Investing in an Entrepreneur and Disliking the Idea

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Several months ago I was giving a high profile, out-of-town VC a tour of the Atlanta Tech Village. As we walked around the rooftop patio, I asked about one of his investments I had read about previously and he said something that surprised me, “I don’t think the idea for [redacted] is that good, but I love the entrepreneur and invested just so I could invest in whatever company he does after this one.” Wow! This is an investor who has put many millions of dollars into a startup saying the idea is only OK but that’s it’s all about the belief in this person.

Naturally, I pressed further and asked about expected return on investment and how it compares to other investments. The expectation is still to make good money (e.g. a 10x), but that there’s no way it could be a 100x (or 1000x like Jeff Clavier’s Fitbit investment). So, disliking an idea while still believing it can generate good financial returns are not mutually exclusive. Regardless, a fundamental belief in the entrepreneur is the driving force.

The next time you hear of an investor saying ‘no’ because they’re not interested in the idea, remember that the entrepreneur is even more important. In fact, some investors bet on the entrepreneur regardless of the idea.

What else? What are some more thoughts on the idea of investing in an entrepreneur and disliking the idea?

Comments

7 responses to “Investing in an Entrepreneur and Disliking the Idea”

June 19, 2015

Michael Ugino

David,

Why isn’t there a share button on your posts so I can shout this with you as loudly as possible? 😛

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1. June 19, 2015
  
  Michael Ugino
  
  *on your emails that is…
  
  Shared!
  
  Reply
June 19, 2015

calvindjohnson

Sometimes you bet on the horse & sometimes you bet on the jockey.

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June 20, 2015

Anand Thaker (@AnandThaker)

As a general rule, an investor should plan to make multiple investments in various startups and expect multiple rounds. David, would it be prudent to plan to make investments in multiple ventures with that individual…once you’ve found the right one?

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June 20, 2015

Dave Williams

I only like to invest in entrepreneurs as I feel that they will find the way. If I don’t know the entrepreneur or have a positive experience working / connecting with them then I won’t invest. That is the first critical test.

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June 20, 2015

kreadivmedia

If the entrepreneur can sell you on an investment that large, he or she can probably sell others on the product and business idea, building and then turning a profit. It isn’t about the idea, it’s about the guy behind it. That being said, if they never come up with something interesting, they’re all talk and they’re always crashing and burning, your first investment would teach you a decent lesson.

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June 25, 2015

Toufigh Gordi, PhD

Isn’t it Warren Buffett’s style to invest only in companies, where he trusts the management and believes in their ability to run a profitable business? If someone has proved s/he is smarter than me in working on the right idea, why not invest in her/him? I rather invest in a company with (in my mind) mediocre product with strong management team than an excellent product with jokers running the show.

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