(Another old post – trying to get all my writings in one place.)
So we are thinking of raising a round of angel investment in the next few months. While we’ve been reading up on Cap Tables, Executive Summaries, Slide Decks, and things needed for official suit and tie meetings, we aren’t sure how to get that first cup of coffee with potential investors. Here’s some great advice our adviser told me:
You Are The Star:
Think of yourself as a talented high school quarterback. Maybe you aren’t the best of your state, per say, but you are clearly ahead in your team and ready to try for the big leagues. Before you start applying to colleges and selling yourself to recruiters, you first visit the schools you are interested in and see if they would be a good fit for you. You should start the same way with investors: they should want YOU by the time this phrase is done, not vice versa.
Pick your schools: The Ideal, The Acceptable, and the Fallback
Ask around and get a long list of investors (angel or otherwise.): at least 15, but 20+ would be safe. Research ALL of them: get an idea of what sort of companies they invest in and if they appear, on the surface at least, to be a good fit for your company or idea. Categorize them as Poor Fits, Decent, and Ideal. Your first coffee meetings should be with the investors you know you don’t want. This is just to get you practice, and to spread the word in the investor world about you. Don’t meet with your top choice investors until you really feel ready and have had at least 5-10 practice rounds.
Introduce Yourself in a Neutral Environment
Next, see if you can find someone in your contacts who can get you a personal introduction to them. If not, don’t be afraid to blind email them. Let them know you are working on a new idea, have XX amount of experience, and want to ask them about the investment industry, their experience, etc. Be sure you do NOT meet them in their office. This sets a precedent for professional attitudes, poker faces, and non-disclosure crap. Buy them a coffee, be laid back and conversational, be polite but not reverent.
At this meeting, ask them about their interests, what they are looking for, how involved they like to be with their companies, how much money they have invested in the past, and, if they can share it, what sort of success their portfolio companies have encountered. If they are at ALL interested in investing in new companies, they will inevitably ask what you are working on. Here you should have one sentence that sums up everything concisely, but leaves them wanting to know more. If it feels right, you can follow this up with a brief description, under 2 minutes. If they dont ask about your company, they probably aren’t worth your time.
A Subtle Sale
Inevitably they will then ask, “Well, when are you looking to raise money?” Your answer should be about 2-3 months further out than you truly think, so you don’t sound desperate or needy (IOW: “Oh, in 4 – 6 months). They will then ask “Well, how long could you go without funds?” You respond, “Well, money isn’t really an issue. My (last company, parents, relatives, loans) are supporting me for a fair amount of time.” They look surprised, “Well then, why are you interested in raising money?” You calmly retort, “Well, I don’t want people to look at this as just some pet project of mine. I want it to be legitimized, able to stand on its own to feet. We are working with (list companies they may have missed out on funding) already, and I know we can get even stronger people with the right funds.” This keeps you from sounding like you are begging for money, but also lets them know specifically how an increase in funds would help you.
As you wrap up, be sure to ask if they can introduce you to anyone they think would be interested in the idea. This not only lets them know that you are talking to other investors and people, but also gets you some great new contacts, and lets them feel especially helpful and more invested in the idea.
Make sure you are aware that, from these meetings to the moment you receive the cash can take anywhere from 3-6 months (and that is, of course, assuming you raise funds in this economy.) It certainly isn’t impossible, but it’s pretty damn hard.