Angel investing · Fundraising

Best practices to find Angel or Seed investors?

Anonymous

June 23rd, 2016

We are finishing our prototype (self-funded) and considering attracting outside investors and funding. Are there any best practices or set rules around finding the right investors for this early stage?
More than 65% of new companies fail because they lack funding. In this course, you’ll learn common fundraising mistakes, how to nail an elevator pitch, how to craft a killer pitch deck, where to source investments from, and all about term sheets and convertible notes.

Bryan Brewer Startup mentor, educator, and entrepreneur advisor; focus on helping companies raise investor funding.

June 23rd, 2016

I'll answer your question in two parts. First, "finding investors," then "find the right investors."


In my 15 years of helping clients raise millions in investor funding, I have found that by far the best method of finding investors is to leverage your personal network of connections. Most of the deals get done that way. Put the majority of your efforts into casting a wide net with efficient networking. Be prepared with a concise summary of your business plan and use a contact management system to track the process. When you get a "no," always ask for two or more referrals, which may lead you to other investors who might be interested in your deal. Angel groups and other startup events may be useful, too. Online sites like Angel List usually don't produce results until you have some solid traction on your round or you have a well-respected lead investor on board.


Finding the "right" investors is another matter. Smart money is always preferable, so focus your networking activities on finding investors with relevant domain experience or connections. And make sure you follow your instincts about the person. It's just as important for you to perform due diligence on any investor!


Finally, don't approach investors for money until your business plan demonstrates enough of the right stuff so that investors will take you seriously. How do know if you've crossed that threshold? Take my free Minimum Fundable Company Test at mfctest.com to find out. The results will pinpoint any areas you need to work on.

Saravjit Singh Independent Consultant and Trainer

June 23rd, 2016

My best practice for introducing innovative products in the market and to angel investors: Use a Business Model Canvas for your project. This model is very well explained at http://www.businessmodelgeneration.com/canvas/bmc

Create and use this wonderful, easy to understand, model to explain the viability and key parameters of your business proposition to angel investors. The model covers all key areas an investor would want to know about. Be concise and to the point when preparing the Business Model Canvas, but do have backup material ready to answer any questions.

I suggest that you personally give the presentation to prospective investors. Be enthusiastic when making the presentation and make the presentation into a story they will bite.

If you need any help in creating the model you can connect with me directly at saravjit.singh@gmail.com 

洛傑 李 Founder/Chairman at Infinite Partners

June 24th, 2016

Hi, I advise you as investor on following this steps: 1. Investor who understand your industry 2. Believe in your vision 3. Not greedy For you: 1. Killer pitch deck 2. Financial modeling 3. Be honest don't lie in your pitch 4. Show your expert in your industry in your knowledge and know how of your competitors.

David Evans Angel Investor

June 25th, 2016

Focus on building the business and acquiring customers.  Investors want companies focused on the right goal: a successful business, not a successful raise.  Investment capital should be used to accelerate growth, not create it.  Work on getting a few customers and pay attention to how much time and money it will cost.  Armed with that information, you will have a much better chance of attracting investment dollars.  And you may find out you don't need it at all.

Martin Omansky Independent Venture Capital & Private Equity Professional

June 25th, 2016

Generally agree. We early-stage investors want some comfort that the business idea is solid. Nothing like a few paying customers to validate that. Admittedly, not all e yet proses can do this. A lot of life science deals, for example, need third-party financing to establish proof-of-principle and even a minimum of market acceptability. And this doesn't even take into consideration any regulatory approvals. True investment angels might support R&D projects if they are intrigued about the substance of the deal (new approaches to cancer or diabetes research, for example) but please don't count on financing from angels for niche market ideas. Sent from my iPhone

Chicke Fitzgerald

June 24th, 2016

Before you decide to raise money:

  • Finish your MVP and launch with a significant launch client (even if you have to give the product away for a discount)
  • Have at least 3 months experience with the product and be able to demonstrate the learning from the pilot
  • Expand to at least 3-4 other markets/uses for your product to show that the product can scale and how it will behave in different situations
  • Be prepared to continue to bootstrap for 6-9 months, as raising money from the right, smart sources will always take longer than you think.

Martin Omansky Independent Venture Capital & Private Equity Professional

June 24th, 2016

Finding risk investors for early stage companies is always a problem. Best bet is to try to identify people who are in your technical area or industry (we call them "affinity investors"). It also depends on your location. Some places are hotbeds of innovation and smaller deals, other not so much. Figure Boston area and Northern California as being good places, New York City not so much. Our group (Boston area) invests in private, early-stage deals featuring strong IP. If qualified, you can reach us at crucibleadvisorsatgmaildotcom. Sent from my iPhone

Steve Owens

June 24th, 2016

1. Pitch to people who fund the kind of thing your doing
2. Have a great (not good, but great) team - this is much more important than anything else you do, including the idea
3. Find out what their objections to your plan is
4. Overcome their objections

After saying all this - are you sure you want to raise money?  Is there any possibility of bootstrapping?  Most likely outcome of raising money is that you have a "OK" full time job.  There are easier ways of accomplishing this goal.

Nathan Beckord

June 28th, 2016

It is *really* hard to raise money for a startup at the prototype stage unless you have something extraordinary about your circumstances-- e.g. your team has 3 prior startups, and 2 of them had good exits that made money for investors. 

It sounds more like you're at the "friends and family" round of funding, where people are basically investing because they believe in you, not the product or opportunity. Other options at your stage are crowd-funding or bootstrapping.  

That said, a best practice for raising money at any round is to treat it as a structured sales process-- meaning you build a list of targets, filter and qualify that list, get intros to each qualified target, and drive them all through the cycle of: pitch --> follow on pitch--> due diligence--> commitment (or "no"). (I blog about this process here.)

Good luck! Last piece of advice-- fundraising is a numbers game. Treat it as such and realize you'll probably need to connect with >100 to find the 5 or 10 that want to fund you. 

Stephen G. Barr Inimitable Advisor with Wide experience.

June 24th, 2016

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