Investors and Industry Expertise
I had two recent discussions with very young companies that involved whether they should seek out industry expertise from their investors. In both cases the entrepreneurs were convinced they needed to find investors with experience and contacts in their particular industries despite the fact that those industries are not typically well represented among angel of venture investors.
My advice to them was that although it would be great to find someone with deep domain knowledge, that’s probably not what they should emphasize since investors will tend to be good at much more abstract business issues (scaling a software business, building a consumer brand, developing sales channels, etc.) — most experienced investors are, almost by nature, several years out from their operating careers, so even if they have experience in a particular industry their skills have likely been honed much more towards the higher-order issues of company building. By limiting yourself only to investors with deep knowledge of your industry you may be narrowing the field too quickly and not interacting with some great investors who will add a lot of value.
What’s more, it seems that ultimately it’s the founders and the team they build that should “own” the industry expertise — if you need your investors to give you insights into your core industry you might be in trouble from the start. If you aren’t more knowledgeable about your industry than most other people (or at least have someone on the team who is) you are going to have an uphill struggle (as if starting a company isn’t already enough of an uphill struggle!).
Of course, I am not suggesting you don’t want investors who have basic familiarity with the industry you are working in, and obviously you will need to find people who have an appetite to make investments in your field. But, especially in the very early days of seed stage startup land, take a broader view of the kinds of insights and contacts you need from your investors — you might find it’s everything but industry expertise that you really need from the outside.