

As an active investor you’ve spoken to countless entrepreneurs claiming their product is the next big thing that will be acquired. Preoccupation with product demonstrates a lack of consideration for the voice of the customer and business required to return your investment. Startups seeking investment rarely have accountability to profitability. The importance of a dollar invested generating more than a dollar for re-investment or withdraw can’t be quickly taught. A commitment to profit efficiency, like integrity, forms overtime with each business decision an entrepreneur makes. On the surface profitable businesses might not appear compelling investments compared to get rich quick opportunities advertised by startups sacrificing profits for hyper growth. The cemetery of unicorns in Silicon Valley and mass graves of wannabe unicorns outside the Valley convey a clear lesson. Lack of accountability to profitability is not innovative or a way to get rich quick – its wasteful. If you can’t instantly tell an entrepreneur is in it for the long haul, they’ve violated the first law of startup investing: an entrepreneur’s actions must demonstrate their commitment to build a profitable business.


Law 2: An entrepreneur must perform the key activities of their business with skills they’ve mastered

Fortune 500 companies don’t generate returns for shareholders hiring in-experienced professionals to do highly specialized jobs. Startup investors shouldn’t expect returns when an entrepreneur has a steep learning curve in the core domain expertise of their business. Precious time and resources are wasted as they educate themselves making mistakes that should have been avoided. Mastery isn’t a pre-requisite for friends and family, but if you invest in the equivalent of a student loan expecting a return you’re doing entrepreneurship a great disservice. Shortcuts don’t exist for entrepreneurs to acquire the experience and expertise needed to turn a startup into an investable business. If it isn’t instantly clear how an entrepreneur is using skills they’ve mastered in their startup, they’ve violated the second law of startup investing: an entrepreneur must perform the key activities of their business with skills they’ve mastered.


Law 3: An entrepreneur must be a servant leader

Great entrepreneurs know how to employ listening, empathy, commitment, and insight while sharing power and authority with team members. They create a sticky work culture and achieve extraordinary results by helping their people focus on the needs of their customers. A rare ability, servant leadership can be found woven into the fabric of many startup successes. Servant leadership is often overlooked by investors because it doesn’t show up in a pro forma and it’s impact can’t be projected in a spreadsheet. Even more important than the impact on investment performance, an entrepreneurs lack of servant leadership will exponentially increase your risk of lost time and stress. What is the worst startup investment you ever made? Look beneath the lost money and you’ll find an entrepreneur that lacked this leadership philosophy. If it isn’t instantly clear an entrepreneur is a good listener, empathetic and without ego, they’ve violated the third law of startup investing: an entrepreneur must be a servant leader.


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Publisehed in: Simple-guides 07-2017

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