Venture capitalists (VC) make funding decisions based on the people in a startup, not based on the idea, according to an expert panel.
Speaking at the U-Start Africa conference in Cape Town, South Africa, a panel of VC investors agreed the key to whether or not they grant funding to a startup is the people in the team, not the idea.
“We’re leaning in South Africa that it’s not always about the idea, it’s often about the entrepreneur,” said angel investor Eric Edelstein, adding that entrepreneurs who have previously worked in a tech company, or tried other startup ventures have more “wisdom”.
“I agree it’s about the team. It’s difficult to back an idea because there’s limited data,” said Joana Picq, head of international and business development at Jampp.
Picq said that entrepreneurs who have launched a startup in the past are often good candidates for funding, even if their previous startups were not successful.
“Failure provides a good learning curve,” she said.
Brett Commaille, chief executive officer (CEO) of Angel Hub Ventures, agreed the entrepreneur behind the startup is critical to securing funding, saying that the focus will be that entrepreneur’s passion for their business.
“I want someone who can make me believe they can make this thing a reality,” he said.
According to Raymond Ndlovu of Invenfin, entrepreneurs need to have the right blend of technical and business skills to win funding for their startup.
“It’s about finding entrepreneurs who can marry technical ability with commercial viability,” he said, although adding that it often proves difficult to find people with such a mixed skill set.
For Justin Stanford, co-founding general partner of 4Di Capital, entrepreneurs need to demonstrate the ability to focus and execute targets.
“Execution is important. The quality guys I’ve seen are executors,” Stanford said.
While the people behind the startup are key, the VCs said the relationship between entrepreneur and investor, and the method of applying for funding is also paramount.
“The key is in relationships,” said Stanford, explaining that cold applications are difficult to “qualitatively” consider without knowing who is behind the idea.
“Deals are done by people through other people they know,” Ndlovu said, adding that he would encourage entrepreneurs to make the most of networking events to connect with VCs regardless of whether they currently need funding.
“It’s a conversation,” he said.