A few months back, a unique conference called "AngelConf" took place in Silicon Valley. The conference was organized for angel investors and its goal was to educate angel investors on how to invest in startups.

Key questions that the event addressed were:

• How much are you supposed to invest?


• What legal agreements do you need?


• Where do you find startups to invest in?


• How do you pick winners?

It was this last question that conference organizer Paul Graham from YCombinator agreed was the most important.

Graham's first point on this topic is that angel investors should pick startups that "make things that people want." Seems simple enough. However, Graham went on to say that angels should not invest in things that are already wildly popular. "By then it's too late for angels. VCs will already be onto them. As an angel, you have to pick startups before they've got a hit-either because they've made something great but users don't realize it yet, like Google early on, or because they're still an iteration or two away from the big hit, like Paypal when they were making software for transferring money between PDAs."

As such, angel investors need to be able to predict future market sizes (not just identify markets that are already doing well).

Graham's second point on this topic is that angel investors need to pick founders who are winners. On this point, he said the following:

"What makes a good founder? If there were a word that meant the opposite of hapless, that would be the one. Bad founders seem hapless. They may be smart, or not, but somehow events overwhelm them and they get discouraged and give up. Good founders make things happen the way they want. Which is not to say they force things to happen in a predefined way. Good founders have a healthy respect for reality. But they are relentlessly resourceful. That's the closest I can get to the opposite of hapless. You want to fund people who are relentlessly resourceful."    

Now, what this means to you as the entrepreneur is that this is how you will be judged by many angel investors. They will judge the future potential of your business concept and they will judge the potential of you and/or your management team.

With regards to the potential of your business concept, you must convince them that your market is poised for growth, and in doing so, you MUST cite multiple research and statistical points that confirm your views (I can't reiterate enough how critical great market research is).

With regards to the quality of you, the founder, and/or your management team, you need to show the investor, via past performance and ALL current interaction between you and the investor that you are a winner. You need to show them that you make things happen. Here are some examples of how can you accomplish this:

• Tell them a current business objective and come back to them two weeks later and show them you have achieved it.


• Find some way you can help them (e.g., introducing them to a business contact of yours that could help them) and execute on it right away.


• Ask them about questions they have about your opportunity and/or market and come back to them within 24 hours with great research and answers to their questions.

These smaller, short-term accomplishments which show investors that you can execute and that you are clearly not 'hapless' will massively improve your chances of getting them to invest in you.

The old adage about the definition of insanity -- "Doing the same thing over and over again and expecting different results" -- has never been more applicable than it is right now with the crisis in our financial markets and our government's response thereto.  The daily, depressing drama of the federal government's frenetic, "bailout flavor of the day" response mechanism would be comical if it wasn't so tragic, frustrating, and anger-inducing.

Sometimes I feel I went to bed one night in the United States of America and woke up in the U.S.S.R. in the midst of a "5-year plan." It is long-overdue time for Main Street America, for Small Business America, for Scientist's and Engineer's America, for Junior Achievement America, for Paper Route America, for Immigrant America, for eBay America, for Mary Kay America, for Franchise America, for Venture Capital America, for Startup America, for Entrepreneurial America to stand up and shout ENOUGH IS ENOUGH.

Because they built this country.  Because they represent and embody its best and most admirable and most idealistic qualities.  And because if the Washington bureaucrats would just let them be and get out of their way they can and will dig this country out of its current hole far quicker, cheaper, and more fairly than via the banana republic cronyism that masquerades as policy in Washington these days.

The funny thing is, Entrepreneurial America has never been more vibrant, more creative, more productivity-building, more value-creating, than it is right now.  With the collapse of the "Blue Chips," the playing field has never been more level, the competitive arena never more wide open, the cost of key business inputs (labor, rents, technology) never less than it is right now for entrepreneurs.

What these firms need to succeed is not government handouts or "stimulus," but simply good old-fashioned growth capital.  And for this capital, these companies -- in such dynamic growth arenas as alternative & green energy, healthcare & biotechnology, digital media, and software -- are priced at  "end-of-the-world" levels.  In other words, as long as the world does not end, they will make themselves and their investors money.

So my suggestion to all of those in Entrepreneurial America: make yourself heard.  Call and write your congressperson and senator.  Email essays like this to your family, friends, and colleagues.  Support your local small business.  If you see a website of a business you like, write the company and tell them to keep on keeping on.   Blog.  Twitter.  Post on YouTube.  Shout out on Facebook.  Because this is a fight for private enterprise and economic freedom and one that Entrepreneurial America, and the world for that matter, cannot afford to lose.

Read Jay's second article in this series - Entrepreneurial America, Part 2.

Webinar: Keys to Successful Private Company Investing

Please join me on a live, interactive web conference where I will share with you my keys to successful private company investing including:

- How to utilize the Internet to source and research opportunities
- How to conduct data-driven risk analysis on private company deals
- How to exploit the "pricing inefficiency gap" endemic to private equity
- The importance of technology bias (and which technologies to bias) when selecting deals
- How to properly apply "black swan," or "randomness" thinking to private company investing strategy

To register, click here: http://www.growthink.com/livedeals

It is absolutely astounding how quickly the discussion around the appropriate government response to the economic crisis has morphed -- from one around whether it even makes sense, or is the proper thing to do, for government to bail out ailing financial and manufacturing firms -- to one simply around "how much," "how fast," and "how many."

Last week, we talked about how entrepreneurs, who serve a crucial role in growing an economy, have been shortchanged by the proposed stimulus package.

See our previous post: How Entrepreneurs are Key to Job Creation.

Now, as the Wall Street Journal reports, many individual states are planning to harness the energy of entrepreneurs in an effort to jumpstart the economy.

Maryland is tackling the issue head on by allocating over $70 million for programs to support small and minority owned businesses, and $15 million for heath insurance at such businesses.

The approach in Florida includes low interest rate loans for small businesses with less than 100 employees.  Loans up to $250,000, that would be purposed for everything from expansion to new salaries, would be available at a 2% interest rate.

In New Jersey, to spur expansion and hiring, a stimulus plan includes grants and tax incentives. $3,000 is available for small companies that hire an employee and keep them for a year.  Sales tax credits are being considered for capital investments that exceed $5,000.

Similar tax incentives are being considered in Colorado, Arizona, and Minnesota.

Such considerations at the state level are a step in the right direction, and signal recognition, at the government level, that entrepreneurs can and will play a significant role in reinvigorating the American economy.

As the House rushed to put the $819 billion economic stimulus package in place, Congress may be overlooking one of the most critical components to creating new jobs: entrepreneurs.

The stimulus package is chock-full of plans to stimulate job creation though public works and projects. However, a study by Grant Thornton recently released to the US Department of Commerce Economic Development Administration reports that investing in business incubators, which support young companies and entrepreneurs, is a more effective strategy for creating jobs.

And the numbers are staggering. Here is a look at what a government investment of $10,000 accomplishes in different sectors:

• Roads and transportation projects:  4.4 to 7.8 jobs created
• Commercial structures: 9.6 to 13.4 jobs created
• Business incubators: 46.3 to 69.4 jobs created

Business incubators create jobs at an expense as low as $144 per job -- almost 10 times less than road and transportation projects, which typically cost more than $1,200.

This data, while surprising to some, supports what we’ve always believed here at Growthink: That the American entrepreneurship isn’t just one piece, but the most important piece of our economy.

If you're looking to start your own business, you need to learn the main components of a business plan before you start. Keep that in mind before you begin putting your plan together.

Related post: President Obama and Entrepreneurship