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

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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.”

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Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and Editor of Xconomy Boston. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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