Richard Branson's 5 rules of investment
- By Jack Preston -
- May 09, 2013
As those of you who followed last week’s Pitch to Rich competition will know, Richard Branson isn’t afraid to invest in start-ups. In fact the Virgin Founder has made a string of investments in tech start-ups over the past couple years, but what does he look for when deciding where to place his funding?
In a recent entrepreneur.com blog Branson shed some light on his investment criteria, providing five rules which he adheres to when assessing an investment opportunity.
Check them out and let us know what you think, what do you think is important to look for in a start-up?1. Does your company offer a smart, simple solution that improves customers' lives?
If I understand a startup's product or service on first glance, then customers will too - and if it solves a problem that needs fixing, there's a good chance that some will buy it.
That's why I invested in Square two years ago. It's a company that was started by the Twitter co-founder Jack Dorsey when he was trying to help his friend, a glass-blower who wanted to sell his work but didn't have a credit card machine. Square's system allows entrepreneurs to accept credit card payments via smartphone. The company says it now handles about $12 billion in transactions annually, and in 2012, it announced a deal with Starbucks, so that customers can pay for their coffees and other items using the Square Wallet app.
2. Is your company's use of technology disruptive?
There are many companies that dress up their products by putting lights and screens on them, but don't exactly make a difference to anyone's everyday life. Such products may attract attention, but unless the technology adds easy functionality, the customers won't be back a second time.
Hailo, the yellow taxi cab app, is a great example of a disruptive technology, since it's so more efficient and responsive than our current options: trying to wave down a passing cab or placing a call to the cab company. We chose to invest in this company because it lets passengers hail free taxis on nearby blocks with their smartphones. It helps cabbies too, since they spend about 40 percent of their time driving around looking for passengers.
3. Does your company offer customers greater choice and better access?
However small a company, its founders should try to expand people's opportunities and choices.
The online coding tool Codecademy is giving anyone with an Internet connection the chance to learn basic programming skills for free. With its easy-to-use interface and lessons drawn from real-world examples, Codecademy is outshining the competition.
I decided to invest in Codecademy because many people need and will benefit from access to such skills, especially women who hesitate to enter such a male-dominated field -- one in which most students tend to be men as well. Already, over 35 percent of Codecademy's users are women.
4. Does your company's product or service encourage customers to share their work or experiences?
The development of Web-based applications has enabled collaboration on a scale that was unimaginable 30 years ago. In almost every industry, more sharing is helpful and useful: between friends and family members; between colleagues, and sometimes between customers.
The best way to encourage sharing is make it fun, which is why businesses like Pinterest have found such success. This beautiful platform is all about inspiration and discovery, providing people with a quick, easy, entertaining way to share photos. It has rapidly become a household name -- and inspired us to invest in their company.
5. Does your company care enough about people and the planet to use business as a force for good?
Every company can make a difference. New businesses can tackle local problems, growing businesses can tackle national problems, big businesses can tackle global problems. One example that stands out is Twitter, which activists have used to evade authoritarian leaders' controls on communication -- it has helped to topple governments. I use Twitter to generate awareness for causes that are meaningful to me and others, like ending the war on drugs, and this is why I've invested in this company.
Similarly, we've funded Tumblr, which is one of the most popular Web destinations in the United States, and it also gives people a digital platform where they can express themselves.
These are just a few of the promising startups that have helped me to learn more about the challenges and opportunities faced by tech companies today. Those that provide services that help entire communities may have built long-lasting businesses that will be influential for years to come.
By Jack Preston. Content Executive. Tweets at @JackPressedOn
