The 3 things we look for in the entrepreneurs we invest in
30th December 2014 0 Comments

We at Ankur can be picky with the companies we choose to invest in. Out of 500 companies we screened in the last year, we made the decision to invest only in 3. When we first look at a company, we pay close attention to the potential of geographic and social impact that company will have for its beneficiaries and suppliers. Then we judge the intrinsic business potential of the company – we look at a company’s potential for scalable growth at a sustainable rate. We make decisions based on analytical rigor, and we look at the potential upside of the company.

But we’re really picky because we don’t just look at the hard data. The truth is that as much as we are investing in companies that make impact, we’re also investing in people that make impact as well. We don’t just assess the companies; we assess the people running them as well.

To boil it down, here’s what we’re looking for in the entrepreneurs we invest in. We look for 3 things: brains, talent and character. This is the complete trifecta as far as we’re concerned. So what, you’re probably asking, do we mean by each?

Brains

When we say brains, we’re not necessarily talking about a degree from a top 10 b-school, although we do value the work that goes into getting an MBA and it signals to us a hard worker and high achiever. But brains aren’t about how you scored on your college final; brains are all about problem solving.

We look for problem solvers. Why? Because problem solvers effectively do three things: they correctly identify and understand problems, they take steps to address the problem in the most optimal way possible and they execute the solution. Entrepreneurs are faced with new problems on a day-to-day basis, whether it’s a “small” problem like ensuring office supplies are available in the office storeroom to “big” problems like a sunk asset cost.

Entrepreneurs don’t buckle under the weight of all these problems, though. They identify the problem and call it out for what it is. They logically analyze the causes that led to that problem. And once they’ve understood the problem, they take steps to address it. They research how other people solved it, or they ask for help. They study. They learn. They adapt. They use creativity. And most of all, they’re not afraid to execute. They know how to solve problems well, and they know how to allocate resources effectively to do just that.

Talent

Talent is an easy word to misunderstand. Some people usually don’t think of themselves as talented – as in someone who has a gift or ability or a skill that sets them apart from someone else. Other people overestimate their talent – a lot. And yet other people think talent isn’t developed or refined but is inherent and present from birth. Part of that may be true – some people are just better suited genetically to athletics, for example. (I say that as someone who watches the Olympics on his couch.) But all of us need to work to develop our skills and talents. That’s the most important part – it’s the learning curve.

Everyone has skills – but some people work at their craft, practicing and refining their skills everyday, and some people take it for granted.

We invest in people who aren’t just talented and have the right skills, but in people who are talented and strive to learn and develop their skill sets. That latter part is more important. People who are open to new ideas, who are constantly practicing and who work hard at developing their skill can apply it in multiple situations.

A musician who’s mastered sheet music can play only in certain situations – like when sheet music is available. A musician who’s mastered sheet music and perfect pitch and has taught herself to listen to different styles of music and rhythms can play whether or not sheet music is available. Both are talented, but we would invest in the second one – not because they are “more” talented but because they’ve demonstrated a willingness to learn, understand and work at it.

All of this is important to an investor looking to work with entrepreneurs for the long haul because it reveals to us the entrepreneur’s personality.

Character

When we say character, we don’t just mean our investees should be nice and polite. In fact, far from it. The word “nice” comes from the Latin word “nescius” which literally means, “to be ignorant.” We definitely don’t want ignorant people on our team.

What we want are people who value what it means to create a sustainable business. These are people who value honest business practices, transparency, truth-telling and vision-casting. Naturally, due to the nature of our work with BoP communities, we look for compassion and empathy in our entrepreneurs – an ability to understand the context and real day-to-day struggles of the communities their company works with.

But most of all, we look for grit. Stick-to-it-ness. The ability to stay and weather a storm, no matter how tough the situation gets. Angela Duckworth, a professor of psychology at the University of Pennsylvania suggests, “grit is a better predictor of success than IQ or measures.” In her definition, it’s the tendency to sustain interest and effort towards very long-term goals. In the social entrepreneurship game, nothing is short term. We’re in it for the long haul – both investors with patient capital and entrepreneurs who are working towards creating something sustainable and long-lasting.

Now, to be sure, we’re not talking about people who do the wrong things over and over again. It’s not grit to stick to the same way of doing things, especially when it’s not working. Grit, more fundamentally, is the commitment to see a vision through and to show resilience when confronted with failure.

That’s why we listen carefully to the stories of our potential investees. We spend time understanding the professional journey of entrepreneurs so far. Since a part of Ankur’s mission is to actively engage with our investee companies and provide the resources, skills and mentorship they need to succeed, we need to know our investees demonstrate sound brains, talent growth and grit. The journey to success for an entrepreneur is not a straight arrow, and it’s not neat and clean. It involves a lot of let-downs, a lot of sleepless nights, a lot of uncertainty and a lot of sacrifice. But for those who demonstrate these characteristics, we are confident in their ability to succeed and in our ability to help them.