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One successful angel investor has revealed two red flags that prevent him from investing in a founder in the first meeting.
Carles Reina is an angel investor who backed voice cloning AI startup Eleven Labs when it was still in its very early stages in 2022. The firm was co-founded by Mati Staniszewski and Piotr Dąbkowski, and raised $180 million at a valuation of $3.3 billion, in its Series C funding earlier this year.
In September, the company announced it was letting employees sell shares at a $6.6 billion valuation. Reina is now a vice president of revenue at the AI firm.
When Reina first met Eleven Lab’s co-founder Staniszewski, he told CNBC Make It that nobody wanted to invest in voice AI at the time. However, Reina decided to take a chance on Eleven Labs after just one meeting.
“We started talking, and within 30 minutes of the first conversation, I told him, ‘How much money do you want?'” Reina shared.
He explained that the first meeting is critical when making a decision and Staniszewski displayed certain traits that attracted him as an investor.
“If the first signs are just not there, I usually don’t want to waste anyone’s time… I think you end up optimizing always for high quality interactions, [it’s] like you’re trying to triage if this is something that you really like and that you want to spend more time with the founders or not.”
Reina opened up about two reasons why he wouldn’t want to invest in a founder after a first meeting.
Two red flags
One of the key traits that Reina looks for when meeting a founder is technicality.
“This is very personal, especially in different stages. But for me, if one of the founders is not technical, like literally cannot build products, is not a researcher or something like that, I just don’t see the value in that because they’re not going to be able to move as quickly,” he said in the interview.
Reina saw this quality in Eleven Lab’s Staniszewski, who has a first-class honors degree in mathematics from Imperial College London.
“It was really interesting to see he was thinking about the problems of the entire ecosystem before even actually having any product, or before even actually talking to any real potential customer,” he said.
The second red flag is if the founder is trying to build a company in a “very crowded market” which Reina often tries to steer clear of.
“if there is a lot of venture capitalists looking at that market, because it is sexy, I’m just not interested because then valuations skyrocket and you end up going into a pricing war where everyone’s trying to give them term sheets and so on,” he said.
When too many VCs want to invest in a company, it inflates the valuation of that company which then puts unnecessary pressure on the founders to show rapid growth and maintain or increase that valuation, according to Reina.
Other reasons might be that the founder is in an industry he just isn’t interested in and it doesn’t fit his profile of investments.
“If someone sends me a pitch, or I get introduced to someone that just doesn’t really bring my attention straight away, I will tell them straight away ‘happy to help you on anything that you need [but] from an angel perspective or investing perspective, it’s just not one of my things.'”