How Does An Angel Investor Think? What kind of Entrepreneurs Does He Invest In? A Necessary Read For Every Entrepreneur!

Over the past few months I have interviewed a number of highly talented entrepreneurs who have gone quite aways forward(?), which I found to be very inspiring. I met these entrepreneurs at various stages in their ventures, some being after a fund-raise and an inch away from launching their product, some have just finished a POC successfully in Israel and were planning how to penetrate foreign markets. In each and every personality and story there was inspiration and wisdom for us to draw on and make use in our personal journeys. However, there were also people on the other side of the entrepreneurial equation we wanted to get to know more.

These people are the investors that provide the entrepreneurs with the actual fuel, tools, and know-how to take the company forward and meet their milestones to reach their goals. These are the investors who once were in the entrepreneurs shoes and had gone through the same ups and downs in their own journey.

This article is a little different from the other stories we publish, as this one is told from the point of view of the angel investors – those who see startups in an early stage, sometimes before they are officially incorporated! How do angel investors think? How do they operate? What do they emphasise? And what projects do they rule out immediately? I sat down for a discussion with Amos Talmor, a partner at Seedbiz and Chairman of the Advisory Board. Amos is one of the leading and well-known venture capital investors in Israel.

Amos serves as chairman and consultant at several high tech and telecom companies in Israel, and he invested in dozens of Israeli companies over the past 15 years, including Kenshoo , Storewiz , Globalepay ,Koranga Covertix, Saguna, TipRanks, HopOn Simple Order, and more.
Amos loves entrepreneurship. You can find him offering his valuable advice in lectures he gives and on conference panels taking place all over Israel. He is highly motivated to improve the Israeli entrepreneurial scene. Beyond being a partner at Seedbiz, Amos is a personal mentor to Daniel Kugler and I myself whom we highly appreciate as he has helped us throughout our entrepreneurial and personal journeys.

Amos, what do you think is the number one factor for a project’s success?

“Unequivocally, the entrepreneurs themselves – and I will expand on that – an entrepreneur today, particularly here in Israel, needs to be willing to listen and learn, which ultimately determines the success of their project. Entrepreneurs need to learn what they are getting themselves into, who their target audience is, and who their market is, who their competitors are and who the players are.
Without that open mindset and without learning these subjects deeply, such a project will unlikely succeed. An entrepreneur must learn the field he’s in from the inside and out. No one is born with knowledge, certainly nowadays, in such a rapidly developing environment.

I will give you an example of an interesting phenomenon I came across with “tech entrepreneurs”. Tech entrepreneurs are undoubtedly brilliant and very knowledgeable in their fields, but there lies the problem, they are confident they know the market and have all the answers. They’re in love with their product and in building it, all at the cost of learning the business environment, the markets and commercial aspects. This usually ends up with a company launching an ill-prepared product, missing out on their potential, and ending up with disappointing results.

Every company is an operation where each department must be run professionally and in the best way possible, given the above traits I mentioned. Look, Nitzan, I saw with my own eyes companies closing shop, even though they had great products to sell, however as I noted, the number one factor for the project’s success is the entrepreneur and his innate ability to observe, listen, and learn about his, or her, business environment.”

Was there ever a case that you were very impressed by a product and decided not to invest because of the people?

“Certainly, and not just once or twice. There were quite a few cases where it was very obvious to me that the product could be a hit, and even groundbreaking on a global scale. However, my analysis of the team led me to decide not to invest.

A professional investor usually knows how to identify entrepreneurs, and like everything else, at first you get it wrong, but you quickly learn how to assess the entrepreneur you’re facing, and mostly his personality.

An entrepreneur needs to be attentive, learn from feedback and be someone who wants to learn, especially when the other side is invested in his success.”

What point do you put an emphasis on when assessing an investment?

“Excellent question. Personally I focus on several main points:
● If it’s a partnership it’s very important to me to see the dynamic between the partners. The more I perceive there to be good and healthy chemistry between the founders, and that each one knows his place and role, I know that these are good people to invest in.

● Sellability / Marketability – When I invest in a company I focus my thinking on the company’s customer, I try to get as deep as I can into the end-customer’s mind and ask myself, would I buy this company’s product? now that I have an opportunity to invest in it. This kind of thinking helped me greatly in choosing investments that turned out to be profitable and successful.

