What angel investors look for in a promising emerging brand

As a follow-up to yesterday’s post, here’s a list of things we look for when evaluating a partnership with a promising emerging brand:

• Exceptional founders with shared values
• Beginnings of a healthy organization (3-4 collaborative team members, key partnerships in place)
• Strong core product/service, supporting high margins
• Excellent brand DNA
• Secure intellectual property (trademarks, formulas, designs, etc)
• High ROI sales & marketing
• Business momentum – high quality sales pipeline, influencer uptake, market buzz
• Bespoke business model: proprietary, scalable, capital-efficient, leveraging new media
• Profitable, or clear path to cash break-even within 6-12 months
• Operating in a niche, growing market with few established competitors
• Accurate books and records
• Sound operations (for more established companies)
• Good corporate governance
• Realistic and opportunistic exit strategy
• Reasonable deal terms

Most seasoned angel investors active in this space have similar criteria, although maybe stated differently.

Related post:

> Find Your Angel(s)

Photo: Detail of woman, Matt Bollinger @ Plane Space

What makes for a successful entrepreneur?

People often ask us what qualities we look for in entrepreneurs building early-stage companies. It’s a good question because we make a living by betting on people. So, here’s our not-so short list:

• compelled by a strong vision (see How Good is Your Vision?)
• natural, benevolent leader
• talented
• ambitious
• hungry (different from ambitious - e.g. Trump might be ambitious but is he hungry at night?)
• tenacious
• excellent evangelist/communicator
• hustler (ability to marshal resources quickly and cheaply)
• opportunist (knowing when to seize an opportunity, and when to pass)
• street-smart, adaptable
• appreciation for all aspects of a business (creative, strategy, financial, org development, etc)
• pragmatist
• immersed and at ease in target market culture
• respected by peers
• tempered by failure

I would like to hear from other investors or entrepreneurs out there… I’m sure I’ve missed something.

Tomorrow we’ll take a look at the qualities we look for in promising emerging brands.

Uncertain times for US indies

Ouch. The economic news is getting worse every day. Here’s an excerpt from the today’s Wall Street Journal:

“University of Maryland economist Carmen Reinhart and Harvard University economist Kenneth Rogoff… say the current crisis appears on track to be at least as bad as the five most catastrophic financial crises to hit industrialized countries since World War II.”

Tightening credit markets, high energy prices, a softening job market, stretched savings and shaken confidence are undermining consumer spending.

Retailers, responding to the consumer slow-down, are retrenching to proven performers, cutting back their spend on fledgling brands. (As a friend and savvy investor recently put it: “not so long ago it was about introducing new brands, now it’s about dollars a square foot.”)

How will the domestic indie brands fare in this climate? My guess: the next 12-24 months are going to very tough, so hunker down! (See related post: Hedging Your Baby)

Working against the indies: softening consumer demand*, retailers cutting back on their assortment and support for new brands, tightening credit markets (banks, suppliers, retailers are all reigning it in)… what else?

* Spending in some highly discretionary categories must be evaporating - e.g. fashion accessories, jewelry, watches. See related post:

US Females Consider Trimming Back the Excess

Working for the indies: empowered consumers seeking out enlightened and authentic brands, high-growth niche markets (organics, men’s grooming, micro-distilling, etc), a weak US dollar (which has the effect of blocking out many overseas brands and spurring international sales for US-based indies)

TBD: What happens to the market for angel investing, which has been self-organizing and emerging as a potent capital source for a new breed of start-ups since the late 90s? Any major pull-back by angels would but a big dampener on indie activity and prospects.

What else is at play here? Come on, readers, take a stand, speak up, share the good word - what are you experiencing in your business?

More related posts:

The Coming Brand Flush

Find Your Angel(s)

It’s Indie Time

US females consider trimming back the excess

Here are some juicy stats to ponder… (and colorful too - I just discovered a new format bar). They show the relative sensitivity of spending by the voracious American female on various consumer categories “as a result of current economic conditions” (which seem tenuous, stock market rallies aside, although you wouldn’t know it walking the streets of NYC):

Where Women Are Cutting Back
As a result of current economic conditions, I am cutting back on … (%)
Fashion accessories (watches, jewelry, bags) - 73
Home decor - 69
Magazines - 63
Clothing - 62
Cosmetics - 55
Perfume/cologne/fragranced lotions/creams - 54
Salon services (hair care, manicure, etc.) - 54
Greeting cards - 35
Skin care products - 35
Hair care products - 32
Premium cable TV service - 32
Cell phone service - 32
OTC medication - 21
Prescription medication - 11

What insights, if any, can we glean from this?

I guess it’s no secret that American closets are busting at the seams with heaps of fashion accessories after a five-year buying binge fueled by savvy marketers, lenient credit companies and very keen consumers.