One of the concerns people have about online startup investing is getting a read on founders over the internet. However, I don’t think this is a real problem.
The best way to evaluate founders is to simply evaluate their business. How much progress have they made? What’s their growth rate look like? How big is the opportunity? And of course, we can always take a look at who else is investing in the round. Quality co-investors are a great signal.
If it’s a pre-traction startup, you can still evaluate progress. Simply look at the company’s rate of iteration. Founders that regularly try new things, improve existing processes and constantly strive for a better business are fairly easy to spot. For example, you can take a look at a company’s website on archive.org’s Wayback Machine and see how it’s evolved over time.
In terms of evaluating the founders themselves, I look for teams that have known each other and worked together for years. Shared history reduces the chance of co-founder drama, which can really hurt an early-stage company.
You can also evaluate founders’ social media accounts and see how they present themselves to the world.
Online startup investing is likely to be the future of venture capital (VC) and angel investing. So the fact that retail investors like you and me have been investing online for years is a great sign. We’re already well ahead of many of the VCs who, before COVID, only invested in founders they met in person.