Depending on which funding round a company is going for there will be different investor skill sets that are requirements. For example, seed stage enterprise companies (that are still working on product) might benefit more from investors with good technical expertise. By the time the company hits it Series B, and revenue becomes the priority, preferred investors are the ones that know how to build a sales force and can connect a company to potential customers. And in the growth round, investors that know how to deepen a management bench and scale a company are probably most helpful.
For seed stage companies I think the two most important investor qualities are technical understanding and proximity. By proximity I mean an investor who is close by and in close contact with the company. Here’s my logic…
Let us say you are a highly technical founder (and if you are building an enterprise startup you should be highly technical). In fact, you have focused so keenly on developing your technical ability that you may have done so to the detriment of other skills that are common in building a business. The net result may be that you have the skills to build a fantastic product, but don’t have all the skills to build a great company around it.
When the time comes for you to pick your investors you will need to decide what you are looking for. You will probably want someone who understands why the product really is fantastic. You will probably also realize that you are building a business and you could use some help. If you were to ask me, I would agree that you want at least a semi-technical guy who has experience building businesses.
Of course the thing about building businesses is it happens day-by-day, brick by brick, decision by decision. It most definitely doesn’t happen only on a monthly basis (and at the seed stage you should be on a monthly board meeting schedule) when the board meets.
A founder needs to be face-to-face with his investors, talk to his investors, and even hang out with his investors. Consideration regarding closeness should be part of the due diligence process on both sides of the investment. The question ‘can I work closely with this person’ should be asked and answered in the affirmative by both sides.
Experience tells me that a founder in the seed stage should have a planned conversation with his investors at least once a week and expect an unplanned chat, once or twice more. The founder spends the time to avoid making any operational mistakes that could doom the business. The investor spends the time to be a good custodian of the company during the time that the seed capital is being deployed.
I would argue that a good seed investor (especially the lead) should be looking to make investments close to home where there can be an impact on the day-to-day and as a result investment proximity is an important factor in the success of seed stage investing.