By Tom Ballard, Chief Alliance Officer, PYA
It’s been an event-filled several weeks in the entrepreneurial ecosystem with “Innov865 Week” followed by Launch Tennessee’s “3686 Festival,” not to mention a trip to Charlotte in between for the final day of the “President’s Cup” competition.
So, we’re catching-up on summarizing important information that came out during the last event of “Innov865 Week” when Tricia Martinez, Managing Director of the “Techstars Industries of the Future Accelerator,” hosted an event in the organization’s space in Downtown Knoxville. The event was titled “How to Think Like an Angel Investor,” and Martinez was joined by Samer Saab, Senior Vice President of Product at Alloy Labs Alliance and a Principal in the Alloy Alchemist Fund that invests in start-ups reinventing financial products, customer relationships, and banking. He’s also her husband.
The 90-minute session was the latest in a series of independent discussions intended to encourage more individuals to get off the sidelines and become investors in the rapidly growing Knoxville regional start-up ecosystem.
“Only invest in things that bring you happiness,” Martinez advised at the beginning of the session. First step questions include: (1) the amount of funds an individual is willing to invest and possibly lose; (2) the outcomes the prospective investor is seeking; (3) areas of interest where the investor also has expertise; and (4) value the investor can bring to a start-up.
“You will need to build your own brand as an investor,” Martinez added.
To become a great investor, the husband and wife team said it will be critical to have robust deal flow, an ability to pick winners, and an ability to sell yourself as an investor. The latter point is related to the fact that those seeking investment will be evaluating potential investors just as the investors are evaluating the start-ups.
Identifying good opportunities is one thing but being able to invest in them is another. “Deals you want to get into are the hardest,” Saab said.
The duo also emphasized understanding the all-important product-market fit. Martinez explained that Techstars ranks team composition first followed by market fit and finally the product. “Are you actually solving a problem?”
Saab added to the discussion with some examples from his experience.
- If you have a great team, great product, and great market, it is most likely a win.
- If you have a great team, no product, and no market, it will fail.
- If you have a great team, great product, and no market, it will also fail.
- If you have a great team, no product but a great market, it can be a winner.
He also said a good way to evaluate start-up teams is to answer these questions:
- Can they sell to customers?
- Can they sell to investors?
- Can they hire good people?
- Do they have the ability to build the business?
- Do they understand their customers very well?
“At the end of the day, it’s still a guess,” Martinez added.