● Depth – How much depth does the project have. At the end of the day, as I noted earlier in the interview, we are in a world of rapid innovation. If you’re too fixated and inflexible, you will fail! You always need to improve product features and get deep into them, and to know how to take an existing product and always adapt it to the developing situation.

● Business – The business aspect is very important. The milestones the entrepreneur sets for his company are critical. I’ve seen entrepreneurs start a funding round of 500K while they really need 150K for an MVP. It’s important not to jump too high, and get things done step by step.”

Are investors really divided up by certain fields?

“Yes. Unequivocally yes. Investors, and of course myself, invest in projects that are “close to their heart”, personally I’ll invest in other fields as well, but usually I’ll invest in a project where I know something about the field, or alternatively, it somehow related to my professional experience. Every investor invests in a specific project which he usually has some kind of informed understanding of the company they are about to invest in.

Lets take myself myself as an example, in 2006 I had an opportunity to invest in Kenshoo, a company that went into online paid advertising. Back then, this field was not popular, and beyond my financial investment, I provided strategic value to the company on the sales side. In retrospect, this was my best and most successful investment, however, I can’t ignore the fact that back then I had to have an “open mind” in order to realise that we may be going into a new era in advertising. When I was considering the Kenshoo investment, I imagined myself as the customer, and I realised that the age of paid advertising is about to break out big time. At that time, having an investor like myself that brings value for such a pioneering company would be valuable to them (which is what you usually get with an “angel” investor). Nowadays I’m happy to say that Kenshoo grew massively and now employs over 600 talented people globally”.

Amos Talmor speaking at the Hula Valley Conference 2020.

Amos, in your opinion, what is the most professional way to approach an investor?

“The best way to approach an investor is by creating a real human connection with the investor, not a shallow one. What does that mean? For example, every investor has a business circle he trusts, and as long as one of his colleagues wants to introduce him to an entrepreneur, the investor is more likely approach that opportunity more professionally.

I can tell you that contacts via WhatsApp, email, and linkedin are ways I’ll never take seriously. Every day I get loads of opportunities, and even if I wanted to I couldn’t really get in-depth into every single one of them.

I can tell you that in one of those cases I received an email from an entrepreneur that must have forgotten to use Bcc, I, and many other investors on that list instantly knew he tried to appear personal but was actually using a distribution list. I don’t have a problem with that, but I do business differently.

The additional way you can get in touch with an investor besides using a personal connection, is by attending conferences where you know the investor will be attending, if you can present your project at the conference – good for you. There are many advantages to participating in a conference and presenting your project to an investor that you know is watching for two main reasons

● The investor is aware of you, even if he only passed by you.
● Investors don’t attend conferences for no reason, they are genuinely looking for good investment opportunities. It’s important to understand that.”

Do you have any more advice that currently active entrepreneurs should know?

“I have a very clear message – money is not the problem. The big problem most entrepreneurs have is they think the problem the project is up against is money”.

“Get this in your heads, the worlds is growing, there is always money around and everybody wants to invest, there is nothing one can do with money in the bank. The one thing that is certain is that every day new entrepreneurs rise up, they must understand that when they approach an investor that worked hard his entire life for his fortune, they shouldn’t look at an investor as a wallet, investors don’t just “hand you cash”, even a billionaire becomes a billionaire having worked very hard for it, and he nor his hard earned money should not be disrespected. When you approach any investor, approach them as entrepreneurs and business people who are there to do business and not just to take their money, because chances are it won’t happen. Instead, show up with the right materials: presentation, an image video, your market research, and show the investor how you’re going to build a large successful and profitable company together.”

“I’ve encountered quite a few entrepreneurs who still have another job and are unwilling to give it up because of the salary they get. They believe that the investor will finance their salary when he invests, while in reality, that’s not going to happen. If you believe in your project, prove it to yourself and the investor by getting up and leaving your job! If you don’t, how do you expect an investor like myself me to believe in it too? As for a salary, there is no doubt that everyone needs some income, and one can reach an understanding with the investor about it. I personally reached understandings with the entrepreneurs where as the company grew, I forced them to draw a salary and to increase it over time, because they deserve it, and because that’s how you keep entrepreneurs and founders to drive their business to success.”

I had the pleasure to sit down and talk with Amos Talmor.

Amos is one of the key thought leaders in the Israeli high tech sector, where he contributes a lot of his personal time and money to promote entrepreneurship in Israel.

We will continue to provide you, the entrepreneurs at home, all the insights and experience that the leaders of this field have so that you can take your project to better places.

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