“Is there any IP,” the most vocal man in a group of 14 “Angel Investors” asked. Quandary. Do I patiently explain why asking about Intellectual Property (IP) is the wrong question? Since the full explanation would take more than 20 minutes I simply said, “No”. This “investment club” wasn’t the only time the wrong question was asked in the wrong way.
IP means next to nothing online.
The hardest thing an Internet marketer does is create community. Creating content and web properties people LOVE is hard. If you have Intellectual Property such as patents and trademarks congratulations. Unless that IP translates into TRAFFIC and LOVE it doesn’t matter.
I understand investors believe IP creates something to sell if there’s a fire. If everything else gets burned up, investors think, we can sell the IP. Selling IP is so specialized and niched counting on it even for fire sale money seems goofystupid as an investment criteria for a local North Carolina angel investment club.
There are BETTER questions this investment club should have asked.
- How many unique visitors will your site get daily in the first year?
- How many downloads (or sales) will your site make daily?
- What is projected cost of customer acquisition first through third years?
- Where will your website’s traffic come from? Top 3 – 5 sources?
- Who are you disrupting and what is the PageRank PageSpread and number of inbound Links?
- What is their PageRank projection for year one through three?
- How will the new website earn high value links?
- What are Facebook LIKE, Twitter Following, G+ Following and YouTube subscription goals?
- How fast will your traffic numbers reach 50% NEW to 50% RETURNING?
- What is your engagement and/or gamification strategy?
I could go on. Bet you see the difference. Here is a bulletin. When your angel investment club is asking a startup questions THEY are evaluating you too. Angel investment clubs have something startups need – cash. The bulletin is your club isn’t the only source of cash in the world.
Can the same thing be said?
I know a lot of people who start companies. Many startups fail, but virtually every one of those ideas CAN ONLY be “purchased” from the startup entrepreneur with the idea. The club that didn’t fund the pitch I made when asked about Intellectual property didn’t hurt so much (lol). They didn’t pass OUR evaluation. They didn’t ask the right questions.
What is more important than MONEY to startups?
Startups live in a “pivot a minute” environment. Pivoting so much means PIVOTING is process. You might THINK you are creating a team capable of developing a widget. Not so much. You ARE creating a team capable of pivoting and that requires BRUTAL honesty and “check your ego at the door” smart people.
Any startup is developing a team capable of pivoting. Another group of questions helps investors discover if the statup team can handle the stress they will encounter:
- What was your biggest failure?
- Why did you fail?
- How did you attempt to stop the ship from sinking?
- How did you know the end was near? What did you do once you knew there was no way out?
- If you fail again what will you do?
- Would you describe yourself as more passionate than creative or other way around?
That last bullet speaks to a cool article I shared on Scoop.it the other day (Why Creativity Is More Important Than Passion For Startups). I’ve started companies from PASSION and CREATIVITY. I agree with points made in the article because Internet marketing needs a tweak, twist, mash and burn relationship to ideas, creations and campaigns.
Passion or a desire to “be right” can be very expensive online and that isn’t an investment ride I suggest. Ask yourself when things get ROUGH and are happening FAST can the team in front of you willfully DESTROY everything they’ve built to better respond to a new development. Online startups require a ruthless honesty few understand and fewer still obtain and FAILURE happens every damn day (lol). M