The startup world is full of big ideas. Entrepreneurs have grand plans to make these big ideas a reality. It is the venture world, so you better have large ideas. However, the talk around the idea is often full of overstatements and amplification. It paints a picture of a future so bright that it’s blinding.  The problem is some entrepreneurs are full of big ideas and nothing more. The startup world is open to anybody. Since the space is so open, it seems like everybody comes through it at some point in time. Unfortunately, this leads to some individuals passing through who are not serious enough to propel a startup toward success.  Here are a few signs that an entrepreneur may not take the business seriously enough to be successful: Job titles are overly important to them. They are generally more concerned with receiving titles and credit for the work than they are about the actual work. They are not focused on the customer. In fact, they may not even have a clear understanding of who their customer is or what that customer wants. They don’t take responsibility for problems the startup may have. They blame others for the issues and may claim there is nothing they can do to fix the problem.  Know your entrepreneur. An entrepreneur who isn’t committed to the cause will raise funding and ultimately waste it. You do not want to invest money in those who aren’t going to see it through.

Overlooked Areas of Investment There are a lot of opportunities to invest in early-stage companies, particularly in some of the areas of the country that have been overlooked in the past. We’ve seen areas such as New York City and San Francisco that have essentially turned into startup hubs. As more and more companies spring up in these hubs, investments get poured into these areas. However, we are starting to see a shift outside of these hubs as other, typically overlooked, areas begin to show more and more potential for both startups and investors.  For example, Houston is making tremendous progress in terms of building an ecosystem and creating an environment that will nurture and support startups. More importantly, the Houston area is poised to keep those startups in the city as they grow. Other cities are beginning to follow suit due to cheaper business costs compared to larger, more expensive cities like San Francisco. Examples of this can be found in places like Charlotte, NC and Columbus, OH. As more and more hubs begin to pop up, it’s important to build a culture of early-stage investing in these cities much like Houston is doing today. The more we continue to pay attention to these previously overlooked areas, the more investment opportunities will arise.

The “One Size Fits All” Myth When it comes to first time investments, there’s a lot of information out there. More importantly, everyone has their own ideas and advice on how to get started as an investor. The problem is, a lot of times these ideas and advice are conflicting. As a new investor entering into an unfamiliar field, it can be confusing and overwhelming when figuring out where to begin with all of this conflicting information. The truth is:  There’s no right way and there’s no wrong way to do it. There is no “one size fits all” for investing. Different approaches work for different people and what it really comes down to is finding the best approach that works for you. However, the one thing that nearly all investors can agree on is, it all comes down to the teams.  There’s no bad idea at the beginning but there’s a lot of bad execution. The team you are investing in can make or break the execution.  A lot of times with early stages, people get too attached to a single idea and are less willing to evolve. Find a team that is willing and flexible enough to evolve with the idea and with the company. Be open to evolution and testing new ideas and make sure that team is just as open as you are. Otherwise you risk having that good idea fail because of poor execution. 

As an investor, it’s important to think about investing in human and social capital. Research suggests that investing in human capital and social capital, alongside traditional capital, is most predictive of any startup’s success. Data shows that having diversity on a team benefits a startup’s performance. An additional dataset from the likes of McKinsey, American Express, and the Kauffman Foundation shows that diversity makes for better financial outcomes with a company. Given the data, looking at diverse teams should be a priority for investors. Here are a few benefits of investing in team diversity: Superior decision making and problem solving Diverse backgrounds means diverse solutions being brought to the table. This leads to a more informed and well rounded decision-making process and improved results from the team. Increased innovation A diverse team is a melting pot of ideas. People with different backgrounds and views will bring different solutions to a problem. This, in turn, pushes innovation forward. More talent and skills Individuals from different backgrounds each bring in their own set of skills, talents, and experiences. Not only does this increase performance, it also creates a natural learning environment in which team members can learn from each other. A larger talent pool and long term employees Diversity means attracting more candidates. A progressive company is attractive to prospective employees who value equality and higher employee retention is likely with a more diverse team.