Things I Learned from David Rose

Angel investor and pitch expert David Rose was in fine form at the Shake Shack gathering this evening, holding court and telling us the key traits he tells his biz school students make an entrepreneur. They are, as I remember:
  • Integrity. The most important trait. Rose won’t give money to you if a whiff of dishonesty crosses his sensors. He’s giving you his money for your idea, and he wants to make sure it’s in the right place.
  • Passion
  • Great idea
  • Domain experience (helps if someone’s done something related before, and, perhaps, had successful business)
  • Leadership

You also need a team: sales, tech, BizDev, ... and an entrepreneur, who can be one of the folks doing other function(s) on the team, someone to marshall the others -- a team can’t really be bought, Rose says, and who lives, eats and breathes the stuff. Someone who is by nature that person, an entrepreneur. Someone who, if this one fails, is going to make it on the next one, or the next, or one of the ones after that and so is worth the investment because s/he’ll eventually pay off. You need 30X potential return, because only 1 of ten ventures will make it, and it has to pay for all the rest, at a rate that’s better than if you, say, put your $$ in a hedge fund.

1 comment:

David S. Rose said...

Dorian, it's hard to 'hold forth' without a good audience [grin]. Thanks for listening to my pontifications! In case any of your readers happen to be curious, we really discussed three different things.

1) The Most Important Person on the Startup Team
In a blog post that I wrote on the subject after it came up in a conversation on the nextNY mailing list, I posit that it's not "the techie", nor "the UI person" nor even "the biz guy"...but rather The Entrepreneur... someone with a special set of skils and characteristics that may—or may not—be co-resident with the other functional skills mentioned above.

2) The Ten Crucial Attributes of an Entrepreneur
Although I haven't yet taken the time to blog about this one yet, it has been a staple of my business school lectures (and was captured by the New York Times during my Ignite presentation last month). In a nutshell, I have found that most investors look for the following ten 'must-haves' (pretty much in this order) in their search for the Perfect Entrepreneur: Integrity, Passion, Startup Experience, Domain Expertise, Functional Skills, Leadership, Commitment, Vision, Realism and 'Coachability'.

3) The Entrepreneur/Investor Disconnect on Returns
My point here was that even if you could get a typical entrepreneur and a typical investor to agree on the same target investment return for the investor (say, 25% IRR, as a reasonably high return for investing in a really risky startup), there is a gaping chasm between the two, because the entrepreneur looks at the question in light of his or her own venture, whereas the investor looks at it in light of his or her entire portfolio. The result is that the entrepreneur has heart attack when, having come to such an agreement, the investor says, "great, now that, of course, means that I need to get thirty times my money back from YOUR company! I've gone through the math in detail on my blog, but a crib note version is available over on Center Networks from a presentation I gave last Spring.

Thanks for your interest!