By ADRIANA GARDELLA
Courtesy BlueTree Capital Group
Catherine Mott
Previously, Catherine Mott, an angel investor, stressed the importance of investing in “coachable” entrepreneurs who surround themselves with solid management teams. As chief executive and founder of BlueTree Allied Angels in Wexford, Pa., Ms. Mott says she knows one when she sees one. But during a recent conversation, I asked her to try to specify what she looks for when investing in start-ups. A condensed version of our conversation follows.
Q. How do you define coachable?
Ms. Mott: It’s very challenging to identify. I wish it were black and white, but it’s more of an intuitive gut feel. During our due diligence process, which includes five to six meetings with a start-up’s management team, we hope to see that the founder is the kind of person who takes advice because we know and understand there’s lots they won’t know. They’ll make mistakes. In effect, we’re giving them tuition money. But we want to mitigate how much of it they’ll lose.
Q. Can you tell me about a founder who failed to gain your confidence?
Ms. Mott: There was one who seemed somewhat coachable. But he had met with a very successful entrepreneur who told him to place an extremely high — and in our view unwarranted — value on his company. The founder assumed he should price his company similarly, just because this other guy did. I suggested that he talk to other people who might be able to offer different viewpoints, and he chose not to. I could see he wasn’t going to listen to, or take, advice. Another problem was that he had only one independent on his board. The rest were insiders. He’s still not funded.
Q. Why is a start-up’s management team so important?
Ms. Mott: When you first get into this business as an investor, there’s a tendency to fall in love with a technology. But it’s not the technology that makes the company. It’s the people. You can identify a need in the market and be an industry upsetter, but you’ve got to have the right people to execute. Founders need to make us comfortable that they’ve analyzed their strengths and weaknesses and know how to compensate for the latter.
Q. How can entrepreneurs show you they’ve done this analysis?
Ms. Mott: We want them to be able to say, “I know I’m an engineer. I know nothing about sales or marketing. I know we need someone to develop a marketing plan.” It scares the living dickens out of us when we’ve got all engineers in the room and they’ve made one the vice president of sales. It’s a human foible. We’re more comfortable with people like us. I was recently at an incubator, speaking with a founder who said he knew he was not C.E.O. material. I was thrilled.
Q. Why should a founder listen to an investor?
Ms. Mott: I can only speak for BlueTree, but we are not unreasonable. I don’t hire yes people. I promote people who challenge me. I’m not always right. But I’ve built a solid company and have some experience. I’ve invested in 24 companies and been through four exits. I’ve got a pretty good feel. The longer you do this, the more you can trust your gut.
