Xconomist of the Week: Bill Warner’s Rules for Angel Investing

10/11/12Follow @gthuang

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of that design. Instead of focusing on the first product and the first market. That has often resulted in companies changing quite a bit from their first product to what they launch.”

Clearly it takes a certain kind of relationship, a lot of give and take between Warner and the founding team, to make this work. It’s not for everybody, and I suspect finding the right fit with a startup is more of an instinctive thing than an intellectual exercise. But when it works, look out.

A few more contrarian points from Warner:

On product-market fit: “Instead of looking for market fit on markets that exist, I like to focus on the intentions of the founders,” he says. For Warner, working with founders often turns into “a process of creating a market.” That’s different from a lot of other investors’ philosophies. “Most investments, it’s to prove that there is a market. For the most part, if an entrepreneur can prove there’s a market, I’m usually not interested. If they can prove it, a lot of other people can prove it. I like to work with entrepreneurs who are working on things that really are new.”

On getting traction with first products: “Usually the more traction there is, the more worried I am,” he says. “It’s like having a car that can only go straight, it can’t turn right or left. Those companies are better for other investors. So the things I do are different and unusual. I don’t look at products. Even when entrepreneurs have a product, I don’t look at it before I make an investment. For the kind of investment I do, the product is actually a false signal. How good the product is, is not [necessarily] representative of them.”

On assessing skill sets: “I tend not to be very focused on skill sets. I’m a believer that when people want to make something happen, they’ll learn what they need to learn to do it,” he says.

On how much time it takes him to invest: “I make the decision in one meeting,” he says. “That forces me to do it from my gut instinct.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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